VBG GROUP

ANNUAL REPORT
2019

Promoting safe
and sustainable
transportation
 VBG GROUP 2019 ANNUAL REPORT | CONTENTS

The year in figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

VBG Group is an active long-term
VBG Group in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Niches and products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 owner of industrial companies that
   Safe and efficient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 operate internationally. The Group’s
From the President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Market and trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 three wholly owned divisions, which
Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 operate in 18 countries with some
   Strategic acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CONTENTS

   Comfortable driver climate . . . . . . . . . . . . . . . . . . . . . 18 1,600 employees, are managed with

Goals and outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 considerable industrial expertise,
Sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
a strong corporate culture and
   A great place to work . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 financial resilience.
Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 * Refer to page 54, Significant events after the close of the financial year.
Financial position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
The share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
VBG Group as an investment . . . . . . . . . . . . . . . . . . . . . . . . 36

Financial reports, table of contents . . . . . . . . . . . . . . . . . . 38

Board of Directors' Report. . . . . . . . . . . . . . . . . . . . . . . 39–54
  Truck & Trailer Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 42
  Mobile Climate Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
  Ringfeder Power Transmission. . . . . . . . . . . . . . . . . . . . . 49
Consolidated Income Statement. . . . . . . . . . . . . . . . . . . . . 55
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . 56
Consolidated Changes in Equity . . . . . . . . . . . . . . . . . . . . . 58
Consolidated Cash Flow Statement. . . . . . . . . . . . . . . . . . 59
Parent Company Income Statement . . . . . . . . . . . . . . . . . 60
Parent Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . 60
Parent Company Changes In Equity . . . . . . . . . . . . . . . . . 62 Safe and efficient Strategic acquisitions
Read more on page 6. Read more on page 15.
Parent Company Cash Flow Statement. . . . . . . . . . . . . . 62
Effects of transition to IFRS 16. . . . . . . . . . . . . . . . . . . . . . . 63
Alternative performance measures . . . . . . . . . . . . . . . . . . 64
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Signatures for Annual Report . . . . . . . . . . . . . . . . . . . . . . . . 91
Audit report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Corporate Governance Report. . . . . . . . . . . . . . . . . 96–108
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Group Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Comfortable driver climate A great place to work
Signatures for Corporate Governance Report. . . . . . 108
Read more on page 18. Read more on page 27.
Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Addresses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Our sustainability efforts are presented in three reporting areas, which Cover: The Öresund bridge
include the five main areas in the Swedish Annual Accounts Act. Sustain-
ability efforts for 2019 are reported in both a sustainability section,
which covers pages 21–24, and in the Directors’ Report on pages 39–54.
Sustainability risks, and how they are managed, are presented together
with other risks in Note 2 on page 73. All three sections are part of the
statutory sustainability report under the Swedish Annual Accounts Act,
which VBG Group complies with. The sustainability report is submitted
by the Board of Directors of VBG Group.
 THE YEAR X_SECTION
IN FIGURES | VBG GROUP ANNUAL REPORT 2019

Sales and earnings at

new record-high levels
 onsolidated sales increased by
C E arnings per share (average number
6.7% to SEK 3,725.4 M (3,492.4). of share outstanding) increased by
9.7% to SEK 11.98 (10.92).
 perating profit (EBIT) increased by
O
4.2% to SEK 435.0 M (417.6), which  he Board of Directors proposes
T

THE YEAR IN FIGURES

yields an operating margin of 11.7% a raised ordinary dividend of SEK
(12.0). 5.00 per share (3.50) and no extra
dividend (SEK 1.00 the preceding
 rofit after financial items increased
P
year). This means the proposed
to SEK 397.0 M (373.1).
total dividend of SEK 5.00 (4.50)
 he Group’s profit after tax increased
T corresponds to 41.7% (41.2%) of
to SEK 299.5 M (273.0). profit after tax.

KEY FIGURES

Group 2019 2018 2017 2016 2015

Net sales, SEK M 3,725.4 3,492.4 3,002.0 1,543.9 1,315.3

Operating profit before depreciation/amortization
(EBITDA), SEK M 547.8 497.4 428.3 231.6 178.0
Operating profit before amortization (EBITA), SEK M 467.1 449.3 382.8 196.2 145.9
Operating profit (EBIT), SEK M 435.0 417.6 351.1 184.0 134.7
Profit after financial items 397.0 373.1 315.6 168.2 134.5
Profit after tax, SEK M 299.5 273.0 220.5 120.8 95.5
Earnings per share, SEK 11.98 10.92 9.62 9.66 7.64
Cash flow from operating activities, SEK M 438.9 253.6 243.7 251.0 118.0
ROE (cumulative), % 12.5 12.8 12.3 12.7 11.3
ROCE (cumulative), % 12.4 13.2 10.7 12.7 13.0
Equity/assets ratio, % 57.8 56.7 54.7 28.7 69.2
Interest-bearing net debt/EBITDA 1.20 1.30 1.7 7.3 0.3
Average number of employees 1,596 1,561 1,446 764 636
Average number of shares during the year (‘000) 25,004 25,004 22,920 12,502 12,502
Number of shares outstanding (‘000) 25,004 25,004 25,004 12,502 12,502

6.7% IN INCREASED
4.2%
IN INCREASED
9.7%
IN INCREASED
NET SALES OPERATING PROFIT, EBIT EARNINGS PER SHARE

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 VBG GROUP ANNUAL REPORT 2019 | VBG GROUP IN BRIEF

A long-term active owner of

successful industrial companies

VBG Group is an international industrial

group in which the Parent Company Value creation
VBG GROUP IN BRIEF

and Group Management support and

manage three wholly owned divisions*.
Successful business concept
The Group’s areas of operations are
equipment for drawbar couplings and Focus on attractive niches

automatic tire chains, sliding roofs for

Strategic governance and development
trailers, climate control systems for
commercial vehicles and products in Stable, long-term principal owners
mechanical power transmission and
energy and shock absorption. Long-term financial strength Values-based foundation

* Refer to page 54, Significant events after Considerable industrial expertise

the close of the financial year.

Value creation for many stakeholders Successful business concept

VBG Group’s value creation is based on the successful
identification, completion and integration of business
acquisitions as well as efficient corporate governance.
The Group’s divisions create value on a daily basis
for a number of stakeholders in a range of different
niches. The strong focus on growth and profitability
has resulted in a positive total return for shareholders.
The VBG Group acquires, owns and further develops industrial
companies in business-to-business commerce. The companies
are to operate in carefully selected product and market niches,
and are to have strong brands and strong growth potential.
The companies VBG Group acquires can supplement one of
the Group’s existing divisions, or be companies that form a
­completely new division. The business concept is a tried and
tested one, having proved very successful over time.

Focus on attractive niches

VISION VBG Group focuses on identifying internationally growing niches,
We are number one or two globally in the industrial preferably oriented on commercial vehicles, in which its divisions
niches where we are active. We make a difference by and companies can position themselves as the number one or
creating the products and services of the future. number two player in their niches.

BUSINESS CONCEPT Strategic governance and development

The Parent Company and Group Management work with overall
The VBG Group will, within selected product and
Group-level issues such as strategic development, financing,
market segments, acquire, own and develop industrial
acquisition and policy matters; they also work closely with the
companies in business-to-business commerce with
Group’s operations in the form of governance of the divisions.
strong brands and good growth potential. Based on
a long-term commitment and with a focus on growth
and profitability, the VBG Group’s shareholders will
be offered attractive value growth.

2
 VBG GROUP IN BRIEF | VBG GROUP ANNUAL REPORT 2019

33 wholly owned companies

1,600 employees

Own companies
18 countries

SEK3,725M
Importers/Agents
Truck & Trailer Equipment
Mobile Climate Control
Ringfeder Power Transmission in sales

Stable, long-term principal owners OUR DIVISIONS

The VBG Group’s principal owners comprise three long-term
owners: The Herman Krefting Foundation for Allergy and
Asthma Research, the SLK Employees’ Foundation* and the
VBG-SLK Foundation. Alongside the other owners, they create
a solid and secure ownership structure.
Long-term financial strength
VBG Group’s development has been stable since its initial listing
on the stock exchange in 1987. The Group’s strong financial
position creates conditions for acquisitions and investments,
even during periods of economic downturn.
Values-based foundation
The VBG Group is characterized by a down-to-earth corporate
culture, which can be summarized in the Group’s shared values
— the Keystones. These are Overall view, Business orientation,
Professionalism and Teamwork. Together with the Group’s Code
of Conduct, the Keystones constitute a guide to daily work.
Considerable industrial expertise
In accordance with the owner foundations’ regulations, the
President of VBG Group is to be a Board member of all three
owner foundations and the Parent Company’s Chairman is to
have a seat on the foundation with the greatest share of votes.
This creates strong connections between Group Management,
the Board of Directors and owners, and leads to the formation
of considerable industrial expertise among the principal owners.
TRUCK & TRAILER EQUIPMENT
Coupling equipment for trucks with heavy trailers, automatic tire chains
and sliding roofs for trucks and trailers as well as railway wagons.
>> Page 42
MOBILE CLIMATE CONTROL
Heating, ventilation and air conditioning climate control systems
for commercial vehicles.
>> Page 46
RINGFEDER POWER TRANSMISSION
Products in mechanical power transmission as well as energy
and shock absorption in widely varying niches.
>> Page 49
The Group’s founder, Herman Krefting,
was an active member of society and
greatly interested in traffic safety issues.
In 1951, he started the company that
developed into VBG Group. Today,
traffic safety is a natural part of the
Group’s identity and a driving force in
the development of new products.
* The SLK Foundation (SLK is the Swedish abbreviation for drawbar
couplings) is an owner foundation in which the majority of the
Board of Directors comprises employees in VBG Group companies.

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 VBG GROUP ANNUAL REPORT 2019 | NICHES AND PRODUCTS

Products with high customer

value and social benefits
The vision of VBG Group’s divisions is to be the number one or number two player in the
world within selected industrial market niches. This is achieved through product solutions
that create value, which enables significant competitive advantages. Some examples are
NICHES AND PRODUCTS

presented here of niches in which VBG Group has a leading position globally, with
products that create value for customers, end users and society in general.

TRUCK & TRAILER EQUIPMENT

Drawbar couplings A Automatic tire chains B Sliding roofs C

Truck & Trailer Equipment’s automatic drawbar
couplings for trucks with heavy trailers contrib-
ute to improved road safety, a better environ-
ment and better working conditions for drivers.
Market position
The market for automatic drawbar couplings is
valued at approximately SEK 1,500 M annually.
Truck & Trailer Equipment is world leading,
with a market share of about 55%.
Truck & Trailer Equipment’s automatic tire
chains for commercial vehicles increase safety
on the roads and help truck, fire engine, school
bus and ambulance drivers arrive on time even
in difficult winter road conditions.
Market position
The market for automatic tire chains is valued
at over SEK 300 M annually. Truck & Trailer
Equipment is a world leader, with a market
share of approximately 65%.
Truck & Trailer Equipment’s sliding roofs for
tarpaulin-covered trailers and tipper vehicles,
and sliding bow roofs for railway wagons, con-
tribute to faster loading and unloading, which
enhances the efficiency of transport activities.
The roofs also contribute to a safer work envi-
ronment for the people loading and unloading.
Market position
Approximately 100,000 tarpaulin-covered
trailers are produced worldwide annually, most
of which have a sliding-roof system. Truck &
Trailer Equipment produces more than 40,000
roofs for these trailers and thus has more than
40% of the market.

55%
1st 65%
1st 40%
1st

4

D
RINGFEDER POWER TRANSMISSION
Friction springs D
Ringfeder Power Transmission’s friction springs,
used in many different fields, make up approxi-
mately 10% of the division’s total sales. In air-
craft, they are used as damping components in
the mechanism that adjusts the position of the
wing flaps, and also in aircraft doors. In build-
ings, they are used to reduce vibrations during
earthquakes. This protects buildings and can
save human lives.
Market position
The industrial market for friction springs is valued
at approximately SEK 100 M annually. Ringfeder
Power Transmission holds approximately 50% of
the market.
1st
50%
NICHES AND PRODUCTS | VBG GROUP ANNUAL REPORT 2019
MOBILE CLIMATE CONTROL
Climate control systems E
Mobile Climate Control’s climate control
­s ystems ensure an optimal climate for buses,
off-road, utility vehicles and defense vehicles,
in markets with differing needs. The climate
control systems create a good work environment
for the driver and a pleasant environment for
passengers. Moreover, the innovative technology
of these climate control systems decreases
­negative environmental impact by promoting
reduced fuel consumption in the vehicles.
1st
40%
E
Market position
The North American market for climate control
systems for buses, which accounts for about
50% of the division’s total sales, is valued at
approximately SEK 1,000 M annually. Mobile
Climate Control is a market leader, with a mar-
ket share of approximately 40%.
The figures provided, linked to the size of the markets
and the market shares of the VBG Group’s divisions,
are based on calculations made from a combination
of public statistics and the Groups’ own estimates.
5
VBG GROUP ANNUAL REPORT 2019 | NICHES AND PRODUCTS

6
 NICHES AND PRODUCTS | VBG GROUP ANNUAL REPORT 2019

ONSPOT – FOR EFFICIENT

AND SAFER DAILY WORK

S
ince 1991, Onspot has been a wholly owned brand in VBG
Group. The brand dominates its niche, and is a good fit for
the Group’s brand portfolio.
Onspot belongs to the Truck & Trailer Equipment division,
with production in both Vänersborg, Sweden and North Vernon,
Indiana.
Onspot is an automatic tire chain system installed on the rear
axle of a vehicle. The system comprises two wheels with chains that,
when put into operation, are lowered and pressed against the drive
wheels. When the wheels rotate, the chains are placed under the
drive wheels to improve traction. With a better grip on the road,
transportation becomes safer and the risk of delays is minimized.
“The system is an extremely simple and reliable solution. The
product is activated under slippery road conditions and can be
engaged and disengaged with the push of a button on the dash-
board. In pace with increased focus on delivery times, the transpor-
tation sector can complete assignments safely and in a cost-efficient
manner regardless of the weather,” says Eric Jones, Global Sales
Director for Onspot.
The system is adapted to the unique vehicle using a 3D scan
of the undercarriage of the customer’s vehicle, and a customized
mounting bracket is produced. Onspot’s customers can be found in
long-­distance transportation, rescue services, public transportation
and municipal operations.
“When we get a call from a driver saying ‘Onspot saved me
today!’ – then the system has already paid for itself,” says Rolf Olav
Tenden, Fleet Manager at Thor Tenden Transport.
“The best thing about Onspot is the combination of safety and
economy – and that the driver can always perform well out there on
the roads,” says Åge Henneman, Fleet Manager at Meyer Logistic
Sverige AB.
Onspot has an R&D division that works on developing the prod-
ucts of tomorrow. Electrification is a driving factor in this work.
­Digitalization is also an important trend in which autonomous vehi-
cles are regarded as a possible future customer group for Onspot.
Digitalization is also important from a marketing standpoint, and
the organization has recently assigned crucial resources to ensure
that progress is made in the digital field.
“We have a strong brand in a small niche. It’s a matter of continually
marketing ourselves and emphasizing the importance of using auto-
matic tire chains, since players in the transportation industry could
otherwise choose to drive without them. Expanded legislation and a
greater emphasis on safety, however, mean we have seen increased
demand for our systems – not only for buses but also for waste col-
lection vehicles in large cities,” says Eric Jones, Global Sales Director
for Onspot.

7
 VBG GROUP ANNUAL REPORT 2019 | FROM THE PRESIDENT
Sales and earnings at
new record-high levels
FROM THE PRESIDENT
I would like to begin by thanking all our employees for their hard
work during the year. In summary, 2019 was another strong year
for VBG Group. Our portfolio strategy and diversified business
structure showed our strength, and we successfully maintained a 
stable level of sales and healthy profitability. Today, we have a
solid financial situation with a balanced level of indebtedness.
I can confirm that we improved our net profit by 10% in 2019.
For several years, our operations have benefited from the sus-
tained high level of business activity we have seen over the last
five years. The acquisition of Mobile Climate Control was com-
pleted with good timing in 2016, and resulted in robust struc-
tural growth for VBG Group. Our net profit today is the result
of this structural growth as well as positive organic growth.
Our performance over the last few years is proof that we
have  established a successful portfolio strategy. The Group’s
diversified business structure promotes growth for VBG Group
that is more even and more stable.
2019 got off to a good start with stable organic growth for
the Group, and in April we reported our best quarter ever. In
the second half of the year, on the other hand, we saw some of
our European markets cool off – especially in Germany, where
the trailer market adjusted its capacity and reduced its stockpile
of finished vehicles. This development would have affected the
8
Group more palpably a few years ago, but with the current
­ usiness structure it was largely offset by the Group’s now
b
greater international spread and broader customer base.
A clearer, stronger VBG Group
In the fourth quarter of 2019, the Board of Directors decided
that the two divisions, Edscha Trailer Systems and VBG Truck
Equipment, would be reported and monitored as a joint
­segment: Truck & Trailer Equipment. Going forward, this will
provide a clearer picture of the Group’s primary components:
truck and trailer equipment, climate control systems for com-
mercial vehicles and industrial components.
In the first quarter of 2019, VBG Truck Equipment signed a
strategic agreement to acquire all the rights to BPW’s drawbar
program. Financially, the acquisition was a small one, but
­strategically it was extremely important. Integration efforts
­progressed in 2019, and sales commenced in January 2020.
Mobile Climate Control also passed a milestone during the
year, as strong organic growth resulted in sales that reached
nearly two billion Swedish kronor (SEK 1,998 M). From VBG
Group’s perspective, this is extremely gratifying since one
important reason for the acquisition of Mobile Climate Control
was that we saw better possibilities for organic growth in the

operations compared with our operations at the time. The robust
growth has generated favorable operating profit, but scope
remains for improvements to profitability through cost savings
and streamlining the business model going forward.
Another significant event for the division during the year was
that Division Manager Clas Gunneberg, also the Executive Vice
President of VBG Group, chose to resign his position. As a con-
sequence, I came in as acting Division Manager for Mobile
­Climate Control during the second quarter.
Three years after the acquisition of the division, I can proudly
state our portfolio strategy has been a success, and our analysis
and investments have performed exactly as intended.
Ringfeder Power Transmission reported that its sales levels
remained stable in 2019. Earnings
were negatively impacted, however,
by non-recurring costs during the “For the fifth
consecutive
fourth quarter.
Continued focus on our
sustainability goals
In 2019, we continued our long- year, we
term work on achieving our sustain-
ability goals that extend through increased
our net
2022.
One positive development in
2019 was reaching our goal of
reduced energy consumption.
­For this reason, we have decided profit”
to further increase our ambition
as regards the Group’s energy consumption.
The proportion of women in the Group increased compared
with 2018, as did the proportion of women managers, which
is a step in the right direction, and we will continue working
for diversity. Here as well, we are adjusting our goals and are
increasing our ambition.
One of the prevailing trends in the transportation market
­concerns reductions in carbon emissions. Truck & Trailer
­Equipment is active in a number of projects for developing
high-capacity transport vehicles. These projects have successfully
designed heavier and longer vehicles that have thus enabled a
reduction in fuel consumption per ton shipped.
Mobile Climate Control currently has a well-established
­product range for electric vehicles. For the municipal bus
FROM THE PRESIDENT | VBG GROUP ANNUAL REPORT 2019
­customer segment, electric products represent nearly 50% of
sales, and we envision further increases to this share in 2020.
Good conditions for structural and profitable growth
After several years of strong organic growth, we have an ambi-
tion to once again create structural growth. Continued growth
and acquisitions are part of the strategy. In 2019, there were
opportunities to carry out acquisitions, but we chose to abstain
from them since the acquisition candidates were too highly
appraised. Acquisitions at the right time and at the right price
are important for us.
I am extremely satisfied with what VBG Group achieved in
2019. We have a stable financial situation and a balanced level
of indebtedness. Our strategy has
proved successful, and we maintained
a stable level of sales and healthy
­profitability in 2019.
A great deal of uncertainty contin-
ues to prevail around the world. The
strong business cycle we have seen for
several years is not accelerating at the
same rate. We have healthy profitability
and financial flexibility owing to a
well-balanced level of indebtedness
and financing agreements that provide
scope for us to deploy a stop-and-go
strategy, which is a strength in uncertain
times. A global outbreak of covid-19
blossomed in the first quarter of 2020.
The management of VBG Group is monitoring the development
of this outbreak on a daily basis. At the time of writing, with
the prevailing uncertainty, we cannot determine what financial
effect this will have for the Group. Continual risk assessments
are conducted on a daily basis, and the necessary measures are
routinely taken.
Anders Birgersson
President and CEO, VBG Group
9
 VBG GROUP ANNUAL REPORT 2019 | MARKET AND TRENDS

A changing business
environment
VBG Group operates in a transportation industry that is facing a
paradigm shift. Electrification, automation and digitalization of the
transportation industry, in combination with expanded environmental
MARKET AND TRENDS

requirements in all the divisions, places new demands on us and our

products. The Group is working actively on adapting and developing
solutions and products to meet a changing business environment.

THREE BUSINESS ENVIRONMENT FACTORS IMPACTING THE GROUP

Climate and environment

There is a change under way in the world today from
the use of fossil fuels toward more renewable energy.
There is a great deal of focus on reducing fuel con-
sumption and carbon emissions.

Electrification
The ongoing technological shift has drastically
increased the number of electric vehicles.

Digitalization
The trend is moving towards more connected vehicles
and products, driven by factors such as the search by
customers for increased efficiency and reduced costs.
Digitalization of processes and marketing is also on the
increase.

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 MARKET AND TRENDS | VBG GROUP ANNUAL REPORT 2019

EXAMPLES OF MANAGEMENT

For several years, Truck & Trailer Equipment has played an active role in the
debate around reduced carbon emissions and participated in several projects
linked to heavier and longer transport vehicles. The project has resulted in a
reduction in fuel consumption per ton shipped.

Mobile Climate Control is investing major resources in the field of electrification,

which has resulted in a positive development with increased deliveries of products
adapted for electric vehicles, above all for buses in public transportation.

Truck & Trailer Equipment is working actively on digitalization of its product

offering – for example, sensor technology is being added to its coupling
equipment, which will lead to increased traffic safety.
In addition, the division is venturing into digital marketing for Onspot, VBG,
Ringfeder and Edscha TS.

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 VBG GROUP ANNUAL REPORT 2019 | STRATEGY

A successful business model

GROUP

NICHE IDENTIFICATION ACQUISITIONS

Over nearly seventy years, the Group has In these carefully selected niches, we are work-
STRATEGY

built up extensive industrial expertise and
in-depth knowledge of the markets for com-
mercial vehicles. In addition, through lengthy
and positive customer relationships, we have
a solid understanding of our customers’
needs. With this as a foundation, we work
from a model based on identifying attractive
niches in which our divisions can distinguish
themselves by means of sought-after brands
and products. The niches are to be linked to
our existing operations in order to benefit
from the experience and expertise we pos-
sess. The ambition is for all of our divisions
to be – or over the long term to establish
themselves as – the number one or number
two player in their respective markets, with
healthy long-term growth and profitability
as a result.
ing systematically on identifying companies that
may be of interest for acquisition. They must be
well-managed companies with strong brands.
They can be divided into two categories:
1. Companies that complement our existing
divisions in terms of product range,
­production, logistics and geographical
coverage. Typical supplementary acquisi-
tions for us are operations with annual
sales of SEK 50–300 M.
2. Companies in new fields of operation
that can form a separate division. We are
looking for companies with annual sales
of approximately SEK 500 M and upwards.
A critical part of our analysis of potential
acquisitions is assessing whether the com-
pany fits in with the Group, and whether
the company’s core values correspond
with those of VBG Group.

VBG Group’s business model has proved successful over time, and has its basis in extensive
industrial expertise as well as long-term active ownership. Group Management identifies
and acquires companies in attractive niches, preferably specializing in commercial vehicles.
The companies acquired are integrated into the operation, where synergies are sought both
within the divisions and through vertical integration. Group Management is responsible for
the general governance of VBG Group’s three divisions.

12
 STRATEGY | VBG GROUP ANNUAL REPORT 2019

ADVANTAGES AND STRENGTHS RESULTS

The organization, and the

STRATEGIC GOVERNANCE
manner in which we work, are
a great strength for us. While
we have a decentralized orga-
Group
The Group Management of VBG Group is nization, there is continual
Sustainable
responsible for the overall governance of work at the Group level on
reviewing the organization
and profitable
the Group and plays a role in identifying
as a whole in order to create growth for
­synergistic effect both within and among
advantages for the three VBG Group
the divisions. Group Management provides ­divisions. The Group works
expertise and shares resources from one to achieve a good balance,
­division to another. In addition, Group both geographically and in
­Management sets the strategic framework our customer base, thereby
diversifying our risk.
for the Group, which the divisions subsequently
use to produce their own operation-specific
goals and strategies.

The primary success factor Divisions

for the divisions is the close
relationship with customers, Attractive
suppliers and end users, which products and
provides valuable input for the
services for our
work on developing custom-
ized solutions. customers

Strategic
collaboration

DIVISIONS

MANUFACTURE
DEVELOPMENT PURCHASING SALES AFTERMARKET
AND ASSEMBLY

13
 VBG GROUP ANNUAL REPORT 2019 | STRATEGY

Long-term active ownership

VBG Group is a long-term, active owner and the core of our operations lies in acquiring,
owning and further developing industrial companies in business-to-business commerce.
The Parent Company and Group Management are responsible for the overall strategic
governance of the Group, which entails identifying and carrying out acquisitions,
allocating capital, supporting the divisions in the form of industrial know-how as well
STRATEGY

as approving and monitoring the divisions’ goals and strategies.

Strategic governance based on our values An effective portfolio strategy and

VBG Group’s business model, under which our procedures and
operations are clearly governed based on the VBG Group Key-
stones – Overall view, Business orientation, Professionalism and
Teamwork – has proved successful over time. Together with
the Group’s Code of Conduct, the values provide guidance in
everything we do.
One important element in our acquisition of new companies
is ensuring that the values of the company acquired correspond
with our own.
In addition, as an active owner we consider it important that
the Group and our divisions conduct operations from a sustain-
able perspective, with a focus on environmental responsibility,
social responsibility and business ethics, which creates conditions
for sustainable profitable growth.
A long-term perspective
VBG Group has a long-term perspective for its investments,
with the goal of further developing the business models of its
operations and creating value over time. In addition to setting
the strategic framework for the Group, the Parent Company
and Group Management also work to create synergies among
the Group’s various operations.
diversified business structure
Through a successful history of acquisitions and a functional
portfolio strategy, VBG Group has built up a diversified business
structure that promotes smoother, more stable development for
the Group. Today, decreased demand in individual markets is
offset by the Group’s broader international spread and customer
base.
Decentralized responsibility
The Group Management of VBG Group sets the overall strategic
framework for the Group within which the three divisions then
produce their own operation-specific goals and strategies. The
divisions are fully responsible for their results, in which decen-
tralization is a major strength for the Group. Flexibility is created
through more local decision-making in operational activities,
which leads to value creation for both the customer and the
Group in general.
The three divisions, operating in truck and trailer equipment,
climate control systems for commercial vehicles and industrial
components, work closely with their customers on customized
offerings based on the customers’ specific wishes. Strong
­customer relations, and value for the customer, are in focus.
Through its divisions, the Group obtains a broad offering of
products and solutions for customers in various carefully selected
niches. At the same time, this diversified business structure also
promotes a limitation to business risk for the Group as a whole.

14
 STRATEGY | VBG GROUP ANNUAL REPORT 2019

STRATEGIC
ACQUISITIONS

V
BG Group’s active ownership is built on effective
governance of the three divisions, while the
Parent Company and Group Management
have the important task of identifying poten-
tial acquisitions that could create synergy effects and
strengthen the divisions’ existing offerings.

BPW’s drawbar products program

– completing the systems offering
Truck & Trailer Equipment is a world leader in coupling
equipment for trucks. The division’s offerings are marketed
under two strong brands: VBG and Ringfeder. The busi-
ness is impacted by a number of trends, including digitali-
zation with more connected products and vehicles, and
an increased focus on fuel consumption.
In 2015, the division adjusted its business model for
the Central and Western European markets to more
resemble the one that has been used in the Nordic region
with great success for many years. The business model is
based on offering complete drawbar coupling systems
rather than individual products, creating great customer
value through simplification.
An agreement was signed in early 2019 in which the
division exclusively acquired all rights to manufacture,
market and sell BPW’s drawbar program. When this
agreement entered force in December 2019, the division
gained access to a vital component that supplements
its existing product range and facilitates deliveries of
complete systems, which strengthens the division’s
­offering in the European markets.
“We lacked this type of drawbar for central axle trailers
in our offering for Central and Western Europe, but we
have now secured the final important piece of the puzzle
to make our systems offering complete,” says Anders
Erkén, Division Manager of Truck & Trailer ­Equipment.
The acquisition and supplementary investments made
to integrate the products is a clear example of active
ownership and the central role of Group Management
in creating value for VBG Group.
“For VBG Group, this is a small investment financially
but important strategically as it is completely in line with
our ambition to create a high level of customer value in
our products,” says Anders Birgersson, President and
CEO of VBG Group.

15
 VBG GROUP ANNUAL REPORT 2019 | STRATEGY

The divisions’ value chain

The divisions offer their customers a broad selection of products
and solutions in which the value chain runs from the develop-
ment phase to aftermarket.

DEVELOPMENT
STRATEGY

The product development work is marked by close collabora-

tion with customers in order to offer complete customized
solutions that are technologically leading.

PURCHASING

In the purchasing organizations, focus lies on total cost

rather than lowest price. Another distinguishing quality is
fruitful long-standing relationships with suppliers, which
has enabled them to build up knowledge of the divisions’
needs and thus contribute to development.

MANUFACTURE
AND ASSEMBLY
Four Group-wide strategies
The production equipment in the facilities is modern and, With a goal of continuing to create profitable growth, VBG
relatively speaking, highly automated. Moreover, production Group bases and governs its operations on four Group-wide
is largely LEAN-based, and the ambition is to optimize all strategies:
production through continual improvements.

SALES
Strong brands and leading


The primary sales strategy is to create demand through market positions in selected
close relationships with end users and to offer complete niches
solutions instead of only individual products.

High customer value in the

AFTERMARKET products
Diversified customer base


The aftermarket work is characterized by close customer
relationships. This, together with the divisions providing International expansion

products that by nature need to be replaced or serviced,
means the divisions have a strong, well-developed after-
market business.
The Group Management of VBG Group focuses on creating
conditions for increased international expansion and a diversified
customer base while the divisions pursue product development
and marketing for increased customer value in their products
and ever stronger brands and market positions.

16
 STRATEGY | VBG GROUP ANNUAL REPORT 2019

Four Group-wide strategies

Division-related

Strong brands and


 Examples of activities in 2019 Examples of focus for 2020
leading market • Developed digital marketing for Truck • Develop digital marketing for more
& Trailer’s brands, Ringfeder and VBG brands
positions in selected
• Strong growth for Mobile Climate
niches Control in the segment for smaller
off-road vehicles (Compact segment)

High customer value


 Examples of activities in 2019 Examples of focus for 2020
in the products • The Ringfeder brand drawbar • Launch of new coupling products
couplings expanded its systems
• Continued electrification of Mobile
offering into the German market
Climate Control’s heating, ventilation
• Launched a new product range in air and air conditioning (HVAC) products
conditioning for buses in the European
market

Group Management-related

Diversified

 Examples of activities in 2019 Examples of focus for 2020
customer base • Restructured Ringfeder Power • Acquisitions that complement our
­Transmission’s sales channels in Brazil existing operations in product range
to reach new customer segments and geographical coverage

• Continued stable growth for Onspot

in North America

International

 Examples of activities in 2019 Examples of focus for 2020
expansion • Established sales of drawbar • Continued development of VBG
couplings in Brazil Group’s business in Brazil and China

17
VBG GROUP ANNUAL REPORT 2019 | STRATEGY

18
 STRATEGY | VBG GROUP ANNUAL REPORT 2019

HIGH CUSTOMER VALUE IN THE PRODUCTS

V
BG Group’s overall objective is long-term profitable growth. To achieve this
goal, all of the Group’s operations are based on four Group-wide strategies.
One of these strategies is high customer value in the products. The divisions
will stand at the leading edge, developing the products and services of the future.

Comfortable climate that meets legal requirements

Mobile Climate Control is a leading supplier of complete climate control systems, primarily
for buses and off-road vehicles. Over time, the division has built up a strong brand and
a competitive customer offering, which has enabled the division to occupy the leading
position it has today in both North America and Europe.
In Sweden, Mobile Climate Control has its European technology center in Norrtälje.
The majority of all product customization, and tests for European customers, takes
place here. The tests are performed in the facility’s climate chamber based on applicable
standards, and is an important part of product development and value creation for the
customer. The Norrtälje operations are focused on off-road vehicles in the following areas:
mining, forestry, materials handling, agriculture and other off-road vehicles.
In close collaboration with the customer, tailored solutions that are adapted to their
specific needs are designed. In this process, the Norrtälje operations also work closely
with other sections of the operations, above all in Germany and Poland. The project teams
in those countries work together with the various units. For example, all the pre-serial and
serial production takes place in the division’s plant in Poland. Collaboration also takes
place with Mobile Climate Control’s North American operations concerning software
development and control systems.
“Working closely with the customer is important for understanding their challenges and
their environment. By coming into the vehicle development process early and being able to
impact its design, we have the possibility of optimizing the cabin climate, thereby creating
value for the customer,” says Carl Nicolin, Manager Engineering at Mobile Climate Control
Norrtälje. “We can run analyses and simulations in our data environment and perform
tests in our climate chamber.”
Product development of climate control systems for off-road vehicles is impacted by
legal requirements and by the customer’s specific area of application.
“Several of our customers operate in extremely tough environments – mines, for example
– which places strict requirement on the materials we use in our products. The test phase
in our climate chambers is an important part of product
development, and is greatly appreciated by our custom-
ers. As regards product durability in particular, we are
highly regarded in several different areas of operation,”
says Martin Gidlund, Design Engineer at Mobile
Climate Control Norrtälje.
The development of climate control systems is also
impacted by the trends of electrification and sustainability.
That is why Norrtälje works actively on developing new
concepts. There is a transition occurring in the industry
toward more environmentally friendly coolants, as well
as increased focus on energy-saving functions, which has
a positive environmental impact. Mobile Climate Control
monitors industry developments carefully, and sustain-
ability is now a metric in the division’s operations.

19
 VBG GROUP ANNUAL REPORT 2019 | GOALS AND OUTCOMES

Good conditions for sustained

profitable growth
The combination of an effective business model, long-term active ownership and value-
creating strategies provides ideal conditions for achieving our goals of sustained profitable
growth for the Group. Sustained profitable growth, in turn, creates the conditions for a
GOALS AND OUTCOMES

continued stable financial position and healthy returns for our shareholders.

2019
GROWTH TARGET SUSTAINABLE GROWTH

> 10%
Average annual sales growth over a five-year
SEK M
4,000
%
40

3,000 30
period, of which >5% attributable to actual
organic growth and >5% to structural growth.
2,000 20

OUTCOME

25.7%
1,000 10

0 0
2014 2015 2016 2017 2018 2019
In 2019, sales increased by 6.7%, all of which was organic
growth. Total average growth over five years was 25.7%, Acquired sales Growth over a five-year period
of which 13.3% was organic growth and 17.8% structural Organic sales Targets over a five-year period
growth.

PROFITABILITY TARGET SUSTAINABLE PROFITABILITY

> 12%
Average operating margin (EBIT margin), rolling
%
15

five years. Before 2017, the goal was >10%.

10

OUTCOME

11.6%
5

0
In 2019, the EBIT margin was 11.7%; over a rolling 2014 2015 2016 2017 2018 2019

five-year period, the EBIT margin was 11.6%. Annual EBIT margin Targets, rolling five years
EBIT margin, rolling 5 years

20

Continued work on achieving
long-term goals
Based on the stakeholder and materiality
analysis carried out in 2017, we are working
actively to meet the long-term sustainability
goals defined at that time. Our sustainability
efforts are grounded in our values – the
Keystones – and our Code of Conduct, which
has its starting point in the UN’s Principles for
Corporate Social Responsibility.
A sustainable business strategy
VBG Group works with sustainability, which is now an integrated
part of our overall business strategy, throughout the entire
Group; refer to pages 12–19. Sustainability issues hold a central
position in VBG Group; this remained the case in 2019. We have
chosen to report on our sustainability activities on pages 21–24,
SIGNIFICANT EVENTS IN 2019
• New environmentally profiled policy for company
cars in Sweden.
• Truck & Trailer Equipment manufacturing site
in the Czech Republic was ISO 14001 certified
during the year.
• New 15% energy savings target in plants, as
the previous target of 10% was reached in 2019.
• Increased proportion of women managers.
FOCUS FOR 2020
• Identify which UN Global SDGs that are relevant
to VBG Group and report on them.
• Continued efforts to reduce workplace accidents.
SUSTAINABILITY | VBG GROUP ANNUAL REPORT 2019
SUSTAINABILITY
and we refer the reader to the Board of Directors' Report on
pages 52–54 for more detailed information on the stakeholder
and materiality analysis conducted in the Group in 2017. Sustain-
ability risks, and how they are managed, are presented together
with other risks on page 73, in Note 2 Risks and risk manage-
ment. In our analyses we know that corporate social responsibil-
ity, in which we show respect for people and the environment,
not only enables a more sustainable society but also creates
business opportunities, lowers costs, and reduces risks.
Values and Code of Conduct form the foundation
VBG Group’s sustainability initiatives are grounded in the Group’s
shared values – the Keystones – and the company’s Code of
Conduct. The Code is intended to clarify how we are to relate
to our various stakeholders, and which requirements we can
impose both internally and externally. All the divisions are
­covered by the Code of Conduct, and it forms the foundation
for the daily work of both employees and partners.
Long-term sustainability goals
In 2017, we presented our long-term sustainability goals that
extend through 2022. These goals were presented in three
reporting areas: environmental responsibility, social responsibility
and business ethics. The overall goals are also supplemented
with detailed objectives at the local level in the respective
divisions.
21
 VBG GROUP ANNUAL REPORT 2019 | SUSTAINABILITY
SUSTAINABILITY
ENVIRONMENTAL
RESPONSIBILITY
Our goal is to reduce the Group’s energy consumption and
waste production by 10% from 2017 through 2022. In 2019, we
achieved a total reduction of 11.9% in energy consumption since
2017. The new adjusted goal for reduced energy consumption
from 2017 to 2022 is 15%. Total waste generation remained
constant in 2019, but the share of recyclable waste products
increased to 85% (82.5) of total waste.
The Group applies the precautionary principle, which means
that we avoid materials and methods that could constitute a risk
to health or the environment. There are established routines in
the Group for monitoring and reporting as regards environmental
performance, in which we regularly evaluate potential risks for
our operations as well as for current and future products. We
also monitor the work of our partners to ensure their compliance
with our Code of Conduct.
A further objective in the area of environmental responsibility is
that all the Group’s production facilities are to be environmentally
certified by 2022 at the latest. At the end of 2019, nine out of
the Group’s 12 facilities were certified.
During the year, a new strengthened environmentally profiled
policy for company cars was introduced, which applies to all
Swedish companies in the Group.
22
SOCIAL RESPONSIBILITY
VBG Group supports and respects human rights, and works
actively to counteract all forms of bullying and harassment.
Diversity in the workplace is encouraged at all levels throughout the
Group. We employ and treat our employees in a non-discriminatory
manner as regards gender, age, nationality, religion, political
opinion, physical or mental disability, membership in an association,
sexual orientation, and social or ethnic origin. We also work to
ensure our employees have a safe, healthy work environment.
This includes having a zero tolerance approach to workplace
accidents. In 2019, 26 workplace accidents (30) were reported.
Efforts to prevent future accidents were made during the year,
including Ringfeder Power Transmission’s development of a new
system for analyzing the causes of accidents.
Staff in 2019 comprised 77.4% men (79), 22.5% women (21)
and 0.1% non-binary (0). We are striving for a greater proportion
of women in executive positions in the Group. In 2019, 20% (17)
of executive positions were filled by women. Our goal is for this
percentage to be equal to the total proportion of women in the
Group.
VBG Group tolerates no form of slavery, compulsory labor or
child labor, and we place the same demands on our suppliers
and collaborating partners to comply with this.
A Group-wide whistleblower function was implemented in
the preceding year. In 2019, we had one active case.
 SUSTAINABILITY | VBG GROUP ANNUAL REPORT 2019

ENVIRONMENTAL RESPONSIBILITY

–15%
VBG Group’s energy con­
Energy consumption, kW2

11.9%
sumption is to be reduced by
15% up through 20221.

16.0 15.6 14.1 13.6

2017 2018 2019 2022

–10%
VBG Group’s waste gene­ra­
Total waste products, kg2

33.3%
Recyclable waste products as
% of total waste products
Environmentally hazardous
waste products as % of total
waste products

tion is to be reduced by 10%

up through 2022.

2.7 3.6 3.6 2.4 75.9 82.5 85.0 17.4 13.2 13.7
2017 2018 2019 2022 2017 2018 2019 2017 2018 2019

100%
All of VBG Group’s pro­duc­
Environmental certification 20193

tion facilities are to be

environ­mentally certified
by 2022 at the latest.
9 out of 12 facilities

SOCIAL RESPONSIBILITY
Persons in senior positions, %

 Proportion of women managers  Proportion of women in the organization, 2019

Women 17 17 20

20.3% 22.5%
The proportion of women Men 83 83 80
managers must follow the 2017 2018 2019
proportion of women in
the organization in total.4 
1
Target updated, since previous target has been met 2
Per production hour 3
Under ISO 14001 or the equivalent 4
Number of women, based on headcount

23
 VBG GROUP ANNUAL REPORT 2019 | SUSTAINABILITY

BUSINESS ETHICS pace with the Group expanding globally, especially in conjunc-
tion with establishment in developing countries.
In all the countries where VBG Group conducts operations, we
VBG Group must make a positive contribution to social
will comply with the laws and ordinances in force. If uncertainty
improvement and create opportunities for the local population
arises and the law provides no guidance, we will follow the Group’s
by placing the same stringent requirements on suppliers and
shared standards and principles. We must have an honest approach
­collaborating partners as we do on ourselves.
SUSTAINABILITY

in relation to all our stakeholders. Employees in the Group may

Our accounting and financial reporting must be carried out
not take payments, gifts, or other forms of remuneration from
correctly, in accordance with generally accepted accounting
third parties that could affect their objectivity in decision-making.
practices. Employees and members of the Board of Directors of
During the year, the Group once again held anti-corruption
VBG Group must manage their activities and economic interests
training for selected employees. At the end of 2019, all 435
in a way that does not result in conflicts of interest arising in
selected employees had undergone the training program.
relation to the Group. VBG Group is also politically neutral,
Respect for human rights is not only a social issue, but also
and therefore does not permit names or assets belonging to
important from the perspective of business ethics. Our zero
the Group and its companies being used to promote the
­tolerance approach to discrimination and all forms of slavery,
interests of political parties or candidates.
forced labor or child labor is becoming increasingly relevant in

BUSINESS ETHICS GOALS

Anti-corruption Anti-corruption

100%
training 2018, % training 2019, %

All selected employees in the Group are to undergo

the company’s anti-corruption training annually. 100 100

OUTCOME

100%
Completed Completed

Auditor’s report on the statutory sustainability report

To the general meeting of the shareholders in VBG Group AB (publ), corporate identity number 556069-0751.

Engagement and responsibility Standards on Auditing and generally accepted auditing standards
It is the board of directors who is responsible for the statutory in Sweden. We believe that the examination has p
­ rovided us with
­sustainability report for the year 2018 on pages 21–24 and that it sufficient basis for our opinion.
has been prepared in accordance with the Annual Accounts Act.
Opinion
The scope of the audit A statutory sustainability report has been prepared.
Our examination has been conducted in accordance with FAR’s Gothenburg, 27 March 2020
auditing standard RevR 12 The auditor’s opinion regarding the
statutory sustainability report. This means that our examination Öhrlings PricewaterhouseCoopers AB
of the statutory sustainability report is substantially different and Johan Malmqvist
less in scope than an audit conducted in accordance with International Authorised Public Accountant

24

High levels of satisfaction
in the Group
The work on designing and re-working the
Group’s general policies and routines continued
in 2019. A management conference was held
on the different challenges of the shift in
technology. One of our facilities has received
the “Great Place to Work” certification.
SIGNIFICANT EVENTS IN 2019
• Continued the work on reviewing Group-wide
policies and procedures.
• Management conference focused on challenges
for managers in the ongoing shift in technology.
FOCUS FOR 2020
• Continue the review of Group-wide policies
and procedures.
• Continue working to increase the security
of personal data for the Group’s employees.
EMPLOYEES | VBG GROUP ANNUAL REPORT 2019
EMPLOYEES
The VBG Group is an international industrial group with some
1,600 employees in 18 countries. Apart from nine employees
in the Parent Company, all others are employed in one of the
Group’s three divisions. Group Management supports and
guides the divisions in their daily HR work and ensures that the
right competence is in place within the organization, which creates
the conditions for achieving the Group’s goals for profitable and
sustainable growth.
The shift in technology imposes new demands for competence
The transportation industry is faced with a shift in technology
through increased electrification and digitalization That is why
the theme of this year’s management conference was “Future
challenges impose new demands on us as managers.” These
developments impose new demands in relation to know-how
and competence, which is a challenge both for our divisions and
for the industry as a whole. The shortage of competence in the
fields of technology and engineering is enormous.
The Group is investing significant resources to market VBG
Group as an attractive employer. We collaborate actively with
universities and colleges. Furthermore, we participate in various
job market fairs. An important part of strengthening our brand as
an employer is maintaining our down-to-earth culture that should
be characterized by an open, pleasant and caring atmosphere.
25
 VBG GROUP ANNUAL REPORT 2019 | EMPLOYEES

Gender distribution, % Geographic distribution, %

Icke-binära Afrika

0.1 WomenMän 6 1 Europe Asien

22.5 7
Men North america
Kvinnor Sydamerika
Non-binary South america
44
Asia Nordamerika
EMPLOYEES

Africa Europa
42
77.4

Age distribution, % Length of employment, %

15 24 27 25 9 50 17 13 7 13
Age <30 30–40 40–50 50–60 >60 Age <5 5–10 10–15 15–20 >20

In the competition for talent, we also regard offering opportuni-
ties for further growth in the Group as important.
Excellent potential for competence development
With employees in 18 countries, there is excellent potential for
the exchange of competence and progress within the Group.
In our opinion, regular competence development promotes
the Group’s diversity, efficiency and increased competitiveness.
Moreover, we believe it leads to reduced employee turnover.
Competence development is pursued at both an overall level
and an individual level for our employees.
In 2019, three employees began management training at
KTH Royal Institute of Technology’s Executive School. Since
2010, 21 employees have completed the program.
One of our owner foundations, the SLK Employees’ Foundation,
also offers a training scholarship that all employees in the Group
can apply for. 143 persons applied for scholarships in 2019, and
34 scholarship recipients received a total of SEK 465,000.
Grounded in our values
The core values of VBG Group can be summarized in its Keystones:
Overall View, Business Orientation, Professionalism and Team-
work. Alongside our Code of Conduct, these constitute a guide
for how all of VBG Group’s operations and employees are to act
in internal and external relationships.
Satisfied employees are a prerequisite for success
Our employees are ambassadors for the Group, which is why it
is important that they feel satisfied at their workplaces. Employees
who feel satisfied and enjoy their work are more productive and
enable greater success. VBG Group has a long-term perspective
concerning its operations, and strives in every aspect to be a
­stable, secure employer. We work continually to improve health
and safety at our workplaces, which includes everything from
noise levels to ergonomics.
Sick leave in the Group remains low at 3.4% (3.1), though
it increased slightly year-on-year. We regard a low level of sick
leave together with employee turnover of only 10.3% (11.8)
as solid proof that our employees are satisfied and that they
­perceive the work environment in the Group as positive.
During the year, one of the Group’s operations – Mobile
Climate Control in Toronto – received the “Great Place to Work”
certification. The award is based on an anonymous employee
survey, the results of which were positive and indicated a high
level of satisfaction among employees.
* The SLK Foundation (SLK is the Swedish abbreviation for drawbar
couplings) is an owner foundation in which the majority of the
Board of Directors comprises employees in VBG Group companies.

26

Mobile Climate Control Toronto
– a great place to work
I
n Vaughan, a town outside Toronto, Mobile Climate Control
has its largest and most comprehensive production facility.
The operations here are in the bus, off-road, utility and
defense vehicle segments. The Canadian facility produces
complete climate control systems for vehicles, which includes
heating, ventilation and air conditioning.
The facility in Vaughan has approximately 450 employees.
There is a great deal of diversity as regards age, gender and
­ethnic origins – for example, 32 nationalities are employed in
the various areas of operation. Employee turnover is low –
approximately 2.7% – indicating that employees are satisfied
and tend to remain for the long term.
In pace with the ongoing shift in technology within the industry,
the management at Vaughan asked itself last year how talent could
be attracted going forward. In addition to offering competitive sala-
ries and pension benefits, they wanted to emphasize employee
satisfaction. They decided to conduct an employee survey, and
selected the “Great Place to Work” certification scheme.
This certification is based on an anonymous employee survey,
and requires at least 70% of all employees to submit a positive
response as regards their employer. The results for Toronto were
89% positive. Bob Kuzminski, President North America for
Mobile Climate Control, is proud of the distinction:
EMPLOYEES | VBG GROUP ANNUAL REPORT 2019
“The certification is solid proof that our employees are satis-
fied, and that our work on continually trying to improve our
work environment is appreciated. Moreover, the award gives
us the opportunity to use the Great Place to Work logo on our
web site and in social media, which is extremely positive for
recruitment purposes.”
To be an attractive employer, the Toronto operations also
­collaborate closely with the educational system. Employees are
offered professional development through various courses
both with and without scholarships. To attract new employees,
the plant has internships in which the interns could be offered
­permanent employment after the completion of studies. During
the year, 24 persons took internships over a period of 4 to 12
months.
“The Group’s shared values, or Keystones – Overall View,
Business Orientation, Professionalism and Teamwork – in
­combination with Mobile Climate Control’s local core values are
regarded as an important competitive advantage in recruitment,
and a contributing factor to the high level of satisfaction at
Vaughan. I would say a major reason for our employees’ satis-
faction is the extremely open environment we have. We have
fun together and we are driven by the view that none of us are
better than we are as a collective,” Bob Kuzminski says.
27
 VBG GROUP ANNUAL REPORT 2019 | FINANCIAL PERFORMANCE

Highest sales and best

ever earnings
For VBG Group, 2019 was the best fiscal year ever, in which sales reached their
historically highest level. All earnings measures – gross earnings, operating profit,
FINANCIAL PERFORMANCE

profit after net financial items and earnings per share – reached all-time highs.

SEK M
Net sales Gross margin
The Group’s growth of 6.7% was Gross margin fell from 34.1% to
3,725.4 exclusively organic, as there were 33.7%, where Truck & Trailer
no corporate acquisitions during ­Equipment increased its gross mar-
the year. gin from 38.3% to 40.5%, Mobile
3,500 Climate Control’s margin fell from
26.9% to 26.5% and Ringfeder
Power Transmission’s margin fell
from 48.0% to 45.3%.

3,000

Sales administration
and R&D expenses
2,500 Total costs for selling, administration and R&D
increased SEK 8.5 M to SEK 791.6 M, which in
relation to sales was 21.2% compared to 22.4%
year-on-year.

2,000

Other operating income

and expenses
1,500 Other operating income totaled SEK
1,253.9 8.7 M, operating expenses were SEK
33.7% –31.6 M and exchange rate differences
were SEK –4.3 M.
–2,471.6

1,000

–380.0

435.0
500 –274.9 11.7%
–136.7 –27.2 –38.0

0
Net sales Cost of Gross profits Selling Administration Research and Other Operating Net finance
goods expenses expenses development operating profit (EBIT) items
sold income/
expenses

28
 FINANCIAL PERFORMANCE | VBG GROUP ANNUAL REPORT 2019

Net profit for the year Other comprehensive income

Net profit for the year totaled SEK 299.5 M, corre- As of 31 December 2019, items recognized
sponding to earnings per average share outstanding directly in equity without going via profit or
of SEK 11.98 (10.92), an increase of 9.7%. loss were: the effect of restating defined-
benefit pension plans, SEK –23.9 M; exchange

300 M
rate differences regarding hedge accounting
for net investments in foreign operations, SEK
1.4 M; and translation differences regarding

SEK the Group’s net assets in foreign subsidiaries,

SEK 36.7 M.

Tax Dividends paid 2019

The tax rate for the year was 24.6%, Dividends amounting to SEK 112.5 M were
which is 2.2 percentage points lower paid during the year, which entailed SEK 3.50 in
than the preceding year’s tax rate of ordinary dividends plus an extra dividend of SEK
26.8%. One reason for this was that the 1.00, for a total of SEK 4.50 per share outstanding.
Swedish tax rate decreased from 22.0% To the 2020 Annual General Meeting, the Board
to 21.4%, which not only impacted tax of Directors proposes raising the dividend to SEK
on profit for the year in the Swedish 5.00 and no extra dividend, which entails a dis-
companies but also resulted in a positive bursement of SEK 125.0 million corresponding to
non-recurring effect of SEK 5.3 M by 41.7% of the Group’s net profits for 2019. This is
reducing deferred tax liabilities in also more than the 30% that the Group’s dividend
Sweden. policy indicates as a normal dividend.

Equity 2019
With comprehensive income of SEK 313.7 M
and after payment of dividends to shareholders
of SEK 112.5 M, equity increased SEK 201.2 M
to SEK 2,427.7 M.

397.0 299.5
10.7% (Earnings per
share 11.98) 14.2
201.2
–97.5
–112.5

Profit Tax Profit for Other Dividend Change in

before tax the year comprehensive paid, 2019 equity for
income the year
recognized
directly against
equity
29
 VBG GROUP ANNUAL REPORT 2019 | CASH FLOW

Record earnings laid the

foundation for a strong cash flow
For VBG Group, cash flow from operating activities was
EBIT, EBITA and EBITDA
the strongest ever. After relatively major investments,
Based on the Group’s consolidated operating
amortizations on loans and lease liabilities, and the highest profit (EBIT) of SEK 435.0 M, non-cash amorti-
zations of intangible assets (brands, customer
dividend ever to shareholders, cash on hand still increased relations) were eliminated, yielding an EBITA of
SEK 467.1 M. After elimination of depreciations
by SEK 101 M. A strong cash flow expands the scope for regarding property, plant and equipment total-
CASH FLOW

ing SEK 49.5 M and right-of-use assets under

future investments. IFRS 16 of SEK 31.2 M, EBITDA is SEK 547.8 M,
which is a rough measurement of operating
cash flow that is normally used in evaluating
a company via multiple calculation.

SEK M 547.8
31.2 14.7%
550
10.7
49.5
–26.9
500
467.1
32.1 12.5%
435.0
450 11.7%
11.6
403.9
400 –127.7

350

300

250

200

150

100

50

0
Operating Amortization EBITA Depreciation Impairment EBITDA Other Net interest Tax paid Cash flow Decrease in
profit (EBIT) of intangible of PP&E of right-of non-liquidity expenses before changes inventory
assets use, IFRS 16 items to working
capital
30
 CASH FLOW | VBG GROUP ANNUAL REPORT 2019

Cash flow before change in working capital
Apart from depreciation and amortization, there were other items in operating
profit that did not affect liquidity and, when eliminated, positively impacted
the cash flow by SEK 10.7 M. Additionally, the cash flow was charged with SEK
26.9 M in net interest paid and SEK 127.7 M in taxes paid. Cash flow before
changes in working capital thus amounted to SEK 403.9 M.
Cash flow from operating activities
Cash flow from operating activities was SEK 438.9 M,
a full SEK 185.3 M better year-on-year. The difference
between the years is entirely the result of the change
in working capital, which was SEK -154.1 M in 2018
compared to positive SEK 35.1 M in 2019.

Change in working capital

SEK 96.4 M
Consolidated sales grew organically by 6.7% during the year, but a slight slow- Cash flow for the year
down in the fourth quarter in combination with destocking efforts by operations After SEK 106.0 M in paid capital expen-
resulted in a decrease in working capital, yielding a positive cash flow of SEK ditures, changes to credits and lease liabil-
35.0 M. ities totaling SEK -124.0 M and dividends
of SEK 112.5 M paid to shareholders, cash
flow for the year was SEK 96.4 M.
With the addition of translation differ-
ences in cash and cash equivalents of SEK
4.7 M, cash and cash equivalents at year
end was SEK 472.5 M.

101.1 472.5
37.9
3.8 438.9

–18.2

371.4

–106.0

–124.0

96.4
–112.5

Decrease in Decrease in Change in Cash flow from Net Net Dividend Cash flow Opening cash This years Closing cash
accounts accounts other operating investments amortization paid, 2019 for the year and cash change in cash and cash
receivable payable receivables/ activities of loans equivalents and cash equivalents
liabilities equivalents
31
 VBG GROUP ANNUAL REPORT 2019 | FINANCIAL POSITION

Strengthening of the Group’s

stable financial position in 2019
Two highly favorable fiscal years, 2017 and 2018, were followed by an even
stronger 2019. Equity and the equity/assets ratio increased, net indebtedness
decreased and liquidity in the Group was strengthened. The VBG Group’s
FINANCIAL POSITION

ability to maintain its strong financial position means security, and creates
scope for future development and investments.

A  C
Cash and cash Lease liability
­equivalents The introduction of IFRS 16 means that liabilities
Cash and cash equivalents in the balance sheet also increased, as a lease
increased by SEK 101.1 M during liability was recognized. At year end, lease
the year to SEK 472.5 M. ­liabilities totaled SEK 156.4 M.

2, 427.7M
B
Right-of-use assets
As a result of the introduction of IFRS 16, rental
SEK
contracts and leases are regarded as non-current
assets in the form of right-of-use assets. At the end
Equity at the end of the year.
of the year, these totaled SEK 154.7 M.

32
 FINANCIAL POSITION | VBG GROUP ANNUAL REPORT 2019

Equity 2019
With comprehensive income of SEK 313.7 M
for the Group and after dividends to share­
holders of SEK 112.5 M, equity increased
to SEK 2,427.7 M. The equity/assets ratio
increased to 57.8%.

SEK M

ASSETS 2018 ASSETS 2019 EQUITY LIABILITIES 2019 LIABILITIES 2018

3,923.8 4,198.6 2,427.7 1,770.9 1,697.3

+ + – –
Other provisions and liabilities 64.6
Accrued costs
Cash and cash
equivalents
A 155.9

472.5 Accounts payable

Other provisions and liabilities 89.5
203.0
Cash and cash Accrued costs
equivalents
371.4 Other receivables 75.9
Lease liabilities for IFRS 16
156.4 C 151.2
Accounts payable
212.7
Other receivables 86.5 Accounts
receivable
467.2
Accounts Loans
receivable 741.2

57.8%
491.2
Loans
822.4

Inventory
638.7
Deferred tax liabilities
219.6
Inventory

=
634.9
Pension provisions Deferred tax liabilities
Tax assets 67.3 230.2 224.6

Increase of Pension provisions

Tax assets 63.8 201.2 196.9

Goodwill
1,143.3

Goodwill
1,128.6

Equity 2018
2,226.5
Proposed dividend
Brands etc.
797.2 The Board of Directors proposes a raised
Brands etc. ordinary dividend of SEK 5.00 per share
798.9 (3.50) and no extra dividend (SEK 1.00
the preceding year). This means a total
dividend of SEK 5.00 per share (4.50),
Right-of-use assets corresponding to a disbursement of SEK
for IFRS 16 154.7 B 125.0 M.
Machinery and Machinery and
equipment 162.4 equipment 194.7

Buildings and Buildings and SEK

land 186.2 land 187.3 125.0 M

33
 VBG GROUP ANNUAL REPORT 2019 | THE SHARE
Strong share performance
and increased dividend
VBG Group has been listed since 1987 on Nasdaq Stockholm, and the company’s
Series B share is currently traded on Mid Cap, Industry (VBG B). Over the past five
years, the value of the share has increased 119.1%.
THE SHARE
In 2019, the share price for the VBG Group Series B share
increased 24.2% to SEK 157.50 (SEK 126.80 at the preceding
year end). The highest share price (SEK 169.50) was noted on
16 July and the lowest (SEK 125.00) on 15 February. A total of
1,429,404 VBG Group Series B shares were traded during the
year, equivalent to a turnover rate of 6.3% (7.4). The VBG Group’s
market capitalization at year end was approximately SEK 3.9
­billion (3.2).
Total return
The VBG Group’s overall objective is sustainable and profitable
growth, which creates the conditions for stable, healthy returns
over the long term for the shareholders. The total return (i.e.
the change in share price plus reinvested dividend) for the VBG
Group Series B share during 2019 was 27.8%. Over the past
­ten-year period, the total return for the VBG Group Series B
share was 136.7%.
Share capital
VBG Group AB’s share capital at December 31, 2019 was SEK
65.5 M distributed among 26,196,024 shares with a quotient
value of SEK 2.50 each. The VBG Group shares are divided into
two classes of shares: 2,440,000 Series A shares and 23,756,024
Series B shares. Each Series A share carries ten votes and each
Series B share carries one vote, except for the Series B shares
bought back by VBG Group AB, which carry no votes or dividend
rights. Following the buy-back program that was implemented in
2002, VBG Group AB owns 1,191,976 Series B shares representing
4.55% of the share capital. The Board of Directors has been
authorised by the Annual General Meeting to resolve on one
or more occasions to transfer these shares in connection with
acquisitions.
Shareholders
The VBG Group had 4,727 (4,308) shareholders at year end. The
Series A shares, which represent 51.95% of the votes in the VBG
Group, are held by the three foundations: the Herman Krefting
34
Foundation for Allergy and Asthma Research, the SLK Employees’
Foundation and the VBG-SLK Foundation. Of the total number
of shares in the company, 90.51% are owned by institutions,
including the three foundations and the VBG Group’s repurchased
shares. Foreign ownership is 14.11%.
Dividend and dividend policy
Since the company’s initial listing on the stock exchange in 1987,
and including the dividend of SEK 5.00 (4.50) proposed by the
Board to the 2020 Annual General Meeting, the company has
paid an average dividend amounting to 35.9% of the net profit.
The average over the past ten years amounted to 38.9%. In
March 2012, the Board adopted a dividend policy which says
that the company normally will pay out 30% of the net profits
to the shareholders. The proposed dividend for fiscal year 2019
is equivalent to 41.7% (41.2) of the Group’s net profit, corre-
sponding to a dividend yield of 3.17% (3.55).
Contacts with the stock market
The VBG Group’s contacts with the stock market are mainly
based on quarterly financial reports, press releases and presenta-
tions by the VBG Group in various contexts. In 2019, some ten
meetings were held with investors and analysts in Sweden.
Financial statements and other information, both financial and
general, can be found on the Group’s website at www.vbggroup.
com. As of May 2020, the person in charge of Investor Relations
is CFO Fredrik Jignéus, telephone +46 (0)521-27 77 53,
e-mail fredrik.jigneus@vbggroup.com.
41.7%
The proposed dividend for fiscal year 2019 is
equivalent to 41.7% of the Group’s net profit.
 THE SHARE | VBG GROUP ANNUAL REPORT 2019

TEN BIGGEST SHAREHOLDERS AT 30 DECEMBER 2019

Capital, Votes,
Shareholders Series A shares Series B shares Holding % %

Herman Krefting Foundation for Allergy and Asthma Research 817,400 5,109,042 5,926,442 22.62 28.28
The SLK Employees’ Foundation 1,134,600 1,134,600 4.33 24.16
VBG-SLK Foundation 488,000 14,000 502,000 1.92 10.42
Lannebo fonder 3,688,884 3,688,884 14.08 7.85
SEB fonder 2,939,322 2,939,322 11.22 6.26
Swedbank fonder 2,336,000 2,336,000 8.92 4.97
Nordea fonder 1,855,757 1,855,757 7.08 3.95
IF Skadeförsäkring AB (publ) 1,099,192 1,099,192 4.20 2.34
Didner & Gerge Småbolag 1,058,936 1,058,936 4.04 2.25
HSBC BANK PLC W8IMY 341,938 341,938 1.31 0.73
Ten largest shareholder groups 2,440,000 18,443,071 20,883,071 79.72 91.23
Total other shareholders 4,120,977 4,120,977 15.73 8.77
Total number of shares outstanding 2,440,000 22,564,048 25,004,048 95.45 100.00
VBG Group AB, own holding 1 1,191,976 1,191,976 4.55
Total number of registered shares 2,440,000 23,756,024 26,196,024 100.00
1
Without voting or dividend rights.

SHAREHOLDER CATEGORIES SIZE OF SHAREHOLDINGS SHAREHOLDERS IN SWEDEN AND

Percentage Dec 30, 2019 ABROAD
Dec 30, 2019 of capital Percentage
Share Share Percentage
holding holders of capital Dec 30, 2019 of capital
Foreign shareholders 14.11
Swedish shareholders 85.89 <500 3,816 1.69 Sweden 85.89
Of which: 500–5,000 802 4.50 Other Nordic countries 4.15
Institutions 90.51 5,000–10,000 38 1.03 Other European countries 8.81
Private persons 9.49 10,000–20,000 23 1.20 Rest of world 1.15
>20,000 48 91.58
Total 4,727 100.00

DATA PER SHARE

2019 2018 2017 2016 2015

Earnings, SEK 11.98 10.92 9.62 9.66 7.64

Dividend, SEK 5.001 4.50 3.25 3.50 (1.752) 3.25
Share price, SEK 157.50 126.80 132.00 160.50 121.00
Share price adjusted, SEK (as regards new share issue, Feb 2017) 157.50 126.80 132.00 111.19 83.83
P/E ratio 13.1 11.6 13.7 16.6 15.8
Equity, SEK 97.09 89.04 80.18 82.09 69.71
Cash flow from operating activities 17.55 10.14 10.63 20.08 9.43
Dividend yield, % 3.17 3.55 2.46 2.18 2.69
Total number of shares outstanding (thousands) 25,004 25,004 25,004 12,502 12,502
Average number of shares outstanding (thousands) 25,004 25,004 22,920 12,502 12,502
1
Proposed dividend per share.
2
Dividend per share based on doubling of the number of shares outstanding to 25,004,048 after the new share issue in February 2017.

PRICE OF VBG GROUP AB’s SERIES B SHARE OVER FIVE YEARS

200 5,000 Series B share

OMX Stockholm_PI
180
4,000
Number of shares traded, thousands
160

3,000
140

120
2,000

100
1,000
80

60 0 Source: Nasdaq
2015 2016 2017 2018 2019

35
 VBG GROUP ANNUAL REPORT 2019 | VBG GROUP AS AN INVESTMENT

Favorable profitable growth

and attractive yield
There are many reasons to invest in VBG Group. We have listed a few of them below.
VBG GROUP AS AN INVESTMENT

1 S trong brands in attractive niches Over time, VBG

Group has built up and acquired several strong brands.
2 S ecure, stable ownership situation VBG Group acquires,
governs and pushes the development of the Group for-
To a great extent, these have enabled the Group’s three ward from a long-term and sustainable perspective.
divisions to take positions today as world leaders in their This is possible owing to a solid base of stable long-term
respective industrial niches. The Group’s focus on oper- owners. These comprise both the three owner foundations
ating in several different niches enables diversification started by the founder of VBG Group and a number of
and a strong risk spread. major institutional owners.

79.7%
10 LARGEST OWNERS, CAPITAL

4 S ustained profitable growth VBG Group is growing,

both organically and through acquisitions. The objective
is average annual sales growth of at least 10% over a

3 Long-term financial strength The VBG Group’s owner-

ship model, together with strong earnings performance,
has provided financial stability over the years with a
high equity/assets ratio. By balancing a stable yield for
the owners with allowing the earnings to remain in the
Group and work, in combination with strong operations,
VBG Group creates a stable financial foundation for con-
tinued development of operations as well as acquisitions.
five-year period. In 2019, sales increased 6.7%, all of
which was organic growth. Total average growth over
a five-year period was 25.7%, of which 13.3% was
organic growth and 17.8% structural growth. Strong
profitable growth yields higher operating profit and
increased earnings per share, which was also the case
for VBG Group in 2019, since operating profit increased
4.2% and the profit per share by 9.7%.

57.8%
EQUITY/ASSETS RATIO
%
30
GROWTH IN EARNINGS PER SHARE

26.4

21.1
20

13.5
9.7
10

−0.4
0
2015 2016 2017* 2018 2019
* New share issue February 1:1.

36
 VBG GROUP AS AN INVESTMENT | VBG GROUP ANNUAL REPORT 2019

5 S table yield Under VBG Group’s dividend policy, we will

normally distribute 30% of the Group’s net earnings.
Over time, VBG Group’s
performance has been highly stable
Over the last five years, we have distributed on average
with profitable growth. 2019 was no
40.0% of net earnings, and the average dividend yield
exception; earnings were the best ever.
has been 2.75% per year. The total return for 2019 was
Two share-related key figures indi-
27.8% after a strong conclusion to the stock exchange
cate healthy growth: earnings per share
year. Over the past five-year period, the total return was
increased 9.7% and the proposed divi-
136.7%.
dend is 11.1% higher year-on-year.

3.6%
DIVIDEND YIELD
Claes Wedin
CFO

TOTAL RETURN & SHARE PRICE

% SEK

60 180

40 120

20 60

0 0

–20

–40
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total return, %
Adjusted share price, SEK

Read more about the share’s performance on pages 34–35.

37
FINANCIAL
STATEMENTS
Board of Directors’ Report 39 Note 14 | IFRS 16 81
Consolidated Income Statement 55 Note 15 | Interests in Group companies,
Consolidated Balance Sheet 56 changes in carrying amounts 82

Consolidated Changes in Equity 58 Note 16 | Deferred tax liabilities/assets 83

Consolidated Cash Flow Statement 59 Note 17 | Inventories 84

Parent Company Income Statement 60 Note 18 | Prepaid expenses and

accrued income 84
Parent Company Balance Sheet 60
Note 19 | Equity 84
Parent Company Changes in Equity 62
Note 20 | Untaxed reserves 85
Parent Company Cash Flow Statement 62
Note 21 | Provisions for pensions
Effects of transition to IFRS 16 63 and ­similar obligations 85
Alternative performance measures 64 Note 22 | Other provisions 87
Note 23 | Borrowing 87
Notes to Parent Company and
consolidated financial statements 67 Note 24 | Trade receivables 88

Note 1 | General information 67 Note 25 | Overdraft facilities 88

Note 2 | Risks and risk management 72 Note 26 | Accrued expenses and

deferred income 88
Note 3 | Segment reporting 74
Note 27 | Pledged assets 89
Note 4 | Other operating income 75
Note 28 | Contingent liabilities 89
Note 5 | Other operating expenses 75
Note 29 | Cash flow statement 89
Note 6 | Salaries, other remuneration
and social security contributions 76 Note 30 | Significant accounting estimates
and assessments 90
Note 7 | Fees and cost reimbursement
paid to auditor 78 Note 31 | Proposed distribution of profits 90

Note 8 | Depreciation, amortization

and impairment 78 Signatures for Annual Report 91

Note 9 | Operating expenses classified Audit Report 92

by nature of expense 78
Note 10 | Appropriations 78
Note 11 | Tax on profit for the year 78
Note 12 | Intangible assets 79
Note 13 | Property, plant and equipment 80

38
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019
Board of Directors’ Report
VBG Group AB (publ) Corp. ID No. 556069–0751
(All amounts in SEK thousand unless otherwise stated.)
The Board of Directors and President of VBG Group AB (publ)
hereby submit their annual report and consolidated financial
statements for the 2019 fiscal year, the company’s 61st year
of operation.
Information on the business
General
VBG Group AB (publ) in Vänersborg is the Parent Company of
an international engineering Group with wholly owned compa-
nies in the USA, Canada, India, Brazil, China, Australia, South
Africa and nine countries in Europe. For 2019, operations were
monitored and reported in three segments: Truck & Trailer
Equipment (with the divisions VBG Truck Equipment and Edscha
Trailer Systems), Mobile Climate Control and Ringfeder Power
Transmission, with products that are marketed under strong,
well-known brands. VBG Group AB’s Series B share was intro-
duced on the stock exchange in 1987 and is listed today on the
Nasdaq Stockholm Mid Cap list.
Segments and divisions
Operations in 2019 were divided into three segments and four
divisions.1
• Truck & Trailer Equipment comprises the VBG Truck Equipment
and Edscha Trailer Systems divisions. VBG Truck Equipment is,
by virtue of its own strong brands, an internationally leading
supplier of coupling equipment, especially for trucks with
heavy trailers, where the division – via its VBG and Ringfeder
brands – accounts for approximately 55% of the global mar-
ket. With its Onspot automatic tire chains, the division occu-
pies a world-leading position in its niche. Important major
­customer groups include body builders, truck manufacturers,
haulers and importers. Edscha Trailer Systems is an internation-
ally leading supplier of sliding roofs to tarpaulin-covered trail-
ers and tipper vehicles, as well as sliding bow roofs for railway
wagons. Via its main brand, Edscha Trailer Systems, and the
Sesam brand it has approximately 40% of the global market
for sliding roofs. The largest customer segment is European
manufacturers of tarpaulin-covered trailers.
• With its own strong brand, Mobile Climate Control is an
­industry-leading supplier of complete climate control systems
(HVAC systems) for commercial motor vehicles, primarily in
North America and Europe. The customers are mainly found
in four market segments: buses, off-road vehicles, utility
­vehicles and defense vehicles.
1) Refer to page 54, Significant events after the close of the fiscal year.
•R
 ingfeder Power Transmission is a recognized global market
leader in selected niches within mechanical power transmission
as well as energy and shock absorption. The operations include
the main brand, Ringfeder, and the Brazilian brand Henfel.
Customers of the division are found all over the world, in such
widely disparate industrial markets as construction, machinery,
power and the mining industry.
Consolidated sales and earnings
Fiscal year 2019 was the best ever, beating the record high year
of 2018 with new top levels noted for sales, operating profit
and, not least, earnings per share. It was a year in which strong
net cash flow increased liquidity in the company, and the
Group’s financial position could be further strengthened.
Consolidated sales for the full year increased by 6.7% to SEK
3,725.4 M (3,492.4). Adjusted for exchange rate changes, the
actual organic growth was 1.9%. Consolidated operating profit
(EBIT) increased to SEK 435.0 M (417.6), with an operating margin
of 11.7% (12.0).
EBIT included Group-wide overheads of SEK 17.5 M (18.3)
that were not allocated among the various divisions. Net interest
expense for the full year was SEK 32.5 M (33.8) and foreign
­currency-denominated credits were impacted by a currency
effect of SEK –5.5 M (–10.7). Taken together, this resulted in
net financial items of SEK –38.0 M (–44.5). Accordingly, profit
after financial items amounted to SEK 397.0 M (373.1), with
a margin of 10.7% (10.7). Profit after tax was SEK 299.5 M
(273.0), which meant earnings per share increased by 9.7%
to SEK 11.98 M (10.92).
The average return on capital employed (ROCE) decreased to
12.4% (13.2), where the introduction of IFRS 16 impacted ROCE
for the year by –0.5 percentage points. Return on equity (ROE)
decreased slightly to 12.5% (12.8). The Group’s equity/assets
ratio increased compared with year-end 2018 to 57.8% (56.7);
here, however, IFRS 16 had an impact of –2.3 percentage points.
Significant events during the fiscal year
Refer to page 54, Significant events after the close of the fiscal year.
39
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT
Tax expense
Tax expense for the year was SEK 97.5 M (100.1), of which cur-
rent tax accounted for SEK 100.6 M (99.3) and deferred tax for
SEK –3.1 M (pos: 0.8). Tax expense for the year corresponds to
a tax rate for the Group of 24.6% (26.8), attributable in part to
the tax rate in Sweden dropping to 22.0% from 21.4% as of
January 1, 2019.
Capital expenditures
The Group’s total investments for the year amounted to SEK
116.4 M (47.5), of which investments in intangible assets totaled
SEK 30.5 M (2.2). Investments in property, plant and equipment
totaled SEK 85.9 M (45.3), of which SEK 10.4 M were purchases
under IFRS 16.
Exposure in foreign currencies, risks and uncertainties
A detailed account of the Group’s exposure in foreign currencies,
relevant risks and uncertainties is provided under Note 2, “Risks
and risk management.”
Cash flow and financial position
Cash flow from operating activities increased to SEK 438.9 M
(253.6). Paid capital expenditures during the year amounted to
SEK 106.0 M (47.2). During the year, the Group’s total borrow-
ings and current financial liability declined SEK 124.0 M (79.4),
net, with a dividend payment to the shareholders of SEK 112.5
M (81.3). Combined, this resulted in a negative cash flow from
financing activities of SEK 236.5 M (neg: 158.8). Consequently,
net cash flow for the year was SEK 96.4 M (47.5).
Profit after tax for the full year amounted to SEK 299.5 M
(273.0) and other comprehensive income totaled SEK 14.2 M
(28.0), which consisted of exchange rate changes totaling SEK
38.1 M and the impact of the translation of defined-benefit
­pension plans of SEK –23.9 M. Comprehensive income therefore
totaled SEK 313.7 M (301.0). After the payment of dividends
totaling SEK 112.5 M (81.3) to the shareholders, consolidated
equity increased to SEK 2,427.7 M (2,226.5). The equity/assets
ratio increased during the year to 57.8% (56.7). Cash and cash
equivalents increased by SEK 101.1 M (50.0) during the year to
SEK 472.5 M (371.4) at year end. In addition, there were unuti-
lized overdraft facilities of SEK 100.0 M (100.0), which means the
Group at year end had available liquidity of SEK 572.5 M (471.4).
The Group’s interest-bearing net debt (including pension liability)
increased by SEK 7.4 M during the year, despite the Group’s
credits in the bank decreasing by SEK 81.2 M while cash and
cash equivalents increased by SEK 101.1 M. Above all, the reason
net debt still increased was the addition of the new (as of 2019)
lease liability under IFRS 16 of SEK 156.4 M. The defined-­benefit
pension liability also increased by SEK 33.3 M, which altogether
40
resulted in a total net debt of SEK 655.3 M (647.9) at December
31, 2019.
The ratio of interest-bearing net debt to equity was 0.27 at
December 31, 2019 (0.29 at December 31, 2018) and the ratio
of net debt to consolidated operating profit before depreciation/
amortization and impairment (EBITDA) improved to 1.20 (1.30).
The Group’s goodwill increased by SEK 14.7 M owing to currency
effects of SEK 6.4 M and an additional adjustment of SEK 8.3 M
to the goodwill value of Mobile Climate Control. The Group’s
goodwill at year-end amounted to SEK 1,143.3 M (1,128.6),
which in relation to equity corresponded to a ratio of 0.47 (0.51).
Personnel
At December 31, 2019, there were 1,612 employees (1,573)
in the VBG Group, of which 213 (213) in Sweden. The Group
employed an average of 1,596 persons (1,561) in 2019, repre-
senting an increase of 2.2%. Of these, 218 (215) were active
in Sweden. The cost of salaries and social security contributions
increased 10.3% to SEK 885.6 M (803.1).
IFRS 16
The effect of IFRS 16 for full-year 2019 consisted of an increase
in the balance sheet of SEK 152.6 M, a positive impact on EBIT
of SEK 3.0 M and an adverse impact on profit after tax of SEK
2.8 M. As a consequence, a number of key figures were also
impacted. The largest share of the change in the balance sheet
is attributable to properties: SEK 138.9 M, of which SEK 104.7
M relates to Mobile Climate Control. The effect on EBITDA
during the year was a positive SEK 34.3 M, as lease costs from
an IFRS 16 perspective became amortization of the rights-of-use
relating to the lease assets. Total amortization regarding IFRS 16
assets was SEK 31.2 M. Overall, IFRS 16 has a minor impact on
the Group as a whole. See page 63, as well as Note 14 on page
81, for more comparisons of the impact of IFRS 16.
Parent Company
VBG Group AB’s operations are focused on managing, develop-
ing and coordinating the Group. The assets in the Parent Com-
pany consist primarily of shares in subsidiaries and brands. The
objective is for the Group’s intangible assets, in the form of
brands, to be gathered in the Parent Company. VBG Group AB
focuses on maintaining and developing the Group’s brands.
The Parent Company’s net sales, which pertain primarily to intra-
Group services and license revenues, amounted to SEK 45.2 M
during the year (42.6). The operating loss for the year was SEK
6.5 M (loss: 11.1). After dividends from Group companies totaling
SEK 170.7 M (216.5), exchange rate differences of SEK 1.8 M (4.1)
and net interest expenses totaling SEK 10.3 M (expense: 15.6),
the profit after financial items amounted to SEK 155.7 M (193.9).
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019

Group trend, SEK M 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Net sales 3,725.4 847.3 909.1 979.4 989.6 3,492.4 868.8 874.8 931.2 817.7
EBITDA 547.8 96.2 137.4 151.2 163.0 497.4 108.3 127.4 137.3 124.4
EBITA 467.1 74.9 117.3 131.3 143.6 449.3 95.8 115.2 125.3 113.0
Operating profit (EBIT) 435.0 66.8 109.4 123.3 135.5 417.6 87.9 107.3 117.3 105.2
Operating margin (EBIT), % 11.7 7.9 12.0 12.6 13.7 12.0 10.1 12.3 12.6 12.9
Operating profit after
financial items (EBT) 397.0 61.8 103.9 109.6 121.7 373.1 81.1 100.9 105.6 85.6
Profit after tax 299.5 53.6 73.7 83.2 89.0 273.0 60.5 71.2 77.8 63.5
Earnings per share, SEK 11.98 2.15 2.95 3.32 3.56 10.92 2.42 2.85 3.11 2.54
Cash flow from
operating activities 438.9 121.9 145 72.0 100.0 253.6 46.6 97.0 37.0 73.0
ROE (cumulative), % 12.5 12.5 14.0 14.8 15.6 12.8 12.8 13.4 13.4 12.3
ROCE (cumulative), % 12.4 12.4 14.1 14.8 15.7 13.2 13.2 14.0 14.1 13.5
Equity/assets ratio, % 57.8 57.8 55.8 55.2 54.2 56.7 56.7 54.9 53.9 54.1
EBITDA, effect of IFRS 16 34.3 9.5 8.5 8.2 8.1
EBITA, effect of IFRS 16 3.0 1.1 0.8 0.7 0.4
EBIT, effect of IFRS 16 3.0 1.1 0.7 0.7 0.4
Loss after tax, effect
of IFRS 16 –2.8 –0.3 –1.2 –0.1 –1.2

Sales, SEK M 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Sweden 288.0 70.1 60.2 75.5 82.2 275.9 69.2 58.1 73.3 75.3
Other Nordic countries 201.3 49.6 44.9 51.8 55.0 194.7 47.6 48.4 50.1 48.5
Germany 462.9 93.2 112.0 126.3 131.4 514.7 121.2 121.4 135.9 136.1
Other European countries 564.9 122.1 127.2 151.0 164.6 576.2 133.6 134.1 158.4 150.1
North America 1,891.4 423.9 486.3 501.9 479.3 1,648.6 414.2 441.8 449.0 343.7
Brazil 80.5 21.2 21.0 17.9 20.4 62.9 17.1 16.6 13.6 15.7
Australia/New Zealand 100.8 32.7 26.0 20.4 21.7 73.6 19.0 16.1 13.3 25.2
China 37.2 11.5 8.1 8.2 9.4 45.6 14.9 12.4 12.3 6.0
Rest of world 98.4 22.9 23.3 26.5 25.6 100.1 31.9 25.8 25.4 17.0
Group 3,725.4 847.3 909.1 979.4 989.6 3,492.4 868.8 874.8 931.2 817.7

41
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT

Truck & Trailer Equipment

– Record-high performance and strengthened offering
Truck & Trailer Equipment’s primary operations, drawbar couplings, reported records as regards
both sales and profit for the year. The automatic tire chains product area also returned a strong
performance, reporting record earnings. As of the fourth quarter of 2019, Edscha Trailer Systems is
reported as part of the Truck & Trailer Equipment segment, which negatively impacted earnings for
the year since the trailer industry noted a sharp downturn during the second half of the year.

Sales EBITA EBITA margin

SEK 1,204 M SEK 223.9 M 18.6%

In total, Truck & Trailer Equipment sales decreased by 3.2% year-

SIGNIFICANT EVENTS IN 2019
• Acquisition of the rights to BPW’s drawbar
­program
• Investment in fully automated production cells
for plateworking
• Work continued in digital marketing, with the
development of a new website for the VBG
brand
• New underrun protection program that meets
the requirements under regulation 58 (refer to
page 44 for a description)
FOCUS FOR 2020
• Launch and commercialize new digital functions
• Continued international expansion, focusing on
Brazil and China
• Launch new products in sliding roofs
• Continued growth, with profitability maintained
• Prepare for new supplementary acquisitions
on-year, but EBITA increased by 2.3% to SEK 223.9 M with a
margin that strengthened to 18.6%.
In March 2020, Edscha Trailer Systems was organizationally
incorporated into the Truck & Trailer Equipment division. Not
only will this strengthen the division’s offering, it will also create
possibilities for synergy effects.
In the first quarter of 2019, the division signed a strategically
important agreement to acquire all the rights to BPW’s drawbar
program. The integration work progressed throughout the year,
and under the agreement the division will begin sales to the
market as of January 2020.
The market
Three trends stand out: focus on the environment, safety and
longer, heavier vehicles. The need for transportation is expand-
ing at a furious pace but demand is being slowed owing to the
shortage of drivers, which negatively impacts the industry’s
­possibilities of meeting the needs of the market.

42
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019

TRUCK & TRAILER EQUIPMENT

Main market segments Sales by region

∙ Drawbar couplings Sweden 20.4% North America 9.3%

∙ Automatic tire chains Rest of the Nordics 13.0% Australia/New Zealand 5.7%
∙D  rawbars Germany 21.5% China 0.3%
∙D  rawbeams Rest of Europe 27.7% Rest of the world 2.1%
∙ Underrun protection
∙ Sliding roofs

The profitability of a hauler is firmly linked to fuel consumption.
Now that the customers of haulers are also imposing their own
demands for the environment and carbon emissions per ton-­
kilometer transported, new demands are being imposed on the
products. Stricter safety requirements are something that the
haulers must also comply with. This is why we, as a customer-­
centric supplier, are developing new technologies (e.g. sensor
technology with software) and solutions to overcome these
problems. Prime examples of new solutions are the VBG MFC
fully automated drawbar couplings, the Onspot automatic tire
chains and Edscha TS’s electrically controlled sliding roof for
­tipper vehicles.
Moreover, Truck & Trailer Equipment is taking part in a num-
ber of projects with end users, truck manufacturers and other
suppliers to develop applications for longer, heavier vehicles and
autonomous vehicles.
The competitors in the market for drawbar couplings are few,
but despite this the competition is tough and intense. Rockinger
in Germany and Orlandi in Italy are the main competitors. The
market for automatic tire chains and sliding roofs is also experi-
encing tough competition. The main competitor in tire chains is
RUD, in Germany. For Edscha TS, there are primarily three major
competitors: TSE (owned by trailer manufacturer Schmitz
­Cargobull), Versus Omega and Autocar.
Operations
Through its strong brands, Truck & Trailer Equipment has a lead-
ing global position in developing, manufacturing, marketing and
sales of equipment for commercial vehicles. Drawbar couplings
are sold under the VBG and Ringfeder brands; additionally, the
division has a leading position in automatic tire chains sold under
the Onspot brand.
Moreover, the division has a strong market position in sliding
roofs for trailers and railway wagons under the Edscha TS and
Sesam brands. The division pursues sales in approximately 70
countries, in which its offering is addressed to several different
customer groups.
• For drawbar couplings, the most common customer segment
is body builders.
• For automatic tire chains, the most common customer
­segment is users of commercial goods vehicles and
­emergency vehicles.
• For sliding roofs, the largest customer segment is manufacturers
of tarpaulin-covered trailers.
Truck & Trailer Equipment’s continual focus on traffic safety
has gained the division a reputation as a knowledgeable, value-­
creating partner in the area. The ability to deliver customized
systems solutions rather than individual products is the division’s
strongest competitive advantage.
For several years, Truck & Trailer Equipment has played an
active role in the work to reduce carbon emissions. The division
has taken part in several projects associated with longer, heavier
vehicle combinations that have resulted in lower fuel consumption
per ton shipped. Truck & Trailer Equipment is well positioned to
meet changing customer needs going forward.
The division also focuses sharply on trends in digitalization,
and consequently is now investing in digital marketing for its
four brands: Onspot, VBG, Edscha TS and Ringfeder. In addition,
the division is working on digitalization in its product offering.
One example of a new product offering in the division is sensor
technology for coupling and roof equipment. This technology
increases functionality for the user, leading to increased traffic
safety and enhanced efficiency.

43
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT
Share of Group sales Share of the divisions’ EBITA
32% 46%
Truck & Trailer Equipment’s primary operations reported a
record-high performance in 2019 as regards both sales and
earnings. In addition, all the rights to BPW’s drawbar program
were acquired, which supplements the division’s offering and
strengthens its position in Western and Central Europe. There
was also an investment made in a robotic bending cell in Väners-
borg, which will enhance the efficiency of flows and shorten lead
times going forward. The division also launched a new website
for the VBG brand, which will strengthen it further and promote
increased value creation for the customer.
A new underrun protection program that complies with the
new, tougher legal requirements (Regulation 58) was launched
during the year. These legal requirements mean that vehicles
must be able to withstand greater forces and have a lower
­permissble ground clearnace to prevent colliding vehicles from
being pushed under the truck or trailer in the event of a rear-end
collision. Computer calculations of strength and deformation
are no longer enough. The underrun protection must be tested
in physical environments – with reduced allowable vertical
deformation – to be approved.
Financial performance
Sales decreased by 3.2% to SEK 1,203.6 M (1,243.1). As of the
second quarter, the trailer market has stagnated and it reached
what is likely its lowest level in the fourth quarter. Altogether,
sliding roof sales for the full year decreased SEK 87 M year-on-
year. Sales of drawbar couplings and automatic tire chains
increased, however, by approximately SEK 40 M. Adjusted for
currency effects during the year, actual organic growth for Truck
& Trailer Equipment was –5.7%. Despite the loss in volume for
sliding roofs, Truck & Trailer Equipment could report an increased
EBITA since the dominant drawbar couplings operations as well as
the automatic tire chains product area noted strong performances
in 2019. EBITA increased to SEK 223.9 M (218.9), with a strength-
ened EBITA margin of 18.6% (17.6).
44
Share of Group employees Average number of employees
362 
23%
Depreciation of property, plant and equipment for the year
was SEK 31.1 M (21.4), which meant that EBITDA totaled SEK
255.0 M (240.3). Amortization of intangible assets was SEK 5.5
M (5.3), which resulted in an EBIT of SEK 218.4 M (213.6). Total
depreciation/amortization charged to the division was SEK 36.6
M (26.7), of which SEK 9.4 M pertained to depreciation/amorti-
zation in accordance with IFRS 16.
The division’s working capital (inventory, trade receivables
and trade payables) decreased SEK 20.8 M during the year to
SEK 256.4 M (277.2); with the added value of SEK 177.5 M for
property, plant and equipment, operating capital totaled SEK
433.9 M (405.9), of which SEK 33.7 M pertained to right-of-use
assets in accordance with IFRS 16. Return on operating capital
(ROOC) for Truck & Trailer Equipment — that is, EBITDA as a
percentage of the average operating capital — decreased to
56.1% (58.0).
New capital expenditures during the year increased to SEK
65.3 M (15.8), of which SEK 25.0 M pertained to the acquisition
of rights to BPW’s drawbar program and SEK 4.6 M was pur-
chases in accordance with IFRS 16.
In 2019, Truck & Trailer Equipment had an average of 362
employees (363), and 357 persons were employed at December
31, 2019 (359 at December 31, 2018). Personnel costs for the
year totaled SEK 253.9 M (244.6), resulting in a cost per
employee of SEK 701.2 thousand (673.8).
The division, going forward
To meet the needs of the market and to address prevailing
trends, Truck & Trailer Equipment has a clear strategy going
­forward. The division is reviewing opportunities for acquisitions
and increased internationalization. Moreover, with a strong
focus on digitalization as regards product offerings and internal
procedures as well as marketing and sales, Truck & Trailer
­Equipment intends to create sustainability and profitability for
some time to come.
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019

Net sales EBITA and EBITA margin Operating cash flow

SEK M SEK M % SEK M

255,0
1,400 1,243 1,204
250 224 20 280 218,4 223,9 21.2%
219 210,7
1,200 1,096 190 18.1% 18.6% 20.8 17.5%
1,028 200 184 16 210
1,000 919 –65.1
800 150 137 12
140
600 100 8
400 70
50 4
200
0 0 0 0
15 16 17 18 19 15 16 17 18 19 EBIT EBITA EBITDA WC CAPEX Cash Flow
EBITA margin, average 5 years: 17.4%

Sales/Earnings, SEK M
Truck & Trailer Equipment 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Net sales 1,203.6 276.6 268.1 316.4 342.5 1,243.1 316.3 278.4 320.4 328.1
EBITDA 255.0 52.4 54.9 65.8 81.9 240.3 61.0 45.7 57.9 75.7
EBITA 223.9 44.4 47.0 58.1 74.3 218.9 55.5 40.4 52.5 70.5
EBITA margin, % 18.6 16.1 17.5 18.4 21.7 17.6 17.6 14.5 16.4 21.5
Operating profit (EBIT) 218.4 43.0 45.7 56.8 72.9 213.6 54.2 39.0 51.2 69.2
Operating margin (EBIT), % 18.1 15.6 17.0 17.9 21.3 17.2 17.1 14.0 16.0 21.1
EBITDA, effect of IFRS 16 9.6 2.4 2.4 2.3 2.5
EBITA, effect of IFRS 16 0.2 0.0 0.1 0.1 0.0
EBIT, effect of IFRS 16 0.2 0.0 0.1 0.1 0.0

Sales, SEK M
Market 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Sweden 245.0 60.1 50.8 63.3 70.8 234.7 58.8 48.9 62.1 64.9
Other Nordic countries 156.9 39.0 33.7 40.8 43.3 152.7 37.0 38.5 38.6 38.6
Germany 258.4 49.8 58.9 73.3 76.3 300.3 72.0 65.8 80.1 82.4
Other European countries 334.4 67.8 74.1 91.1 101.4 359.0 81.1 79.3 101.0 97.6
North America 112.0 35.8 27.2 23.5 25.5 99.7 36.2 24.0 19.2 20.3
Australia/New Zealand 68.7 19.2 18.2 15.1 16.2 61.5 16.0 13.1 10.0 22.4
China 3.4 0.1 0.0 0.0 3.3 14.4 8.0 3.1 2.8 0.6
Rest of world 24.9 4.9 5.2 9.2 5.6 20.7 7.2 5.7 6.6 1.2
Truck & Trailer Equipment 1,203.6 276.6 268.1 316.4 342.5 1,243.1 316.3 278.4 320.4 328.1

45
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT

Mobile Climate Control

– Strong growth in a still-positive US market
For Mobile Climate Control, 2019 can be summed up by continued favorable organic
growth and stable earnings performance. Sales increased 15.7% year-on-year and the
EBITA margin stood at 9.7%. During the year, the President and CEO of VBG Group
took up the post of acting Division Manager for operations, as the former Division
Manager had left the position.

Sales EBITA EBITA margin

SEK 1,998 M SEK 193.0 M 9.7%

ment forward. Increased electrification and digitalization also

SIGNIFICANT EVENTS IN 2019
• Record high sales for 2019
• One significant event during the year was VBG
Group President and CEO Anders Birgersson
taking up the post as acting Division Manager
for Mobile Climate Control, since the former
Division Manager had left the position.
• “Great Place to Work” certification completed in
Toronto (more on page 27)
FOCUS FOR 2020
• Improved profitability
• Continued product development – connected
products
• Increased digitalization of internal procedures
• More deliveries for electric vehicles
The market
Overall demand is driven by a number of global trends such
as urbanization, digitalization, electrification and an increased
focus on climate and the environment. One positive aspect for
Mobile Climate Control is that its customers are placing stricter
demands on the climate in their vehicles, thus driving develop-
leads to more advanced climate control systems.
The prevailing trends, along with a strong business cycle,
have positively impacted demand for new vehicles with climate
control systems as well as updates to systems in existing vehicle
fleets.
The competitive situation in the industry for climate control
systems in vehicles differs among the various geographical
­markets. Thermo King is a major competitor in the North American
bus market segment, and Bergstrom and Red Dot are competitors
in the other North American segments. In the European market,
Heavac/Aurora, Pedro Sanz and Konvekta are the major com-
petitors in all segments.
Operations
Mobile Climate Control is a global operator in the field of heat-
ing, ventilation and air conditioning (HVAC). The division has
operations on every continent. Sales occur primarily in two main
markets: North America and Europe, in which North America
represents 84% of sales. The offering comprises development,
manufacture, marketing and sales of complete climate control
systems.
The division addresses itself above all to customers in four
market segments:

46
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019
MOBILE CLIMATE CONTROL
Main market segments Sales by region
∙ Buses Sweden 2.0% North America 83.8%
∙ Off-road vehicles Rest of the Nordics 2.0% China 0.8%
∙ Utility vehicles Germany 1.7% Rest of the world 1.5%
∙ Defense vehicles Rest of Europe 8.2%
Share of Group sales Share of the divisions’ EBITA
54% 40%
• Buses, which can be divided into the sub-segments of transit,
coach, school and shuttle buses
• Off-road vehicles in infrastructure, agriculture, forestry,
­mining and materials processing
• Utility vehicles such as emergency and service vehicles
• Defense vehicles for transportation of troops
Through its own brand, Mobile Climate Control, the division
enjoys a strong position in North America across all segments.
In Europe, the brand is strong in climate control systems for
­utility vehicles and in heating systems for buses.
Mobile Climate Control’s brand is strong, and the conditions
for a competitive offering are created through the division’s
­continual efforts in product development One major advantage
for the division is the possibility of offering customized climate
control systems through in-house development, design and
manufacture. As part of product development, the division has
its own prototype lab for testing where the entire vehicle can be
driven in on site to test and optimize the climate control system.
In pace with the growing trend for electrification and digitali-
zation, Mobile Climate Control is placing substantial focus on
resources in these areas. The developments in electrification are
positive, with increased deliveries of customized products for
electric vehicles. In digitalization, the division is working to meet
new needs that arise by developing connected products for its
Share of Group employees Average number of employees
902
57%
customers, which both benefits Mobile Climate Control’s after-
market business and creates added value for the customer. Work
is being carried out in parallel on digitizing internal procedures in
administration and production.
In 2019, Mobile Climate Control continued capturing market
share and displayed strong organic growth with stable profitabil-
ity. Both the compact segment in off-road and buses displayed
positive performances.
The trade war between the US and China during the year
impacted the operations of Mobile Climate Control to some
extent, since certain products and components are manufactured
in China and then sold in the US. Mobile Climate Control man-
aged this in a satisfactory manner.
Financial performance
Mobile Climate Control reported strong growth in 2019; sales
increased by 15.7% year-on-year to SEK 1,998.4 M (1,727.3).
Taking exchange rate changes into account, the actual organic
growth was 9.0%. EBITA for the full year rose to SEK 193.0 M
(173.9), with an EBITA margin of 9.7% (10.1).
Depreciation of property, plant and equipment for the year
was SEK 31.8 M (13.4), which meant that EBITDA totaled SEK
224.8 M (187.3). Amortization of intangible assets was SEK 21.4
M (21.5), which resulted in an EBIT of SEK 171.6 M (152.4).
Total depreciation/amortization charged to the division was SEK
47
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT

53.2 M (34.9), of which SEK 17.3 M pertained to depreciation/
amortization in accordance with IFRS 16.
The division’s working capital (inventory, trade receivables
and trade payables) increased SEK 20.1 M during the year to SEK
444.6 M (424.5); with the added value of SEK 232.4 M (110.9)
for property, plant and equipment, operating capital totaled SEK
677.0 M (535.4), of which SEK 110.6 M pertained to right-of-use
assets in accordance with IFRS 16. Return on operating capital
(ROOC) for Mobile Climate Control — that is, EBITDA as a
­percentage of the average operating capital — decreased to
32.2% (38.6).
New capital expenditures during the year totaled SEK 25.9 M
(21.0), of which SEK 3.4 M was purchases in accordance with
IFRS 16.
Mobile Climate Control increased its workforce in 2019,
employing an average of 902 persons (875). At December 31,
2019, 911 persons (870) were employed in the division. Person-
nel costs increased to SEK 447.7 M (379.2), resulting in a cost
per employee of SEK 496.4 thousand (433.4).
The division, going forward
To meet the needs of the market and to address prevailing
trends, Mobile Climate Control has a clear strategy going
­forward: By continuing to focus on connected products and
­customized advanced climate control systems as well as more
deliveries for electric vehicles, Mobile Climate Control will
­create sustainable growth and improved profitability.

Net sales* EBITA and EBITA margin* Operating cash flow

SEK M SEK M % SEK M

1,998 224,8
2,000 200 193 16 250
1,727 174 193,0 11.2%
171,6 178,8
152 159 9.7%
1,500 1,427 150 149
12 200 8.6% –20.1 8.9%
1,264 1,276 –25.9
150
1,000 100 8
100
500 50 4
50
0 0 0 0
15 16 17 18 19 15 16 17 18 19 EBIT EBITA EBITDA WC CAPEX Cash Flow
EEBITA margin, average 5 years: 9.8%

* In 2015–2016, before VBG Group’s acquisition of Mobile Climate Control.

Sales/Earnings, SEK M
Mobile Climate Control 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Net sales 1,998.4 440.7 511.1 532.5 514.1 1,727.3 421.8 460.4 476.8 368.3
EBITDA 224.8 31.9 64.6 66.8 61.4 187.3 33.9 57.0 64.7 31.7
EBITA 193.0 23.2 57.0 59.0 53.9 173.9 30.3 53.4 61.4 28.8
EBITA margin, % 9.7 5.3 11.1 11.1 10.5 10.1 7.2 11.6 12.9 7.8
Operating profit (EBIT) 171.6 17.9 51.6 53.7 48.4 152.4 25.0 48.0 56.0 23.4
Operating margin (EBIT), % 8.6 4.1 10.1 10.1 9.4 8.8 5.9 10.4 11.8 6.3
EBITDA, effect of IFRS 16 20.2 6.1 4.8 4.7 4.6
EBITA, effect of IFRS 16 2.9 1.1 0.7 0.6 0.5
EBIT, effect of IFRS 16 2.9 1.1 0.7 0.6 0.5

Sales, SEK M
Market 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Sweden 39.6 9.1 9.4 11.0 10.1 36.7 9.0 8.3 10.1 9.4
Other Nordic countries 39.6 9.7 10.1 9.6 10.2 36.8 9.5 9.1 9.8 8.3
Germany 33.2 7.5 8.7 8.8 8.3 30.6 7.3 7.8 7.7 7.8
Other European countries 164.6 38.3 38.1 41.9 46.3 153.2 36.0 38.2 39.6 39.3
North America 1,673.9 364.1 431.5 450.4 428.0 1,429.9 348.2 386.0 398.7 297.0
China 16.4 5.2 3.2 4.5 3.6 14.4 3.1 4.4 4.9 2.0
Rest of world 31.0 6.8 10.3 6.2 7.7 25.8 8.7 6.6 6.0 4.5
Mobile Climate Control 1,998.4 440.7 511.1 532.5 514.1 1,727.3 421.8 460.4 476.8 368.3

48
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019

Ringfeder Power Transmission

– Global position promotes stability
For Ringfeder Power Transmission, 2019 was characterized by stable profitability on
a generally weaker market. Strong growth in Australia and recovery in Brazil were
a partial counterweight to the slowdown that took place in Germany and the
US. Sales increased 0.3% year-on-year and the EBITA margin was 12.8% (14.2).

Sales EBITA EBITA margin

SEK 523 M SEK 67.2 M 12.8%

In general, it can be said that the market for mechanical

SIGNIFICANT EVENTS IN 2019
• Continued work on strengthening internal
procedures
• Launch of a new Ringfeder Power
Transmission website
• Strengthened the internal procedures
and sales organization in Brazil
• Developed best practices in various applications
for sharing between markets
FOCUS FOR 2020
• Continued expansion of business in Brazil
• Transfer best practices in various applications
among markets
• Increase cash flow
• New growth markets – continued growth
in China and India
The market
Ringfeder Power Transmission develops, manufactures and sells
a wide range of products for advanced applications in mechanical
power transmission and energy and shock absorption. Important
market segments include the mining industry, metals produc-
tion, energy production and industrial automation.
power transmission is fragmented and subject to competition.
A consolidation in the industry is ongoing. Altra Industrial
Motion, Rexnord, TAS Schäfer and KTR are among the division’s
competitors.
Demand for products and solutions varies greatly based on
geography and market. In Asia and South America, demand is
governed by steadily increasing industrial manufacture, whereas
demand on mature markets such as Western Europe and North
America are impacted primarily by increased automation and
enhancing the efficiency of customer’s systems.
Operations
Ringfeder Power Transmission is a global operator whose operations
are conducted in its own companies in Germany, the Czech
Republic, the US, Brazil, India and China. The path to the customer
runs either through sales subsidiaries or via networks of agents
and distributors.
The division’s approximately twenty product lines are mar-
keted and sold under the following brands: Ringfeder and Henfel
(Brazil). In general, the products can be divided into three differ-
ent categories: shaft-hub couplings, shaft-shaft couplings and
friction springs.

49
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT

RINGFEDER POWER TRANSMISSION

Main market segments Sales by region

∙ Transmissions for Sweden 0.6% North America 20.2%

industrial use
∙M  ining industry
∙ S teel production and ­
metal industry
∙ E nergy production
∙ Industrial automation
Rest of the Nordics 0.9% Brazil 12.9%
Germany 32.7% Australia/New Zealand 6.0%
Rest of Europe 12.6% China 3.3%
Rest of the world 10.8%

Share of Group sales Share of the divisions’ EBITA Share of Group employees Average number of employees

324
14% 14% 20%

• Shaft-hub couplings include locking assemblies and shrink
discs for mechanical power transmission. Locking assemblies
are commonly used in many different operating areas including
freight management, the mining industry and energy produc-
tion, with specific uses in, for example, cranes, hoisting
devices, turbines and industrial pumps, while shrink discs
are often used in transmissions for industrial use.
• Shaft-shaft couplings comprise couplings primarily for the
food, packaging and automation industries as well as for
heavy industrial applications.
• Friction springs are common in drilling equipment and in
industrial rolling mills. Additionally, friction springs are used
for shock absorption in aircraft and to earthquake-proof
buildings, bridges and power plants.
Over the last few years, Ringfeder Power Transmission has
enhanced the efficiency of the division’s logistics and production
processes, and streamlined its product portfolio towards more
profitable products.
In pace with increased industrial manufacturing in several
markets, the division is focused on expanding in new growth
markets and increasing its local presence in the form of propri-
etary sales resources.
The competitive advantages for Ringfeder Power Transmission
comprise primarily leading-edge technical expertise, a broad
product portfolio and an offering that meets strict requirements
for precision, reliability and quality.
In 2019, the division continued its work on strengthening its
internal procedures in order to achieve a higher level of produc-
tivity in its operations. This contributed positively to earnings for
the year. In a generally weaker market, Ringfeder Power Trans-
mission reported stable earnings that were nonetheless nega-
tively impacted by non-recurring costs. A new website for the
division was also launched during the year as a stage in
increased digital marketing. Furthermore, the efficiency of the
sales organization in Brazil, where Ringfeder Power Transmission
sees significant opportunities for growth going forward, was
enhanced.
Financial performance
For the full year, Ringfeder Power Transmission increased sales
by 0.3% to SEK 523.4 M (522.0). Taking exchange rate changes
into account, actual organic growth was –3.6%. Owing to
non-recurring costs of approximately SEK 7 M in the fourth
quarter, EBITA decreased to SEK 67.2 M (74.2) with an EBITA
margin of 12.8% (14.2).
Depreciation of property, plant and equipment for the year
was SEK 16.1 M (13.0), which meant that EBITDA totaled SEK
83.3 M (87.2). Amortization of intangible assets was SEK 4.7 M
(4.3), which resulted in an EBIT of SEK 62.5 M (69.9). Total
depreciation/amortization charged to the division was SEK 20.8
M (17.3), of which SEK 3.5 M pertained to depreciation/amorti-
zation in accordance with IFRS 16.

50
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019

The division’s working capital (inventory, trade receivables
and trade payables) decreased SEK 11.3 M during the year to
SEK 203.9 M (215.2); with the added value of SEK 120.4 M
(107.6) for property, plant and equipment, operating capital
totaled SEK 324.3 M (322.8), of which SEK 7.5 M pertained to
right-of-use assets in accordance with IFRS 16. Return on oper-
ating capital (ROOC) for Ringfeder Power Transmission — that
is, EBITDA as a percentage of the average operating capital —
decreased to 24.5% (27.9).
New capital expenditures during the year totaled SEK 20.1 M
(10.3), of which SEK 0.2 M was purchases in accordance with
IFRS 16.
During 2019, Ringfeder Power Transmission had an average of
324 employees (314). At December 31, 2019, 336 persons (335)
were employed in the division. Personnel costs totaled SEK 155.0
M (148.8), resulting in a cost per employee of SEK 478.5 thousand
(473.9).
The division, going forward
To meet the needs of the market and to address prevailing trends,
Ringfeder Power Transmission has a clear strategy going forward:
Continued focus on growth markets, more efficient deliveries and
production processes, and transfer of best practices in various
applications among markets.
With this strategy, Ringfeder Power Transmission will create
growth and further strengthen profitability going forward.

Net sales EBITA and EBITA margin Operating cash flow

SEK M SEK M % SEK M

600 80 74 16 100 83.3 11.3
522 523 67 15.9% 74.5
479 64 67.2 14.2%
80 62.5
450 396 415 60 12 11.9% 12.8% –20.1
60
300 40 8
29 40
25
150 20 4 20
0 0 0 0
15 16 17 18 19 15 16 17 18 19 EBIT EBITA EBITDA WC CAPEX Cash flow

EBITA margin, average 5 years: 11.1%

Sales/Earnings, SEK M
Ringfeder Power Transmission 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Net sales 523.4 130.0 129.9 130.5 133.0 522.0 130.5 136.2 134.0 121.4
EBITDA 83.3 16.1 20.5 23.8 23.0 87.2 19.8 26.8 21.0 19.6
EBITA 67.2 12.0 16.4 19.8 19.1 74.2 16.5 23.6 17.7 16.5
EBITA margin, % 12.8 9.2 12.6 15.2 14.3 14.2 12.6 17.3 13.2 13.6
Operating profit (EBIT) 62.5 10.7 15.2 18.7 17.9 69.9 15.4 22.5 16.6 15.4
Operating margin (EBIT), % 11.9 8.2 11.7 14.3 13.5 13.4 11.8 16.5 12.4 12.7
EBITDA, effect of IFRS 16 3.5 0.8 0.9 0.9 0.9
EBITA, effect of IFRS 16 –0.1 0.0 0.0 0.0 –0.1
EBIT, effect of IFRS 16 –0.1 0.0 0.0 0.0 –0.1

Sales, SEK M
Market 2019 4/19 3/19 2/19 1/19 2018 4/18 3/18 2/18 1/18

Sweden 3.4 0.9 0.1 1.1 1.3 4.5 1.4 0.9 1.2 1.0
Other Nordic countries 4.8 0.9 1.1 1.3 1.4 5.3 1.1 0.9 1.7 1.6
Germany 171.3 35.9 44.4 44.2 46.8 183.8 41.9 47.2 48.1 46.0
Other European countries 65.8 16.0 15.0 17.9 16.9 64.0 16.4 16.6 17.8 13.3
North America 105.6 24.1 27.7 28.0 25.8 119.1 29.9 31.8 31.1 26.4
Brazil 67.6 17.5 18.6 15.6 16.0 57.1 14.4 14.8 12.7 15.2
Australia/New Zealand 31.2 13.3 7.6 4.9 5.4 11.3 2.8 2.9 2.9 2.6
China 17.4 6.3 4.9 3.7 2.5 16.8 3.9 4.9 4.6 3.4
Rest of world 56.3 15.2 10.4 13.8 16.9 60.2 18.7 16.2 14.1 11.9
Ringfeder Power Transmission 523.4 130.0 129.9 130.5 133.0 522.0 130.5 136.2 134.0 121.4

51
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT

Five-year summary of the Group’s financial performance and position

(definitions, see Note 1), SEK M 2019 2018 2017 2016 2015

Sales and earnings

Net sales 3,725.4 3,492.4 3,002.0 1,543.9 1,315.3
Gross profit 1,253.8 1,190.9 1,067.9 625.9 537.4
EBITDA 547.8 497.4 428.3 231.6 178.0
EBITA 467.1 449.3 382.8 196.2 145.9
Operating profit (EBIT) 435.0 417.6 351.1 184.0 134.7
Profit after financial items 397.0 373.1 315.6 168.2 134.5
Profit after tax 299.5 273.0 220.5 120.8 95.5
Financial position
Balance sheet total 4,198.6 3,923.8 3,663.6 3,576.9 1,258.8
Capital employed 3,399.0 3,246.0 3,064.0 2,994.1 1,062.5
Equity 2,427.7 2,226.5 2,004.9 1,025.3 871.5
Equity per share, SEK 97.09 89.04 80.18 82.01 69.71
Equity/assets ratio, % 57.8 56.7 54.7 28.7 69.2
Interest-bearing net debt (incl. pension liability) 655.3 647.9 742.3 1,692.4 47.1
Interest-bearing net debt/EBITDA 1.20 1.30 1.73 7.31 0.26
Goodwill/Equity 0.47 0.51 0.56 1.09 0.39
Profitability
Gross margin, % 33.7 34.1 35.6 40.5 40.9
EBITDA margin, % 14.7 14.2 14.3 15.0 13.5
EBITA margin, % 12.5 12.9 12.8 12.7 11.1
Operating margin (EBIT), % 11.7 12.0 11.7 11.9 10.2
Profit margin before tax, % 10.7 10.7 10.5 10.9 10.2
Return on capital employed (ROCE), % 12.4 13.2 10.7 12.7 13.0
Return on equity (ROE), % 12.5 12.8 12.3 12.7 11.3
Earnings per share, SEK 11.98 10.92 9.62 9.66 7.64
Personnel
Number of employees at year-end 1,612 1,573 1,502 1,401 748
Average number of employees 1,596 1,561 1,446 764 636
Personnel costs 885.6 803.1 718.2 415.9 357.7
Salaries and social security contributions per employee, SEK ‘000 554.9 514.4 496.7 544.4 562.4
Other
Amortization of intangible assets 32.1 31.7 31.7 12.2 11.2
Depreciation 49.5 48.1 45.5 35.4 32.1
Impairment of right-of-use assets, leased assets, IFRS 16 31.2 — — — —
Cash flow from operating activities 438.9 253.6 243.7 251.0 118.0
Cash flow for the year 96.4 47.5 44.4 118.4 –51.1
Cash flow per share, SEK 3.86 1.90 1.94 9.47 –4.09

Sustainability reporting Stakeholders and material issues

Sustainability issues hold a central position in VBG Group; this
remained the case in 2019. We have chosen to report on our
­sustainability activities in a section on sustainability, pages
21–24, where we refer to the Directors' Report (page 52) for
more detailed information on the stakeholder and materiality
analysis conducted in the Group in 2017. Sustainability risks, and
how they are managed, are presented together with other risks
in Note 2 on page 73.
In VBG Group, owners, customers, employees and suppliers have
been identified as the Group’s main stakeholders with whom
ongoing dialogue is conducted in different forums – for example,
meetings with investors, regular contacts with customers, supplier
collaboration and performance reviews with employees. As a
Group with a great deal of social commitment, society is also an
important stakeholder for us. Dialogue there takes place primarily
at the local level. In order to focus on the correct issues in our
­sustainability activities, a materiality analysis was conducted in

52
 BOARD OF DIRECTORS' REPORT | VBG GROUP ANNUAL REPORT 2019
the Group during 2017. This resulted in nine material issues for VBG
Group and its stakeholders. Of these nine material issues, the six
that are of greatest significance to and have the greatest impact on
the Group and its stakeholders are reported below. The long-term
work in these selected areas continued in 2019:
Environmental responsibility
Waste products, consumption and emissions
The Group strives to be as efficient as possible in using both finite
and renewable resources. The re-use of excess heat to warm up
company premises and the installation of units to chill water in the
production process – which minimizes the consumption of fresh
water – can be named as examples. The Group also strives to utilize
raw materials as efficiently as possible. This includes marking the
parts of products that can be re-used, and thinking strategically
on how production processes are designed.
Environmental impact during use
The Group has far-reaching partnerships with several customers
to ensure they use our products correctly, with the least possible
impact on the environment.
Social responsibility
Human rights
The Group supports and respects internationally proclaimed human
rights. The Group also imposes requirements on suppliers and
­collaborating partners for accepting the Code of Conduct, or alter-
nately having their own equivalent code approved by the Group.
Business ethics
Compliance with laws
To ensure compliance with the laws and ordinances in force where
the Group conducts operations, there are routines for monitoring in
the form of internal and external checks.
Anti-corruption
The Group works actively to counteract corruption in all stages.
As  a part of this effort, selected employees who have customer
or ­supplier contacts — as well as employees in Accounting and HR
— will undergo recurrent annual anti-corruption training.
Fair competition
It is important that the Group compete on fair and equal terms.
Relationships with business partners are marked by honesty at all
stages. The Group complies with the laws and ordinances in force
in the countries where the Group operates. No form of reward or
advantage will be given to customers, potential customers, regimes,
government authorities or representatives of instances that are in
violation either of applicable legislation or reasonable and generally
accepted business practice. The Group’s employees may not accept
money, gifts, or other types of remuneration from third parties that
could affect their objectivity in taking business decisions.
Environmental impact and environmental policy
The Group works actively with environmental assurance in both
production and administration. Although the environmental
impact of its operations is small, it is nonetheless natural for
the Group as a leading player to take an active role in efforts to
protect the environment. This is done by limiting the impact of
the Group’s own processes on the environment, but also by many
of the products manufactured boosting efficiency in the transport
sector and thereby helping to mitigate the environmental impact
from truck transportation, for example. The VBG Group’s environ-
mental policy states that the Group safeguards both the external
and the internal environment. The company’s business activities
shall be conducted so that:
• relevant legislation is observed and environmental impact due
to unintentional releases of materials and energy is prevented
and the occurrence of noise is decreased.
• all employees are aware of their own and the Group’s environ-
mental impact.
• the environmental impact of the products throughout their life
cycle is taken into consideration.
• environmental aspects are among the criteria in the choice of
suppliers and contractors.
Action plans and contingency plans prepared in consultation
with the relevant authorities are to be in place in order to
­mitigate and prevent the effects of any unintentional discharges
and incidents. As regards the Group’s Swedish companies, Truck &
Trailer Equipment’s production unit in Vänersborg is environmentally
certified under ISO 14001 and conducts activities requiring a
permit under the Environmental Code. The permit is needed for
the handling of large quantities of cutting fluid. Mobile Climate
Control’s facility in Norrtälje is also environmentally certified
under ISO 14001.
Outlook for 2020
The Group makes no forecast.
The work of the Board of Directors
The Board of Directors of VBG Group AB (publ) consists of six
members elected by the AGM. The AGM did not elect any deputies.
In addition, the Unionen/Swedish Association of Graduate Engi-
neers/Ledarna and IF Metall trade unions each appoint one mem-
ber and one deputy member. Company officers take part in Board
meetings by submitting reports or serving in the post of secretary.
The Board of Directors held 9 (12) meetings during fiscal year
2019. The work of the Board follows an annual plan designed to
satisfy the need of the Board for information. In all other respects,
the work of the Board is subject to the special rules of procedure
the Board has adopted governing the division of responsibilities
between the Board and the President. The 2019 Annual General
Meeting (AGM) appointed a Nominating Committee, and
the Board appointed an Audit Committee and a Compensation
53
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS' REPORT
Committee on behalf of the AGM. The company’s auditor reports
his observations to the Board every year based on his review and
gives his assessment of the company’s internal control.
Guidelines for remuneration to senior executives
The 2019 AGM passed a resolution adopting the following
guidelines for remuneration to senior executives. The guidelines
pertain to remuneration and other terms of employment for the
Group Management of VBG Group and other senior executives.
Fixed salaries shall be market-related and based on the individu-
al’s responsibilities and performance. In addition to a fixed
annual salary, variable remuneration that is limited and based on
the Group’s or the respective division’s financial performance
compared with established goals shall also be paid. For senior
executives, the variable portion can amount to a maximum of
50% of their fixed annual salary. In addition, long-term variable
remuneration in the form of shares and/or share-based instru-
ments in VBG Group AB can be paid out through participation in
long-term incentive programs decided by the General Meeting.
In addition to the above remunerations, other benefits may also
be provided such as company car and health care. The manage-
ment generally enjoys pension benefits as provided by law and
collective agreement (ITP plan). It is, however, possible for the
individual to opt for other pension arrangements at the same
cost for the company. Persons residing outside Sweden receive
the pension benefits that are customary in each particular coun-
try. For officers residing in Sweden, the period of notice of ter-
mination on the part of the company is six to eighteen months,
and on the part of the employee six months. Severance pay in
addition to salary during the period of notice may not exceed
one year’s salary. For officers residing outside Sweden, periods
of notice and severance pay that are customary in each particular
country are applied. The Compensation Committee decides on
salaries and other terms of employment.
Guidelines concerning remuneration to senior executives for
2020 have been updated to reflect changes to Chapter 8, Sections
51–53 and Chapter 7, Section 61 of the Annual Accounts Act
(2005:551) and to the Swedish Corporate Governance Code
(the “Code”). The updated guidelines will be presented at the
AGM in April 2020 and can be found on pages 102–103 in the
Corporate Governance Report.
The VBG Group share and shareholders
Earnings per share for the year (average) increased 9.7% to SEK
11.98 (10.92), measured against 25,004,048 shares. At Decem-
ber 31, 2019, equity per share (total outstanding) was SEK
97.09, compared with SEK 89.04 year-on-year. At the end of
the year, the share price was SEK 157.50, which corresponds
to a market capitalization of SEK 3,938 M, compared to a share
price of SEK 126.80 and market capitalization of SEK 3,170 M
year-on-year. The number of shareholders increased by 419
during the year, totaling 4,727 (4,308) at year end.
54
Significant events after the close of the fiscal year
In the fourth quarter of 2019, the Board of Directors decided
that two divisions, VBG Truck Equipment and Edscha Trailer
­Systems, would be reported and monitored as a joint segment:
Truck & Trailer Equipment. On March 10, 2020, the Board made
a follow-up decision to organizationally incorporate Edscha
Trailer Systems into the VBG Truck Equipment division. They also
decided that the expanded division would adopt the name of the
segment: Truck & Trailer Equipment. The decision also means
that the primary company in Truck & Trailer Equipment, the
Vänersborg-­based VBG Group Truck Equipment AB, would
acquire all the companies included in the division that are owned
by the Parent Company, VBG Group AB. Thus, like Mobile
Climate Control, Truck & Trailer Equipment becomes a legal
sub-Group. The decision was announced in a press release on
the morning of March 11, 2020.
A global outbreak of covid-19 blossomed in the first quarter
of 2020. The management of VBG Group is monitoring the
development of this outbreak on a daily basis. At the time of
writing, with the prevailing uncertainty, we cannot determine
what financial effect this will have for the Group. Continual
risk assessments are being conducted on a daily basis, and the
necessary measures are being routinely taken.
Proposed distribution of profits
In proposing the dividend, the Board of Directors has taken into
account the Parent Company’s and Group’s short- and long-term
liquidity requirements, development potential, financial position
and investment needs. Bearing these factors in mind, the Board of
Directors of VBG Group AB (publ) proposes that the 2020 Annual
General Meeting resolve to approve an increased ordinary divi-
dend of SEK 5.00 per share (3.50) and no extra dividend of (1.00),
thus a total dividend of SEK 5.00 (4.50) for the 2019 fiscal year.
The proposed dividend entails a total distribution of funds from
the Parent Company of SEK 125.0 M (112.5), corresponding to
5.1% of the Group’s equity – or 8.4% of the Parent Company’s
equity – at year end. The Group reported profit after tax of SEK
299.5 M (273.0), which means that the proposed dividend com-
prises 41.7% (41.2) of the net profit for the year for the Group.
The following funds in the Parent Company are available for
­distribution by the AGM:
Retained earnings SEK 1,194,310,475
Net profit for the year SEK 183,027,784
SEK 1,377,338,259
The Board of Directors proposes that these funds be distributed as
follows:
Dividend to shareholders SEK 125,020,240
Carried forward to new account SEK 1,252,318,019
SEK 1,377,338,259
 CONSOLIDATED INCOME STATEMENT | VBG GROUP ANNUAL REPORT 2019

Consolidated Income Statement

SEK ’000 Note 2019 2018

Net sales 3 3,725,442 3,492,449

Cost of goods sold –2,471,550 –2,301,572
Gross profit 1,253,892 1,190,877

Selling expenses –380,010 –381,680

Administrative expenses –274,946 –264,959
Research and development costs –136,668 –136,403
Other operating income 4 8,707 25,548
Other operating expenses 5 –35,938 –15,768
–818,855 –773,262

Operating profit 6, 7, 8, 9 435,037 417,615

Profit/loss from financial items

Exchange rate effects, net –5,489 –10,723
Interest income 3,450 2,249
Interest expenses, including IFRS 16 –28,242 –27,764
Other financial expenses –7,730 –8,266
Total financial items –38,011 –44,504

Profit after financial items 397,026 373,111

Tax on profit for the year 11 –97,489 –100,117
Net profit for the year 299,537 272,994
Net profit for the year attributable to Parent Company shareholders 299,537 272,994

Other comprehensive income

Net profit for the year 299,537 272,994
Items that will not be reversed in the Income Statement
Effect of translation of defined-benefit pension plans –31,326 –5,686
Deferred tax on effect of translation
of defined-benefit pension plans 7,397 1,275

Items that may later be reversed in the income statement

Translation differences relating to foreign operations 36,702 34,395
Translation differences pertaining to hedge accounting
for net investments in foreign operations 1,425 –1,998
Other comprehensive income, net after tax 14,198 27,986
Comprehensive income for the year 313,735 300,980
Comprehensive income for the year attributable
to Parent Company shareholders 313,735 300,980

Earnings per share, basic and diluted, SEK 11.98 10.92

Number of shares at year-end 25,004,048 25,004,048
Average number of shares during the year 25,004,048 25,004,048

Number of own shares at end of year 1,191,976 1,191,976

Average number of own shares 1,191,976 1,191,976

55
VBG GROUP ANNUAL REPORT 2019 | CONSOLIDATED BALANCE SHEET

Consolidated Balance Sheet

SEK ’000 Note Dec. 31, 2019 Dec. 31, 2018

Assets
Non-current assets
Intangible assets 12
Brands, customer relationships and other intangible assets 797,219 798,889
Goodwill 1,143,333 1,128,601
1,940,552 1,927,490
Property, plant and equipment 13
Land and buildings 187,329 186,151
Plant and machinery 118,189 100,747
Equipment, tools, fixtures and fittings 49,524 51,341
Construction in progress 26,935 10,304
Rights of use under IFRS 16 14 154,660 —
536,637 348,543
Long-term investments
Deferred tax asset 16 67,259 63,843
67,259 63,843

Total non-current assets 2,544,448 2,339,887

Current assets
Inventories 17
Raw materials and consumables 334,153 322,158
Work in progress 79,937 85,059
Finished products and merchandise 224,571 227,648
638,661 634,865
Current receivables
Trade receivables 24 467,202 491,163
Current tax assets 21,270 25,470
Other receivables 29,082 41,351
Prepaid expenses and accrued income 18 25,506 19,673
543,060 577,657
Cash and cash equivalents
Cash on hand and demand deposits 472,474 371,369
472,474 371,369

Total current assets 1,654,195 1,583,891

Total assets 4,198,643 3,923,767

56
 CONSOLIDATED BALANCE SHEET | VBG GROUP ANNUAL REPORT 2019

CONSOLIDATED BALANCE SHEET CONT’D.

SEK ’000 Note Dec. 31, 2019 Dec. 31, 2018

Equity and liabilities

Equity 19
Share capital 65,490 65,490
Other contributed capital 781,316 781,316
Reserves 154,650 116,523
Retained earnings, incl. net profit for the year 1,426,211 1,263,121
Total equity 2,427,667 2,226,450

Non-current liabilities
Provisions for pensions and similar obligations 21 230,165 196,853
Deferred tax liability 16 219,638 224,568
Other provisions 22 24,317 22,451
Lease liability under IFRS 16 23 131,091 —
Liabilities to credit institutions 23 741,161 1,170
Other non-current liabilities 1,857 1,857
Total non-current liabilities 1,348,229 446,899

Current liabilities
Liabilities to credit institutions 23 — 821,535
Trade payables 202,988 212,744
Current tax liabilities 8,815 36,663
Other liabilities 29,687 28,225
Lease liability under IFRS 16 23 25,310 —
Accrued expenses and deferred income 26 155,947 151,251
Total current liabilities 422,747 1,250,418

Total equity and liabilities 4,198,643 3,923,767

57
VBG GROUP ANNUAL REPORT 2019 | CONSOLIDATED CHANGES IN EQUITY

Consolidated Changes in Equity

Contributed Retained Total

SEK ’000 Share capital capital Reserves earnings equity

Opening balance at Jan. 1, 2018 65,490 779,443 84,126 1,075,801 2,004,860

Effect of translation of defined-
benefit pension plans –5,686 –5,686
Deferred tax on effect of translation
of defined-benefit pension plans 1,275 1,275
Translation differences 34,395 34,395
Cash flow hedges, currency effects –1,998 –1,998
Other comprehensive income 32,397 –4,411 27,986
Net profit for the year 272,994 272,994
Total comprehensive income 300,980
Warrants 1,873 1,873
Dividend –81,263 –81,263
Total transactions with shareholders –79,390
Equity at Dec. 31, 2018 65,490 781,316 116,523 1,263,121 2,226,450

Opening balance at Jan. 1, 2019 65,490 781,316 116,523 1,263,121 2,226,450

Effect of translation of defined-
benefit pension plans –31,326 –31,326
Deferred tax on effect of translation
of defined-benefit pension plans 7,397 7,397
Translation differences 36,702 36,702
Cash flow hedges, currency effects 1,425 1,425
Other comprehensive income 38,127 –23,929 14,198
Net profit for the year 299,537 299,537
Total comprehensive income 313,735
Dividend –112,518 –112,518
Total transactions with shareholders –112,518
Equity at Dec. 31, 2019 65,490 781,316 154,650 1,426,211 2,427,667

58
 CONSOLIDATED CASH FLOW STATEMENT | VBG GROUP ANNUAL REPORT 2019

Consolidated Cash Flow Statement

SEK ’000 Note 2019 2018

Operating activities
Operating profit before financial items 435,037 417,615
Depreciation/amortization 112,818 79,803
Other items not affecting liquidity 29 10,670 24,864
Interest received, etc. 4,599 2,984
Interest paid, etc. –31,565 –36,765
Tax paid –127,652 –80,743
Cash flow before change in working capital 403,907 407,758

Decrease/increase (–) in inventories 11,583 –130,905

Decrease/increase (–) in trade receivables 37,923 –61,743
Decrease/increase (–) in other current receivables 1,967 –346
Increase/decrease (–) in trade payables –18,243 29,908
Increase/decrease (–) in other current liabilities 1,758 8,891
Cash flow from operating activities 438,895 253,563

Investing activities
Investments in intangible assets 29 –30,566 –2,211
Investments in property, plant and equipment 29 –75,386 –45,024
Cash flow from investing activities –105,952 –47,235

Financing activities
Repayment of loans –40,000 –80,000
Change in utilization of credit facilities –55,812 564
Warrants — 1,873
Amortization of lease liability –28,211 —
Dividend paid –112,518 –81,263
Cash flow from financing activities –236,541 –158,826

Cash flow for the year 96,402 47,502

Cash and cash equivalents at start of year 371,369 321,423

Translation difference, cash and cash equivalents 4,703 2,444
Cash and cash equivalents at year-end 472,474 371,369
Unutilized overdraft facilities 100,000 100,000
Total cash and cash equivalents available 572,474 471,369

59
VBG GROUP ANNUAL REPORT 2019 | PARENT COMPANY INCOME STATEMENT AND BALANCE SHEET

Parent Company Income Statement

SEK ’000 Note 2019 2018

Net sales 45,208 42,560

Gross profit 45,208 42,560

Administrative expenses –51,738 –53,085

Other operating expenses — –572
–51,738 –53,657

Operating loss 6,7,8 –6,530 –11,097

Profit/loss from financial items

Dividends from interests in subsidiaries 170,650 216,536
Exchange rate effects, net 1,847 4,125
Interest income 15,760 16,162
Interest expenses –18,087 –23,632
Other financial expenses –7,955 –8,167
Total profit from financial items 162,215 205,024

Profit after financial items 155,685 193,927

Appropriations 10 31,164 30,249
Tax on profit for the year 11 –3,822 –2,053

Net profit and comprehensive income for the year 183,027 222,123

Parent Company Balance Sheet

SEK ’000 Note Dec. 31, 2019 Dec. 31, 2018

Assets
Non-current assets
Intangible assets 12
Trademarks and other intellectual property 381 835
381 835
Property, plant and equipment 13
Equipment, tools, fixtures and fittings 3,369 1,229
3,369 1,229
Long-term investments
Interests in Group companies 15 1,992,658 1,992,658
Non-current receivables, Group companies 292,563 348,645
2,285,221 2,341,303

Total non-current assets 2,288,971 2,343,367

60
 PARENT COMPANY BALANCE SHEET | VBG GROUP ANNUAL REPORT 2019

PARENT COMPANY BALANCE SHEET CONT’D.

SEK ’000 Note Dec. 31, 2019 Dec. 31, 2018

Current assets
Current receivables
Receivables from Group companies 131,911 109,802
Other receivables — 1
Prepaid expenses and accrued income 18 7,587 3,906
139,498 113,709
Cash and cash equivalents
Cash on hand and demand deposits 306,270 232,441

Total current assets 445,768 346,150

Total assets 2,734,739 2,689,517

Equity and liabilities

Equity 19
Restricted equity
Share capital 65,490 65,490
Reserves 53,249 53,249
118,739 118,739
Non-restricted equity
Retained earnings 1,194,311 1,084,697
Net profit for the year 183,027 222,123
1,377,338 1,306,820
Total equity 1,496,077 1,425,559
Untaxed reserves 20 10,320 5,520
Provisions
Provisions for pensions 21 12,935 13,060
Total provisions 12,935 13,060

Non-current liabilities
Liabilities to credit institutions 23 741,122 —
Total non-current liabilities 741,122 —

Current liabilities
Trade payables 2,021 1,771
Liabilities to subsidiaries 458,271 409,625
Liabilities to credit institutions 23 — 820,493
Current tax liability 1,916 160
Other liabilities 2,046 2,103
Accrued expenses and deferred income 26 10,031 11,226
Total current liabilities 474,285 1,245,378

Total equity and liabilities 2,734,739 2,689,517

61
VBG GROUP ANNUAL REPORT 2019 | PARENT COMPANY CHANGES IN EQUITY AND CASH FLOW STATEMENT

Parent Company Changes in Equity

Non-restricted Total
SEK ’000 Note Share capital Statutory reserve equity equity

Equity at Jan. 1, 2018 65,490 53,249 1,164,088 1,282,827

Warrants 1,873 1,873
Net profit for the year 222,123 222,123
Dividend –81,263 –81,263
Equity at Dec. 31, 2018 65,490 53,249 1,306,821 1,425,560
Dividend returned 8 8
Net profit for the year 183,027 183,027
Dividend –112,518 –112,518
Equity at Dec. 31, 2019 65,490 53,249 1,377,338 1,496,077

Parent Company Cash Flow Statement

SEK ’000 Note 2019 2018

Operating activities
Operating loss before financial items –6,530 –11,097
Depreciation/amortization 1,120 2,592
Other items not affecting liquidity 29 47,165 65,685
Interest received 15,760 16,161
Dividend received 170,650 216,536
Interest paid, etc. –21,107 –31,799
Tax paid –2,066 1,817
Cash flow before change in working capital 204,992 259,895

Decrease/increase (–) in other current receivables 30,294 5,069

Increase/decrease (–) in trade payables 250 149
Increase/decrease (–) in other current liabilities 47,394 7,931
Cash flow from operating activities 282,930 273,044

Investing activities
Investments in subsidiaries — –100
Investments in property, plant and equipment 29 –2,808 –500
Cash flow from investing activities –2,808 –600

Financing activities
Dividend paid –112,518 –81,263
Warrants — 1,873
Repayment of loans –40,000 –80,000
Change in utilization of credit facilities –53,775 —
Cash flow from financing activities –206,293 –159,390

Cash flow for the year 73,829 113,054

Cash and cash equivalents at start of year 232,441 119,387
Cash and cash equivalents at year-end 306,270 232,441
Unutilized overdraft facilities 100,000 100,000
Total cash and cash equivalents available 406,270 332,441

62
 EFFECTS OF TRANSITION TO IFRS 16 | VBG GROUP ANNUAL REPORT 2019

Effects of transition to IFRS 16

Condensed consolidated income statement

SEK M 2019, excl. IFRS 16 2019 IFRS 16 effect 2019, incl. IFRS 16
Net sales 3,725.4 3,725.4
Operating expenses –3,211.8 34.3 –3,177.6
Depreciation/amortization –81.6 –31.2 –112.8
Operating profit (EBIT) 432.0 3.0 435.0

Net financial items –31.9 –6.1 –38.0

Profit/loss after financial items 400.1 –3.1 397.0

Tax –97.8 0.3 –97.5

Profit/loss for the period 302.3 –2.8 299.5

Condensed consolidated balance sheet

SEK M 2019, excl. IFRS 16 2019 IFRS 16 effect 2019, incl. IFRS 16
Assets
Total non-current assets 2,389.8 154.7 2,544.5
Total current assets 1,656.2 –2.1 1,654.1
Total assets 4,046.0 152.6 4,198.6

Liabilities
Equity 2,431.5 –3.8 2,427.7
Total non-current liabilities 1,217.1 131.1 1,348.2
Total current liabilities 397.4 25.3 422.7
Total equity and liabilities 4,046.0 152.6 4,198.6

The Group’s key figures

SEK M 2019, excl. IFRS 16 2019 IFRS 16 effect 2019, incl. IFRS 16
EBITDA 513.5 34.3 547.8
EBITA 464.1 3.0 467.1
Equity/assets ratio, % 60.1 –2.3 57.8
Interest-bearing net debt 498.9 156.4 655.3
Interest-bearing net debt/EBITDA 0.97 0.23 1.20
ROCE 12.9 –0.5 12.4
Earnings per share, SEK 12.09 –0.11 11.98

63
VBG GROUP ANNUAL REPORT 2019 | ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures

Reconciliation between IFRS and key figures used

Certain information in this report that is used by company management and analysts to assess the Group’s performance has not been
prepared in accordance with IFRS. Company management believes that this information makes it easier for investors to analyze the
Group’s earnings performance and financial structure. Investors should view this information as a supplement to, rather than a
replacement of, financial reporting in accordance with IFRS.

Actual organic growth

Net sales excluding effects of structural changes, meaning acquired or divested operations, and currency effects.

SEK M 2019 2018 2017 2016 2015

Group
Net sales 3,725.4 3,492.4 3,002.0 1,543.9 1,315.3
Acquired volume (incl. full-year
effect from preceding year) — — –1,309.2 –150.2 –52.0
Currency effect –168.2 –100.5 –20.0 –6.9 –84.5
Net sales excluding acquisitions and currencies 3,557.2 3,391.9 1,672.8 1,386.8 1,178.8
Actual organic growth 64.8 389.9 129.0 71.5 –8.0
Organic growth, % 1.9 13.0 8.4 5.4 –0.7

Truck & Trailer Equipment

Net sales 1,203.6 1,243.1 836.7 757.3 697.7
Acquired volume (incl. full-year
effect from preceding year) — — — — —
Currency effect –31.7 –50.2 –5.2 0.7 –26.7
Net sales excluding acquisitions and currencies 1,171.9 1,192.9 831.5 758.0 671.0
Actual organic growth –71.2 96.5 74.2 60.3 34.4
Organic growth, % –5.7 8.8 9.8 8.6 5.4

Mobile Climate Control

Net sales 1,998.4 1,727.3 1,426.7 101.4
Acquired volume (incl. full-year
effect from preceding year) — — –1,309.2 —
Currency effect –116.1 –36.3 — —
Net sales excluding acquisitions and currencies 1,882.3 1,691.0 117.5 101.4
Actual organic growth 155.0 264.3 16.1 n/a
Organic growth, % 9.0 18.5 15.9 n/a

Ringfeder Power Transmission

Net sales 523.4 522.0 479.1 414.7 395.9
Acquired volume (incl. full-year
effect from preceding year) — — — –48.8 –52.0
Currency effect –20.4 –13.9 –10.0 –4.8 –51.5
Net sales excluding acquisitions and currencies 503.0 508.1 469.1 361.1 292.4
Actual organic growth –19.0 29.1 54.4 –34.8 –38.0
Organic growth, % –3.6 6.1 13.1 –8.8 –11.5

64
 ALTERNATIVE PERFORMANCE MEASURES | VBG GROUP ANNUAL REPORT 2019

Interest-bearing net debt

Interest-bearing loan liabilities and provisions less cash and cash equivalents.

SEK M 2019 2018 2017 2016 2015

Group
Provisions for pensions 230.2 196.9 185.7 175.7 165.6
Loans 741.2 822.4 878.0 1,793.1 25.5
Lease liability 156.4 — — — —
Bank balances –472.5 –371.4 –321.4 –276.4 –144.0
Interest-bearing net debt 655.3 647.9 742.3 1,692.4 47.1

EBITDA
Operating profit before depreciation/amortization of intangible assets and property, plant and equipment.

SEK M 2019 2018 2017 2016 2015

Group
Operating profit 435.0 417.6 351.1 184.0 134.7
+ Depreciation/amortization 112.8 79.8 77.2 47.6 43.3
EBITDA 547.8 497.4 428.3 231.6 178.0

EBITA
Operating profit before amortization and impairment of intangible assets.

SEK M 2019 2018 2017 2016 2015

Group
Operating profit 435.0 417.6 351.1 184.0 134.7
+ Amortization of intangible assets 32.1 31.7 31.7 12.2 11.2
EBITA 467.1 449.3 382.8 196.2 145.9

Interest-bearing net debt/EBITDA

Interest-bearing net debt as a percentage of operating profit before depreciation/amortization and impairment.

SEK M 2019 2018 2017 2016 2015

Group
Interest-bearing net debt 655.3 647.9 742.3 1,692.4 47.1
EBITDA, rolling 4 quarter 547.8 497.4 428.3 231.6 178.0
Interest-bearing net debt/EBITDA 1.20 1.30 1.73 7.31 0.26

Profit margin
Profit after financial items as a percentage of net sales.

SEK M 2019 2018 2017 2016 2015

Group
Net sales 3,725.4 3,492.4 3,002.0 1,543.9 1,315.3
Profit after financial items 397.0 373.1 315.6 168.2 134.5
Profit margin, % 10.7 10.7 10.5 10.9 10.2

65
VBG GROUP ANNUAL REPORT 2019 | ALTERNATIVE PERFORMANCE MEASURES

ROOC by division
EBITDA as a percentage of average operating capital, expressed as property, plant and
equipment and working capital (inventory, trade receivables and trade payables).

SEK M Full year 2019 Full year 2018

Truck & Trailer Equipment

Inventories 164.2 169.4
Trade receivables 140.8 166.5
Trade payables –48.6 –58.7
Working capital 256.4 277.2
Property, plant and equipment 177.5 128.8
Operating capital 433.9 405.9
EBITDA, rolling four quarter 255.0 240.3
Average operating capital, four quarter 454.9 414.0
ROOC, % 56.1 58.0

Mobile Climate Control

Inventories 355.3 328.4
Trade receivables 233.7 237.0
Trade payables –144.4 –140.8
Working capital 444.6 424.5
Property, plant and equipment 232.4 110.9
Operating capital 677.0 535.4
EBITDA, rolling four quarter 224.8 187.3
Average operating capital, four quarter 697.7 485.1
ROOC, % 32.2 38.6

Ringfeder Power Transmission

Inventories 119.1 139.0
Trade receivables 92.7 87.7
Trade payables –7.9 –11.4
Working capital 203.9 215.2
Property, plant and equipment 120.4 107.6
Operating capital 324.3 322.8
EBITDA, rolling four quarter 83.3 87.2
Average operating capital, four quarter 339.7 312.9
ROOC, % 24.5 27.9

Group
Inventories 638.7 634.9
Trade receivables 467.2 491.2
Trade payables –203.0 –212.7
Working capital 902.9 913.3
Property, plant and equipment 536.6 348.5
Operating capital 1,439.5 1,261.8
EBITDA, rolling four quarter 547.9 497.4
Average operating capital, four quarter 1,492.3 1,261.8
ROOC, % 36.7 39.4

66

Notes to Parent Company and
consolidated financial statements
NOTE 1 | GENERAL INFORMATION
VBG Group AB (publ) in Vänersborg is the Parent Company of an
international industrial Group with wholly owned companies in the
US, Canada, Brazil, South Africa, Australia, India and China as well
as nine countries in Europe. For 2019, operations were monitored
and reported in three segments: Truck & Trailer Equipment* (with
the divisions VBG Truck Equipment and Edscha Trailer Systems),
Mobile Climate Control and Ringfeder Power Transmission.
The Parent Company is a limited company registered and
­domiciled in Vänersborg, Sweden. The address of the head office
is Kungsgatan 57, SE–461 34 Trollhättan, Sweden.
The Parent Company’s Series B share is listed on the Nasdaq
Stockholm Mid Cap List.
Accounting and valuation policies
The consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS) as adopted by the EU. In addition, the Swedish Annual
Accounts Act and the Swedish Financial Reporting Board’s recom-
mendation RFR 1 are applied. The financial statements have been
prepared in accordance with the cost method, except with regard
to available-for-sale financial assets and financial assets and liabilities
(including derivative instruments) measured at fair value through
profit or loss.
Parent Company accounting policies
The Parent Company has prepared its annual report in accordance
with the Swedish Annual Accounts Act (1995:1554) and the Swedish
Financial Reporting Board’s recommendation RFR 2 Accounting
for Legal Entities. Under RFR 2, the Parent Company shall, in pre-
paring the annual report for the legal entity, apply all IFRS and
statements approved by the EU as far as possible while complying
with the Swedish Annual Accounts Act and taking into account the
relationship between accounting and taxation. The recommenda-
tion stipulates what exceptions and additions should be made with
respect to the IFRS. The same accounting policies and calculation
methods were applied as in recent years. If differences exist
between the consolidated and the Parent Company accounting
policies, they are described in the relevant sections below.
This Annual Report has been prepared in accordance with the
IFRS and IFRIC statements that had entered into effect at the time
of its preparation and that have been approved by the European
Commission.
New and amended standards applied by the Group
New and amended accounting policies that entered into force
in 2019, excluding the below, have not entailed any material
impact on the consolidated financial statements for the fiscal
year. A number of new interpretations and amendments have
been issued by the IFRS Interpretations Committee. These
amendments and interpretations have had no material impact
on the consolidated financial statements for 2019.
IFRS 16 Leases took effect on January 1, 2019. IFRS 16 specifies
the recognition of leases for both the lessor and lessee. The imple-
mentation of the standard means almost all leases will be recognized
in the lessee’s balance sheet, as no distinction is now made between
operating and finance leases. In accordance with the new standard,
an asset (the right to use a leased asset) and a financial liability
pertaining to the obligation to make lease payments are recog-
* Refer to page 54, Significant events after the close of the fiscal year.
NOTES | VBG GROUP ANNUAL REPORT 2019
nized in the balance sheet and that amortization of leased assets,
separate from the interest expense of the lease, is recognized in
profit or loss.
VBG Group applied a modified retrospective approach when
transitioning to IFRS 16 on January 1, 2019, which means the
2018 fiscal year is not restated. Lease liability is the total present
value of all future fees until the lease has expired. The simplified
rule was applied during the transition, meaning the right of use
(before adjustments for any advance payment) corresponds to
the lease liability. The discount rate is VBG Group’s incremental
borrowing rate for each currency. Exemptions to not recognize
short-term leases and assets of low value were also applied.
New accounting policy for leases
As of January 1, 2019, VBG Group applies the recognition of
leases in accordance with IFRS 16 using the following accounting
policies. All leases are recognized in the balance sheet, on the
starting date, as a right of use and a lease liability. An agreement
is considered to be, or includes, a lease if the agreement trans-
fers the right to determine the use of an identified asset over a
specified period in exchange for remuneration. A right of use
and lease liability are recognized for all leases with a lease term
of more than twelve months, with the exception of assets of low
value. After the starting date, right of use is measured in accor-
dance with provisions for property, plant and equipment. A lease
liability is discounted by using the implicit interest in the lease, if
this interest rate is readily identifiable. If the interest rate is not
readily identifiable, the incremental borrowing rate can be used.
The incremental borrowing rate is determined based on currency
and financing terms for the Group. The lease term is determined
as the non-cancellable period together with both periods covered
by a potential extension to the lease if the lessee is reasonably
confident that this alternative will be used, and periods covered
by an opportunity to end the lease if the lessee is reasonably
­confident that this alternative will not be used. VBG Group has
also applied the simplified rule for fixed, non-lease components
and instead recognizes these together with the lease component
in the contract. Moreover, future modified leases will not be
­recognized as a separate lease, but rather as a remeasurement
of the lease liability and an adjustment of right of use.
Consolidated financial statements
Subsidiaries are all companies (including structured companies)
over which the Group holds a controlling influence. The Group
controls a company when it is exposed to or has the right to
a ­variable return from its holding in the company and has the
­possibility to influence this return through its influence in the
­company. Subsidiaries are included in the consolidated financial
statements as from the date when control passes to the Group.
They are excluded from the consolidated financial statements
as from the date when this control no longer exists.
The acquisition method is used for accounting of the Group’s
business combinations. The cost of an acquisition is measured as
the fair value of identifiable assets furnished as compensation and
liabilities arising or assumed as of the date of transfer. Identifiable
assets and liabilities acquired and contingent liabilities assumed in
a business combination are initially measured at fair value on the
acquisition date regardless of the scope of any non-controlling
67
VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 1 CONT’D.

interest. The excess that consists of the difference between the in which case gains/losses are recognized in other comprehensive
cost of the acquisition and the fair value of the Group’s share of income. Exchange gains and exchange losses on operating receiv-
identifiable acquired net assets is recognized as goodwill. ables and liabilities are offset against each other and recognized
Intra-Group transactions and line items, as well as unrealized among other operating income or other operating expenses.
gains on transactions between Group companies, are eliminated. Exchange gains and exchange losses of a financing nature are
Unrealized losses are also eliminated, unless the transaction recognized in profit or loss under financial items.
­constitutes evidence of the existence of an impairment loss for
the ­transferred asset. The accounting policies for subsidiaries have Group companies
been changed where applicable in order to guarantee a consistent The earnings and financial position of all Group companies
­application of the Group’s policies. with another functional currency than the presentation currency
This report may contain rounding differences. are translated to the Group’s reporting currency as follows:
(i) assets and liabilities are translated at the closing rate
Tax (ii) revenue and expenses are translated at the average exchange
The tax expense for the period consists of current and deferred tax. rate
Tax is recognized in profit or loss, except when the tax pertains (iii) all exchange rate differences that arise are recognized
to items recognized in other comprehensive income or directly in as reserves within equity
equity. In such cases, the tax is also recognized in other compre-
hensive income or equity, respectively. For currencies that have the greatest impact on the Group,
Current tax is calculated on the taxable profit for the period the ­following currency exchange rates have been used:
in each individual legal entity. Closing rate, Dec Average currency
Deferred tax is recognized in its entirety, in accordance with 31, 2019 exchange rate 2019
the balance sheet method, on all temporary differences arising SEK/BRL 2.2512 2.3990
between the tax bases of assets and liabilities and their carrying SEK/CAD 7.1283 7.1277
amounts in the consolidated financial statements. If, however,
SEK/CZK 0.4098 0.4124
the deferred tax arises as a result of a transaction that constitutes
SEK/EUR 10.4336 10.5870
the initial recognition of an asset or liability that is not a business
SEK/PLN 2.4445 2.4632
combination and that affects neither the carrying amount nor the
tax base on the transaction date, it is not recognized. Deferred SEK/USD 9.3171 9.4573
tax is calculated with the application of tax rates and tax laws that
On consolidation, exchange rate differences that arise as a
have been enacted or announced as of the balance sheet date and
­consequence of translation of net investments in foreign entities
that are expected to apply when the concerned deferred tax asset
and of borrowing and other currency instruments that have been
is realized or the deferred tax liability is settled.
­identified as hedges of such investments are posted to equity.
Deferred tax assets and tax liabilities offset each other when
Goodwill and adjustments of fair value that arise in connection
there is a legal right of offset for current tax assets and tax liabilities
with the acquisition of a foreign entity are treated as assets and
in question, and when the deferred tax assets and tax liabilities are
liabilities in this entity and translated at the closing rate.
attributable to tax charged by the same tax authority and pertain
to either the same tax subject or different tax subjects, when the
IFRS 15 Revenue from Contracts with Customers
intention is to settle the balances through net payments.
VBG Group’s recognized net sales relate to income from sale of
Deferred tax assets are recognized to the extent it is likely that
goods. Where appropriate, net sales have been reduced by the
future taxable surpluses will be available against which the temporary
value of discounts and returns allowed. Income from sales is
differences can be utilized.
­recognized when control of the goods is transferred and there are
no unfulfilled commitments that could influence the customer’s
Effects of changes in exchange rates
acceptance of the goods. Goods are often sold at volume discounts
Functional currency and reporting currency
based on accumulated sales over a 12-month period. Income from
Items included in the financial statements for the different entities
the sale of goods is recognized based on the price in the contract,
in the Group are stated in the currency that is used in the primary
less estimated volume discounts. Historical data is used to estimate
economic environment where the enterprise is active (functional
the anticipated value of the discounts, and the income is recog-
currency). For all entities, the functional currency is the currency in
nized only to the extent that a significant return is not likely to
the country where the entity operates. The Swedish krona, which
occur. A liability (included under Accrued expenses and deferred
is the Parent Company’s functional and reporting currency, is used
income) is recognized for anticipated volume discounts in relation
in the consolidated financial statements.
to sales up through the balance sheet date.
A receivable is recognized when the goods have been delivered,
Transactions and line items
as that is the point in time when remuneration becomes uncondi-
Transactions in foreign currencies are translated to the functional
tional (i.e. only the passage of time is required for the payment to
currency at the exchange rate prevailing on the transaction date.
occur). The Parent Company’s recognized net sales relate to income
Exchange gains and exchange losses arising in connection with
from sales of services to subsidiaries in the Group and is recognized
the payment of such transactions and the translation of monetary
in the period when the services are delivered.
assets and liabilities in foreign currencies at the closing rate are
­recognized in profit or loss. An exception is when the transactions
constitute hedges that meet the conditions for hedge accounting,

68

NOTE 1 CONT’D.
Inventories
Inventories are measured, with application of the first-in first-out
principle, at the lower of cost and net realizable value on the
­balance sheet date. The cost of own-manufactured semi-finished
and finished products has been calculated as the manufacturing
costs of the products including attributable manufacturing over-
heads. Due provision has been made for obsolescence.
IFRS 9 Financial instruments
Financial assets and liabilities are measured and recognized in the
Group and the Parent Company in accordance with the regulations
in IFRS 9. Under IFRS 9, financial instruments are classified into
categories. The classification depends on the intent behind the
acquisition of the financial instrument. Company management
determines the classification at the original point in time of the
acquisition. The categories are: Financial assets and liabilities
­measured at fair value through profit or loss, Financial assets and
liabilities measured at amortized cost, and Financial assets and
­liabilities measured at fair value through other comprehensive
income. A financial asset or financial liability is included on the
­balance sheet when the company becomes a party to it under the
contractual terms of the instrument. Trade receivables are included
on the balance sheet when the invoice has been sent. Liabilities are
included when the counterparty has delivered and a contractual
obligation to pay exists, even if the invoice has not been received.
A financial asset is removed from the balance sheet when the
rights in the contract are realized, fall due, or the company loses
control over them. A financial liability is removed from the balance
sheet when the commitments in the contract are fulfilled or are
otherwise extinguished. Acquisitions and sales of financial assets
are recognized on the transaction date, which constitutes the date
the company commits to acquiring or selling the asset, except in
those cases where the company acquires or sells listed securities,
when settlement date recognition is applied.
Financial assets at amortized cost
Assets held for the purpose of collecting contractual cash flows,
and where these cash flows only constitute capital amounts and
interest, are measured at amortized cost. Assets in this category
are initially recognized at fair value including transaction costs.
After the acquisition date, they are recognized at amortized cost
using the effective-interest method.
Trade receivables
Trade receivables are amounts attributable to customers as regards
the sale of goods or services performed in operating activities.
Generally, trade receivables fall due for payment within 30 days,
and all trade receivables are therefore classified as current assets.
Trade receivables are held solely for the purpose of collecting
­contractual cash flows, and are thus measured at amortized cost.
Cash and cash equivalents
Cash and cash equivalents consist of funds and balances immedi-
ately available at banks and similar institutions.
Liabilities
The Group’s other financial liabilities are initially recognized at
fair value, net of transaction costs. Other financial liabilities are
subsequently recognized at amortized cost using the effective-rate
method. Non-current liabilities have an expected tenor longer than
NOTES | VBG GROUP ANNUAL REPORT 2019
one year, whereas current liabilities have a tenor of less than one
year. This category includes liabilities to credit institutions, trade
payables and other current liabilities.
Borrowing
Borrowing is initially recognized at fair value, net after transaction
costs. Borrowing is thereafter recognized at amortized cost, and
any difference between the amount received (net after transaction
costs) and the repayment amount is recognized in profit or loss
allocated over the term of the loan with application of the e­ ffective
interest method.
Financial derivatives and hedge accounting
The Group holds financial derivatives in order to hedge its foreign
currency. Derivatives are initially recognized at fair value. The
Group identifies certain derivatives as hedging instruments in
order  to hedge the variability in the cash flow associated with
highly likely transactions arising from changes in foreign currency
exchange rates. When the Group initially identifies hedging
­conditions, the objectives of risk management and the strategy
of the hedging are documented. The Group also documents the
financial relation between the hedged item and the hedging
­instrument, including whether cash flow changes in the hedged
item and hedging instrument are expected to cancel each other.
Cash flow hedges
When a derivative is identified as a cash flow hedging instrument,
the effective portion of the changes in the fair value of the deriva-
tive is recognized in other comprehensive income and is accumu-
lated in the hedge reserve. Ineffective portions of changes in the
fair value of the derivative are recognized immediately in profit or
loss. For all other hedged forecast transactions, the accumulated
amount in the hedge reserve and hedging cost reserve is reclassi-
fied to earnings in the same period(s) the hedged anticipated cash
flow impacts profit or loss. If the hedging no longer meets the
­criteria for hedge accounting, or the hedging instrument has been
sold, fallen due, liquidated or redeemed, the hedge accounting is
discontinued prospectively. When the hedge accounting for cash
flow hedges is discontinued, the amount that has accumulated in
the hedge reserve is retained in equity until it is included in the
cost of the non-financial item at initial recognition (for hedging of
a transaction that results in a non-financial item), or it is reclassified
to the earnings in the same period(s) the hedged anticipated cash
flow impacts profit or loss (for other cash flow hedges). If the
hedged cash flow is no longer expected to arise, the amount that
has accumulated in the hedge reserve and hedging costs reserve
is immediately reclassified to earnings. Exchange rate changes
regarding receivables and liabilities related to operations are recognized
in operating profit or loss, whereas exchange rate changes regarding
financial receivables and liabilities are recognized in net financial
items.
Amortization of financial assets
The Group assesses future anticipated credit losses linked to assets
recognized at amortized cost. The Group recognizes a credit
reserve for such anticipated credit losses on each reporting date.
For trade receivables, the Group applies the simplified model for credit
reserves — that is, the reserve will correspond to the anticipated
loss over the entire life of the trade receivable. Expected credit
losses are recognized in consolidated operating profit or loss.
69
VBG GROUP ANNUAL REPORT 2019 | NOTES
NOTE 1 CONT’D.
Measurement of financial instruments at fair value
The Group has financial instruments in the form of currency deriv-
atives measured at fair value on the balance sheet. Measurement
at fair value for currency derivatives is based on published forward
rates in an active market. The derivatives are measured at fair
value based on input data under Level 2 in the fair value hierarchy.
The Group uses the following hierarchy to classify the instruments
based on the measurement technique:
• Listed prices (unadjusted) in active markets for identical
assets or liabilities
• Input data other than the listed prices included in Level 1,
which are observable for the asset or liability either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
• Input data for the asset or liability in question that is not built
on observable market data (non-observable input data)
Pension obligations
There are both defined-contribution and defined-benefit pension
plans in the Group. A defined-contribution pension plan is a
­pension plan through which the Group pays fixed contributions
to a separate legal entity. The Group has no legal or informal
­obligations to pay additional contributions if this legal entity does
not have sufficient assets to pay all the benefits to employees in
connection with the employees’ services during the present or
­previous periods. A defined-benefit pension plan is a pension plan
that is not subject to defined-contributions. Defined-benefit plans
typically state the amount of pension benefits an employee is to
receive after retirement, which is usually based on one or several
factors, such as age, period of service and salary. The liability that
is recognized in the balance sheet regarding defined-benefit pen-
sion plans is the present value of the defined-benefit obligation
at the end of the report period, minus the fair value of the plan
assets.
The defined-benefit pension obligation is calculated annually
by independent actuaries with the application of the projected-unit
credit method. The present value of the defined-benefit obligation
is established through the discounting of estimated future cash
flows with the application of interest rates for top-grade corporate
bonds, or the equivalent, that are issued in the same currency as
the benefits which are to be paid, with maturity periods comparable
to those of the relevant pension obligation. Actuarial gains and
losses as a result of experience-based adjustments and changed to
actuarial assumptions are recognized under “Other comprehensive
income” within the period in which they arise. Expenses pertaining
to employment during earlier periods are recognized directly in
profit or loss.
The above accounting policy for defined-benefit plans is applied
in the consolidated financial statements. The Parent Company
­recognizes defined-benefit pension plans in accordance with RFR
2. The Parent Company has pledged defined-benefit pensions to
its employees. The present value of these commitments to pay
pensions in the future is calculated according to actuarial principles.
The obligations are recognized as a provision in the Balance Sheet.
The interest portion of the year’s pension expense is recognized
among financial expenses. Other pension expenses are charged
to the operating profit.
Further details, including information on essential actuarial
assumptions, are given in Note 20.
70
Intangible assets
Goodwill consists of the amount by which the cost of the acquisi-
tion exceeds the fair value of the Group’s share of the acquired
subsidiary’s identifiable net assets on the acquisition date. If this
amount is less than the fair value of the acquired subsidiary’s net
assets, in the event of an acquisition conducted at a low price,
the difference is recognized directly in profit or loss. Goodwill on
acquisitions of subsidiaries is recognized as an intangible asset.
Goodwill is subjected to impairment testing annually and is
­recognized at cost less accumulated impairment losses.
Other intangible assets with a definable useful life are recognized
at cost less amortization according to plan during the useful life of
the asset.
Expenditures for strategic computer software are capitalized.
Expenditures for product development projects are capitalized
­provided that the Group will enjoy future economic benefits from
the development work and that it is possible to determine the cost
reliably. Amortization takes place on a straight-line basis according
to plan over the calculated useful life of the assets, as follows:
Brands 15–20 years
Other intangible assets 3–5 years
The amortization period of brands is warranted by the fact that
the Group’s acquired brands are well known, with large and stable
market shares on important markets.
Trademarks with indefinite useful lives are subjected to impairment
testing annually and recognized at cost less accumulated impair-
ment losses.
Research and development
Expenditure for research is expensed immediately. Expenditure for
development projects (attributable to development and testing of
new or improved products) is capitalized as intangible assets to
the extent that this expenditure is expected to generate future
economic benefits and the acquisition cost of the asset can be
­estimated reliably. Other product development costs, including
expenditure for ongoing product adaptations, are expensed as
incurred. No expenditure for development projects has been
­capitalized as intangible assets during the year.
Property, plant and equipment
Property, plant and equipment are recognized at cost less planned
depreciation during the useful life of the assets. Amortization takes
place on a straight-line basis according to plan over the calculated
useful life of the assets, as follows:
Buildings 25–50 years
Plant and machinery 3–10 years
Equipment, tools, fixtures and fittings 3–10 years
The company has no assets where residual values have to be taken
into account in calculating depreciation. The residual values and
useful lives of the assets are tested every balance sheet date and
adjusted if necessary.
Interest is capitalized as a part of the cost of investments in
assets that take a substantial period of time to get ready for their
intended use.

NOTE 1 CONT’D.
Impairment losses
Assets that have an indefinite useful life are not depreciated but
are subjected to annual impairment testing. Assets that are depre-
ciated are assessed with respect to loss of value whenever events
or changes in conditions indicate that the carrying amount may
not be recoverable. An impairment loss is recognized equal to the
amount by which the carrying amount of the asset exceeds its
recoverable amount. The recoverable amount of an asset is the
higher of its fair value less selling expenses and its value in use. In
impairment testing, assets are grouped at the lowest levels where
separate identifiable cash flows exist (cash-generating units).
Leases
Leases that do not pertain to IFRS 16 are classified in the consoli-
dated financial statements as either finance or operating leases.
Leases where the economic risks and rewards incidental to owner-
ship are transferred substantially to the lessee are accounted for as
finance leases. Other leases are accounted for as operating leases,
and lease payments are expensed on a straight-line basis over the
lease period.
Lease payments for operating leases are recognized as expense
on a straight-line basis over the lease period.
Equity
Equity is recognized in the consolidated balance sheet allocated
between “Share capital,” “Other contributed capital”, “Reserves”
and “Retained earnings.”
Share capital consists of the nominal value of issued shares.
Other contributed capital comprises all contributions from
the shareholders in conjunction with share issues aside from the
amounts recognized as share capital.
Reserves comprise amounts which are to be posted directly
to equity as a consequence of IFRS rules. They include hedge
accounting effects and translation differences in the translation
of foreign subsidiaries and effects caused by the translation of
defined-benefit pension plans.
Retained earnings consists mainly of earnings during the year
recognized in profit or loss less dividends paid. This item also
includes amounts transferred from non-restricted earnings to
a statutory reserve in a legal entity.
In the Parent Company, equity is distributed between restricted
and non-restricted equity in accordance with the rules in the
Swedish Annual Accounts Act.
Provisions
Provisions, for example, for environmental remediation measures,
restructuring costs and legal requirements are recognized when
the Group has an existing legal or informal obligation as a conse-
quence of earlier events, it is more likely that an outflow of
resources is required to settle the obligation than not, and the
amount has been calculated reliably. Provisions are not recognised
for future operating losses.
Provisions for warranty costs pertain to a predetermined period
and are based on historical information on warranty costs as well
as current information that may indicate that future requirements
will deviate from the historical outcome.
NOTES | VBG GROUP ANNUAL REPORT 2019
Segment reporting
Segment information is presented from a management perspective,
which means it is presented in the same manner as in internal
reporting, and is evaluated regularly by the chief operating decision
maker in the Group, the VBG Group’s Chief Executive Officer.
Cash Flow Statement
The cash flow statement is prepared in accordance with the indi-
rect method. The recognized cash flow only includes transactions
that entail cash receipts and cash payments. Besides cash on hand
and demand deposits, cash and cash equivalents include short-term,
highly liquid investments that are subject to an insignificant risk of
changes in value, and – are traded on the open market at known
amounts, or – have a shorter remaining maturity than three
months from the acquisition date.
Items affecting comparability
Items affecting comparability are recognized separately in the
financial statements when this is necessary to explain the Group’s
earnings. Items affecting comparability refer to material income
or expense items that are recognized separately due to the significance
of their character or amount.
Definitions of performance measures
Equity/assets ratio
Equity as a percentage of the balance sheet total.
Return on capital employed (ROCE)
Profit after financial items plus interest expenses as a percentage of
average capital employed, expressed as the balance sheet total less
non-interest-bearing liabilities.
Return on equity (ROE)
Net profit for the year as a percentage of average equity.
Return on operating capital (ROOC)
EBITDA as a percentage of average operating capital, expressed
as property, plant and equipment and working capital (inventory,
trade receivables and trade payables).
Profit margin
Profit after financial items as a percentage of sales.
Net debt
Interest-bearing loan liabilities and provisions less cash and
cash equivalents.
EBITDA
Operating profit before depreciation/amortization of intangible
assets and property, plant and equipment.
EBITA
Operating profit before amortization and impairment of intangible
assets.
71
VBG GROUP ANNUAL REPORT 2019 | NOTES
NOTE 2 | RISKS AND RISK MANAGEMENT
Operational risks
The VBG Group is market-leading and active on many often highly
competitive markets. The Group’s long-term success is therefore
dependent on continued high competitiveness and quality in all
parts of the operation. Some of the most important risk factors
and how the Group manages them are described below.
Claims, product liability, recalls
“Claims” refers to costs for rectifying or replacing defective products.
The Group’s costs for claims amounted to 0.7% of sales in 2019.
If a product causes bodily harm or property damage, the Group
may be held liable. The VBG Group is insured against such product
liability losses. No major product liability losses have occurred
during the past decade.
“Recalls” refers to cases where all or a large part of a production
series has to be recalled for rectification of defects. The VBG Group
has never had any major recalls and is not currently insured for this
type of risk.
The VBG Group constantly strives to minimize the risks of claims,
product liability losses and recalls by means of comprehensive and
long-term testing in the development process and quality manage-
ment and control in production.
Commodity prices
The Group’s production is dependent on a number of raw materials
and intermediate goods. The most important raw materials are
steel, cast iron and aluminum. Price increases or raw material
shortages can have a negative impact on the Group’s earnings.
A price increase of 10% would increase the Group’s costs by
about SEK 47 M. However, price increases can be passed on to
the customers to some degree. Price agreements with the Group’s
raw material suppliers normally extend over six months. In times of
scarcity or large price increases, however, there is a risk that suppliers
will fail to honor these agreements. The VBG Group strives to establish
long-term relationships with its suppliers in order to ensure contin-
ued deliveries during times of shortage.
Technical advances
An important part of the VBG Group’s strategy is to take advan-
tage of technical advances. The Group believes that a focus on
safety, quality and ergonomics will lead to a product offering that
will be rated highly by users and legislators for the foreseeable
future.
At the same time, there is always a risk that competitors will
make technical advances that reduce demand for the Group’s
products. This risk is reduced by the fact that the introduction
of new technology usually has a lead time of several years.
The Group’s costs for research and development amounted
to 3.7% of sales in 2019.
Intangible asset risks
Intangible asset risks concern cases in which competitors infringe
on the Group’s patents as well as cases in which the VBG Group
infringes on patents held by competing companies. To minimize
these risks, the patent situation is monitored closely and continu-
ously. Our own innovations are protected by patents as far as
­possible. The risk that unlicensed copies of the Group’s products
will be marketed may increase over the next few years.
72
Environmental risks
Environmental risk refers to the risk of costs the Group may incur
for emissions reduction, site remediation, improvements in waste
management, etc. The Group has satisfactory environmental
­insurance for all production facilities. Our operations cannot be
considered to be environmentally harmful in a narrow perspective.
The VBG Group complies with the laws and regulations in effect
in each country with ample margin. The unit in Vänersborg and
Norrtälje are environmentally certified to ISO 14001.
Political risks
Political risks in the Group’s primary markets in Europe and
North America are very low. These risks may be somewhat higher
in new markets in Asia and Latin America, but are not judged to
be significant.
Business interruption and property losses
Damage to production plants caused by fire, for example, can have
negative consequences in the form of both direct property damage
and business interruptions that make it more difficult to meet
­customer obligations. This can in turn induce customers to choose
other suppliers. The risk of this type of damage at the Group’s
­production plants can be considered to be “medium-high” for an
industrial enterprise. Continuous efforts are made to improve loss
prevention. The Group carries full insurance cover against both
business interruption and property losses.
Cyclical risks
The motor vehicle industry is characterized by fluctuations in
demand. After-market sales account for a large portion of Group
sales in this segment, which helps dampen the fluctuations. The
Group’s establishment in new geographic markets also contributes
towards minimizing these fluctuations. To cope with the variations
in demand, the Group tries to increase flexibility in its production.
Order backlogs with standing orders from customers are normally
short, but thanks to close customer relationships the VBG Group
is well informed about its customers’ long-range plans.
IT security
IT risks include both the risk of intrusion into systems and the risk
that hardware will be damaged due to fire, for example. The intru-
sion risks are minimized by the fact that information is handled in
networks that are well protected by firewalls and rigorous authori-
zation procedures. The hardware is distributed over a large number
of different units, limiting the negative consequences of damage.
Financial risks
The Group is exposed to financial risks. To mitigate the effects
of these risks, the VBG Group applies a financial risk management
policy.
Currency risks
Due to its international operations, the VBG Group is exposed
tocurrency risk. Exchange rate changes affect the consolidated
income statement and balance sheet in the form of transaction
risks and translation risks.

NOTE 2 CONT’D.
Transaction risks
The Group’s net flows of payments in foreign currencies give rise
to transaction risks. The total value of net flows in foreign curren-
cies amounted to a value of approximately SEK 607 M.
The currency flows with the greatest impact on earnings are
inflows in USD and EUR to SEK. An exchange rate difference
of 10% between EUR and SEK affects the Group’s earnings by
approximately SEK 13 M, while the effect of a similar change
between USD and SEK is approximately SEK 23 M and an exchange
rate difference between CAD and SEK yields an earnings impact of
SEK 55 M. Net flows are not hedged.
Translation risks
Total non-restricted equity in foreign companies amounted to
approximately SEK 1,275 M. This is an investment in foreign cur-
rencies which gives rise to translation risk when translated to SEK.
This exposure is hedged in part by borrowing in the corresponding
currency. The currencies that are affected the most by changes in
exchange rates are the EUR and SEK, with a 10% change between
the two yielding a currency impact of approximately SEK 17 M.
A 10% change in exchange rates between CZK and SEK yields a
currency effect of approximately SEK 15 M, while a similar change
between USD and SEK would entail a currency impact of approxi-
mately SEK 55 M. Other currencies affected are SEK against CAD,
where a 10% change yields a change in exchange rate of SEK 22 M,
and for SEK against PLN a change in exchange rate of SEK 12 M.
Interest rate risk
Interest rate risk refers to the risk that changes in the interest rate
level will have a negative impact on the Group’s earnings. Borrow-
ing with a fixed interest rate exposes the Group to an interest rate
risk with respect to fair value.
In June 2019, the Group signed a new financing agreement, a
revolving facility of SEK 1,300 M and an overdraft facility of SEK
100 M. It is a three-year agreement with two extensions of one
year each. The loan currently bears a three-month interest rate.
The maturity dates of the loans are shown in Note 23.
Credit risk
Credit risk refers to the risk that one party in a transaction will be
unable to fulfill its obligations, causing the other party a loss. The
risk that customers will default on payment for delivered products
is minimized by thorough checks of new customers and follow-up
of the payment behavior of existing customers.
The Group’s trade receivables amounted to SEK 467 M at year
end and are recognized at the amounts that are expected to be
paid. All receivables are expected to be paid within 12 months.
The geographic distribution of the trade receivables largely
matches the distribution of sales by region. The Group’s bad
debt losses normally amount to less than 0.05% of sales; refer to
Note 24. The finance policy regulates how credit risk is minimized
for financial instruments. This is done by restricting short-term
investments to interest-bearing instruments with low risk and
high liquidity and by limiting the maximum amount that may be
invested with any given counterparty.
Liquidity risk
Liquidity risk, in other words the risk of not being able to meet the
Group’s capital needs, is controlled by having sufficient cash and
cash equivalents and granted but unutilized credit facilities that
NOTES | VBG GROUP ANNUAL REPORT 2019
can be utilized without reservation. At the end of 2019, unutilized
credits amounted to SEK 559 M. The maturity dates of the loans
are shown in Note 23.
Capital risk
The Group’s goal with regard to the capital structure is to safe-
guard the Group’s ability to remain in business so that it can
­continue generating return to the shareholders and benefit for
other stakeholders and to maintain an optimal capital structure
in order to keep the cost of capital down.
The Group’s long-term goal is that the equity/assets ratio should
exceed 40%. The equity/assets ratio at 31 December 2019 was
57.8%.
Sustainability risks
Based on the materiality analysis performed in 2017, we have con-
tinued our long-term sustainability efforts. The four areas identi-
fied as particularly important remain:
Bullying and harassment
It is highly likely that bullying and harassment take place, but it is
difficult to know the extent since it is often surrounded by silence.
Management: A whistleblower service for employees to anony-
mously or openly report any offenses was introduced and estab-
lished in 2018. The service is available to all employees in the Group.
One report was made in 2019. The Group-wide efforts around core
values continued during the year. These activities include studying
needs for new policies and guidelines.
Corruption in the purchasing organization
The risk of corruption is deemed to be highest in connection with
purchasing and procurement.
Management: The VBG Group Code of Conduct outlines the
types of relationships that the Group’s employees are to have
with suppliers and partners. The VBG Group arranges an online
anti-corruption training course every year to raise awareness
among managers and employees. 435 people were selected to
take part in the training for 2019. At year end, all the selected
employees had undergone the training.
Child/slave labor among suppliers/sub-suppliers
The risk of child or slave labor is highest in high-risk countries
in Asia, South America and Africa.
Management: The VBG Group Code of Conduct regulates
the requirements that the Group imposes on its suppliers. We do
not accept slave labor or child workers as a labor force. We have
­procedures in place for continuous monitoring and control to
ensure supplier compliance. We require our suppliers to accept
our Code of Conduct or have their own similar code of conduct.
Discrimination
The risk of discrimination varies between different countries, as
do the underlying reasons for discrimination. This is why discrimi-
nation can often be difficult to detect.
Management: Work is being conducted to establish Group-wide
processes for recruitment and salary levels to minimize the risk of
discrimination.
73
VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 3 | SEGMENT REPORTING (SEK M)

• Truck & Trailer Equipment is an internationally leading supplier
of systems to customers in the truck industry and includes the
brands VBG and Ringfeder for coupling equipment and
Onspot for automatic tire chains as well as Edscha TS and
Sesam as a supplier of sliding roofs for trailers. Customers are
mainly truck manufacturers, body builders, trailer manufacturers,
haulers and importers.
• Mobile Climate Control is, through its own brand, an indus-
try-leading supplier of complete climate control systems
(HVAC systems) to commercial motor vehicles, primarily in
North America and Europe. The customers are mainly found
in four market segments: buses, off-road vehicles, utility
­vehicles and defense vehicles.
• Ringfeder Power Transmission is a global market leader in
selected niches within mechanical power transmission as well
as energy and shock absorption. The operation includes the
Ringfeder and Henfel brands. The customers are machine
manufacturers, companies in the mining industry and other
high-tech companies all over the world.
No sales are transacted between the divisions, and unallocated
costs are Group-wide overheads. Assets in each division consist
primarily of property, plant and equipment, intangible assets,
inventories and receivables, but exclude cash on hand and securities.
Liabilities consist of operating liabilities but not tax. Investments
consist of purchases of property, plant and equipment and intangible
assets.

Truck & Trailer Mobile Climate Ringfeder Power Group-

Equipment Control Transmission wide Group

2019 fiscal year

External sales 1,203.6 1,998.4 523.4 — 3,725.4
Operating profit (EBIT) 218.4 171.6 62.5 –17.5 435.0
Financial expenses — — — –41.5 –41.5
Financial income — — — 3.5 3.5
Tax expense for the year — — — –97.5 –97.5
Net profit for the year 218.4 171.6 62.5 –153.0 299.5
Other disclosures
Non-current assets 487.2 1,777.0 273.5 6.7 2,544.5
Current assets 325.6 626.5 224.0 5.5 1,181.7
Cash and cash equivalents 472.5 472.5
Assets 812.9 2,403.5 497.5 484.7 4,198.6
Non-current liabilities 256.8 283.1 41.3 767.2 1,348.2
Current liabilities 126.3 226.5 44.1 25.8 422.7
Liabilities 383.1 509.6 85.4 793.0 1,771.0
Capital expenditures 65.3 25.9 20.1 5.1 116.4
Depreciation/amortization –36.6 –53.2 –20.8 –2.2 –112.8

2018 fiscal year

External sales 1,243.1 1,727.3 522.0 — 3,492.4
Operating profit (EBIT) 213.6 152.4 69.9 –18.3 417.6
Financial expenses — — — –36.8 –36.8
Financial income — — — –7.7 –7.7
Tax expense for the year — — — 100.1 100.1
Net profit for the year 213.6 152.4 69.9 –162.9 273.0
Other disclosures
Non-current assets 411.8 1,662.7 263.2 2.2 2,339.9
Current assets 362.6 610.1 237.7 2.1 1,212.5
Cash and cash equivalents 371.4 371.4
Assets 774.4 2,272.9 500.8 375.7 3,923.8
Non-current liabilities 207.9 180.3 38.4 20.3 446.9
Current liabilities 146.2 211.9 55.4 836.9 1,250.4
Liabilities 354.1 392.2 93.8 857.2 1,697.3
Capital expenditures 15.8 21.0 10.3 0.5 47.5
Depreciation/amortization –26.7 –34.9 –17.3 –0.9 –79.8

74
 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 3 CONT’D.

2019
Truck & Trailer Mobile Climate Ringfeder Power
Sales per geographical area 2019 Equipment Control Transmission Group

Sweden 245.0 39.6 3.4 288.0

Other Nordic countries 156.9 39.6 4.8 201.3
Germany 258.4 33.2 171.3 462.9
Other European countries 334.4 164.6 65.8 564.9
North America 112.0 1,673.9 105.6 1,891.4
Brazil 7.5 5.4 67.6 80.5
Australia/New Zealand 68.7 0.9 31.2 100.8
China 3.4 16.4 17.4 37.2
Rest of world 17.3 24.8 56.3 98.4
Total 1,203.6 1,998.4 523.4 3,725.4

2018
Truck & Trailer Mobile Climate Ringfeder Power
Sales per geographical area 2018 Equipment Control Transmission Group

Sweden 234.7 36.7 4.5 275.9

Other Nordic countries 152.7 36.8 5.3 194.7
Germany 300.3 30.6 183.8 514.7
Other European countries 359.0 153.2 64.0 576.2
North America 99.7 1,429.9 119.1 1,648.6
Brazil 3.5 2.3 57.1 62.9
Australia/New Zealand 61.5 0.8 11.3 73.6
China 14.4 14.4 16.8 45.6
Rest of world 17.2 22.7 60.2 100.1
Total 1,243.1 1,727.3 522.0 3,492.4

NOTE 4 | OTHER OPERATING INCOME

Group
2019 2018

Royalty income 32 31
Capital gain on property, plant and equipment 20 681
Exchange rate differences — 21,166
Other 8,655 3,670
Total 8,707 25,548

NOTE 5 | OTHER OPERATING EXPENSES

Group
2019 2018

Exchange rate differences 4,258 —

Service warranties 26,023 12,989
Other 5,657 2,847
Total 35,938 15,836

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 6 | SALARIES, OTHER REMUNERATION AND SOCIAL SECURITY CONTRIBUTIONS

2019 2018
Salaries and other Social security Salaries and other Social security
remuneration contributions remuneration contributions

Parent Company 17,498 11,511 18,817 11,648

of which pension expenses 5,747 6,097
Subsidiaries 710,516 146,107 615,618 156,971
of which pension expenses 26,197 25,600
Group 728,014 157,618 634,435 168,619
of which pension expenses 31,944 31,697

Salaries and other remuneration broken down by country and among Board members, etc. and other employees:
2019 2018
Board and President Other employees Board and President Other employees

Parent Company 7,526 9,972 8,040 10,777

of which bonuses, etc. 1,605 1,832
Subsidiaries 40,892 669,624 38,154 577,464
of which bonuses, etc. 7,980 6,015
Group total 48,418 679,596 46,194 588,241
of which bonuses, etc. 9,585 7,847

2019 2018
Average number of employees Number of employees Of whom men Number of employees Of whom men

Parent Company
Sweden 8 5 9 5
Total in Parent Company 8 5 9 5
Subsidiaries
Sweden 210 181 206 177
Norway 7 6 7 6
Denmark 5 4 5 4
France 3 3 3 3
Belgium 15 9 14 9
UK 8 4 8 5
Germany 160 127 150 104
Czech Republic 136 81 142 84
Poland 167 102 175 116
US 223 181 214 160
Canada 443 403 433 387
China 54 23 48 20
India 45 32 29 27
Brazil 99 90 106 95
South Africa 13 7 12 8
Total in subsidiaries 1,588 1,253 1,552 1,205
Group total 1,596 1,258 1,561 1,210

At year-end, the Group had 1,612 employees (1,573).

Remuneration to Board members and senior executives
In accordance with a resolution by the 2019 AGM, the Chairman
and members of the Board receive a total of SEK 1,750,000 in
fixed annual fees. Of the total fee, SEK 100,000 is paid to the
Audit Committee and SEK 50,000 to the Compensation Commit-
tee, to be distributed by the Board of Directors.
Employees of VBG Group AB (publ) do not receive a Board fee.
Remuneration to the President and other senior executives consists
of basic salary, variable remuneration, other benefits, pension and
other remuneration. By “other senior executives” is meant the
five persons (including Clas Gunneberg) who, together with the
President, comprise Group Management. The proportions of
basic salary and variable remuneration should be commensurate
with the individual’s powers and responsibilities. For the President,
variable remuneration may not exceed 50% of basic salary. The
variable remuneration of other senior executives may not exceed

76
 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 6 CONT’D.

33–50% of their basic salary. The variable remuneration is based Board of Directors and senior executives
on actual outcome in relation to set goals. Pension benefits and 2019 2018
other benefits for the President and other senior executives are Number Number
payable as a part of the total remuneration. The retirement age on Of on Of
closing whom closing whom
for the President and other senior executives is 65 years. date men date men
The President has an employment contract that expires with a
notice of termination of six months. Variable remuneration is not Group
(incl. subsidiaries)
pensionable. The President can set aside 35% of his fixed salary
Board members 28 24 27 23
in pension provisions. Variable remuneration is not pensionable.
In the event his employment is terminated by the Company, the Presidents and
other senior executives 37 35 37 35
President is entitled to receive six months of employment benefits
and severance pay equivalent to 12 months’ salary. The equivalent
period for other senior officers is 6–18 months. Compensation to All Board members in the Group’s subsidiaries are employees.
the President for the 2019 fiscal year has been determined by “Senior executives” refers to Group Management and Division
the Compensation Committee. Compensation to other senior Management teams, and the persons who are Presidents of the
executives has been determined by the President in consultation subsidiaries.
with the Compensation Committee.
As of the 2018 AGM, all Board fees are paid as salaries to Board 2019 2018
members. The payments occur twice a year, with the result that Number Number
the cost in 2019 pertains to half of the Board fees resolved at the on Of on Of
2018 AGM and to half of the Board fees resolved at the 2019 closing whom closing whom
date men date men
AGM.
2018 corresponds to one and a half years of Board fees owing Parent Company
to the new payment plan. Board members 8 5 9 6
Presidents and
Related-party disclosures other senior executives 5 4 6 5
There have been no related party transactions in 2019 that have
significantly affected the company’s financial position and results.

2019 Fees/basic salary Variable Other benefits Pension cost Total

Chairman of the Board (until the 2019 AGM)

Peter Hansson 263 — — — 263
Chairman of the Board (as of the 2019 AGM)
Former Deputy Chairman of the Board Johnny Alvarsson 517 — — — 517
Director Louise Nicolin 245 — — — 245
Director Peter Augustsson 245 — — — 245
Director Jessica Malmsten 245 — — — 245
Board member Mats R. Karlsson 257 — — — 257
President Anders Birgersson 3,918 1,605 105 1,431 7,059
Other senior executives (5 persons) 9,602 3,018 427 4,106 17,153
Total (12 persons) 15,292 4,623 532 5,537 25,984

2018 Fees/basic salary Variable Other benefits Pension cost Total

Chairman of the Board Peter Hansson 2

763 — — — 763
Board Deputy Chairman Johnny Alvarsson2 570 — — — 570
Board member Louise Nicolin2 320 — — — 320
Board member Peter Augustsson2 320 — — — 320
Board member Jessica Malmsten2 320 — — — 320
Board member Mats R. Karlsson1 110 — — — 110
President Anders Birgersson 3,805 1,832 87 1,421 7,145
Other senior executives (5 persons) 9,837 2,777 411 3,757 16,782
Total (12 persons) 16,045 4,609 498 5,178 26,330
1
E lected as a new Board member at the 2018 AGM and thus received half the Board fee for 2018.
2
In 2017 (as in all previous years) the fees for Board year 2016–2017 were expensed in May after the AGM. As of 2018, all Board members will receive their fees as salary on
two occasions during the Board mandate: November and May, when these amounts will also be expensed. For the fiscal year, this means that the cost of the Board fees will
include the full fee for Board year 2017–2018 as well as half the fees for Board year 2018–2019.

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 7 | FEES AND COST REIMBURSEMENT NOTE 9 | OPERATING EXPENSES CLASSIFIED

PAID TO AUDITOR BY NATURE OF EXPENSE

Group Parent Company Group

2019 2018 2019 2018 2019 2018

PwC Direct material incl. change in inventories 1,749,964 1,650,911

Auditing assignments 5,175 3,230 753 812 Employee benefits 885,632 803,054
(of which Parent Company’s Depreciation/amortization 112,818 79,803
auditor) (1,063) (1,152) (753) (812) Other expenses 541,991 541,066
Auditing activities other than Total operating expenses 3,290,405 3,074,834
auditing assignments — — — —
(of which Parent Company’s Includes cost of goods sold, selling expenses, administrative
auditor) — —
expenses and costs for research and development.
Tax advice 1,194 1,685 — 195
(of which Parent Company’s
auditor) (195) (195)
NOTE 10 | APPROPRIATIONS
Other services 668 294 493 223
(of which Parent Company’s Parent Company
auditor) (668) (223) (493) (223)
2019 2018
Total PwC 7,037 5,209 1,246 1,230
Difference between book depreciation
Other auditors: and depreciation according to plan –500 1,730
Auditing assignments 1,208 1,087 — — Change in tax-allocation reserve –4,300 –2,500
Auditing activities other than Group contributions received 65,090 60,000
auditing assignments — 82 — —
Group contributions paid –29,126 –28,981
Tax advice 526 599 — —
Total 31,164 30,249
Other services 100 146 — —
Total other auditors 1,834 1,914 — —
8,871 7,123 1,246 1,230
NOTE 11 | TAX ON PROFIT FOR THE YEAR

Group Parent Company

NOTE 8 | DEPRECIATION, AMORTIZATION 2019 2018 2019 2018
AND IMPAIRMENT
Current tax
Swedish companies –22,294 –12,533 –3,822 –2,053
Depreciation and amortization are recognized in profit or loss
under the following headings: Foreign companies –78,258 –86,797 — —
Deferred tax 3,063 –787 — —
Group Parent Company
Total –97,489 –100,117 –3,822 –2,053
2019 2018 2019 2018

Cost of goods sold 51,663 37,410 — — The difference between the tax expense according to the Swedish
Selling expenses 42,963 34,267 — — tax rate and the actual tax rate comprises the following sub-items:
Administrative expenses 13,698 6,669 1,120 2,592 Non-recurring effect of new tax rate in Sweden – from 22.0%
Research and to 21.4% – regarding deferred tax totals SEK 5.3 M.
development costs 4,494 1,457 — —
Total depreciation/amortization 112,818 79,803 1,120 2,592 Group Parent Company
2019 2018 2019 2018

Reported profit before tax 397,026 373,111 186,849 224,176

Depreciation and amortization are allocated to the following
Tax calculated according to
assets in the balance sheet: Swedish tax rate –84,964 –82,084 –39,986 –49,308
Group Parent Company Difference between tax rate
2019 2018 2019 2018 in Sweden and weighted tax
rate of foreign subsidiaries –14,589 –11,313 — —
Computer software 2,998 3,098 249 304
Non-deductible expenses –1,738 –879 –352 –389
Trademarks 9,110 8,555 204 1,885
Non-taxable revenue — — 36,531 47,643
Customer relationships 20,002 20,002 — —
Imputed income,
Land and buildings 30,177 8,603 — — tax allocation reserve –113 –73 –5 1
Plant and machinery 24,653 23,401 — — Tax attributable to prior
Equipment, tools, fixtures and income years –1,101 –878 –10 —
fittings 25,878 16,144 667 403 Changes to tax rate in
Total depreciation/amortization 112,818 79,803 1,120 2,592 Sweden 5,259 — — —
Other –243 –4,890 — —
Total tax –97,489 –100,117 –3,822 –2,053
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 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 12 | INTANGIBLE ASSETS

Group Parent Company The Group has allocated goodwill to three cash-generating units
2019 2018 2019 2018 that correspond to the lowest level at which goodwill is monitored
as part of the internal control in the Group, which coincides with
Trademarks, customer
relationships and other the Group’s three divisions.
intangible assets Goodwill and trademarks are subjected to impairment testing
Opening costs 968,836 962,488 34,687 34,687 annually and when there are indications of impairment losses.
Purchases for the year 30,566 2,230 — — The  recoverable amount for cash-generating units is determined
Sale and retirement of by the company management and is based on discounted cash
assets –1,397 –390 — — flows for the 2020 budget and business plans up to 2022.
Translation differences 3,008 4,509 — — For the period after the forecast interval, sustained growth
Closing accumulated of 2.0% (2.0) is estimated, which is deemed to correspond to
costs 1,001,013 968,836 34,687 34,687 ­long-term inflation assumptions. With the above assumptions
and using a discount rate of 8.0% (8.0) after tax, the value in
Opening amortization –169,947 –134,616 –33,852 –31,664
use exceeds the carrying amount for these three cash-generating
Amortization for the year –32,110 –31,655 –453 –2,189
divisions. The discount rate was determined based on expected
Sale and retirement of cost of capital, weighted between borrowed capital and equity.
assets 1,281 371 — —
An increase in the discount rate of 1 percentage point and a
Translation differences –3,018 –4,047 — —
decrease in operating profit of 20% would, individually, not
Closing accumulated
give rise to any impairment of goodwill in any of the divisions.
amortization –203,794 –169,947 –34,306 –33,852
In 2019, the Group acquired all rights to BPW’s drawbar program.
Closing balance 797,219 798,889 381 835
The acquisition plan comprises a purchase price of EUR 2.4 M, and
  of which brands 764,075 792,423 168 372 assets have been identified in the form of customer relationships
1
I ncludes the Mobile Climate Control brand with totaling EUR 1.9 M and other intangible assets t­ otaling EUR 0.5 M.
an indefinite useful life of SEK 400 M (400). No liabilities were identified in conjunction with the acquisition.
Group
Goodwill 2019 2018

Opening cost 1,128,601 1,118,861

Adjustment to initial value of previous acquisi-
tions 8,264 —
Translation differences 6,468 9,740
Closing accumulated costs 1,143,333 1,128,601

Group
Goodwill is allocated to the Group’s divisions
as follows: 2019 2018

Truck & Trailer Equipment 250,110 242,912

Mobile Climate Control 773,167 764,903
Ringfeder Power Transmission 120,056 120,786
Carrying amount 1,143,333 1,128,601

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 13 | PROPERTY, PLANT AND EQUIPMENT

Group Parent Company

Land and buildings 2019 2018 2019 2018

Opening costs 257,570 237,071 — —

Purchases for the year 5,680 4,337 — —
Reclassification 788 6,168 — —
Sale and retirement of assets — –31 — —
Translation differences 6,448 10,025 — —
Closing accumulated costs 270,486 257,570 — —
Opening depreciation –71,419 –57,784 — —
Depreciation for the year –8,973 –8,603 — —
Sale and retirement of assets — 31 — —
Translation differences –2,765 –5,063 — —
Closing accumulated depreciation –83,157 –71,419 — —
Closing balance 187,329 186,151 — —

Group Parent Company

Plant and machinery 2019 2018 2019 2018

Opening cost 284,587 271,769 — —

Purchases for the year 30,167 12,676 — —
Reclassification 6,758 10,179 — —
Sale and retirement of assets –5,512 –14,005 — —
Translation differences 9,439 3,968 — —
Closing accumulated costs 325,439 284,587 — —
Opening depreciation –183,840 –169,975 — —
Depreciation for the year –23,145 –23,401 — —
Sale and retirement of assets 5,221 13,279 — —
Translation differences –5,486 –3,743 — —
Closing accumulated depreciation –207,250 –183,840 — —
Closing balance 118,189 100,747 — —

Group Parent Company

Equipment, tools, fixtures and fittings 2019 2018 2019 2018

Opening cost 152,218 142,461 5,836 5,336

Purchases for the year 14,918 11,268 2,808 500
Reclassification 593 1,921 — —
Sale and retirement of assets –4,451 –11,375 — —
Translation differences 7,107 7,943 — —
Closing accumulated costs 169,430 152,218 8,644 5,836
Opening depreciation –100,877 –88,453 –4,607 –4,204
Depreciation for the year –17,368 –16,144 –667 –403
Sale and retirement of assets 4,233 9,727 — —
Translation differences –5,705 –6,007 — —
Closing accumulated depreciation –119,906 –100,877 –5,274 –4,607
Closing balance 49,524 51,341 3,369 1,229

Group Parent Company

Construction in progress 2019 2018 2019 2018

Opening balance 10,304 8,050 — —

Business combinations — 3,394 — —
Purchases for the year 24,621 17,032 — —
Reclassification –8,139 –18,052 — —
Translation difference 149 341 — —
Closing balance 26,935 10,304 — —

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 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 14 | IFRS 16

Rights of use Effects of changed lease policies

Group Group
Land and buildings, IFRS 16 2019 2018 2019 2018

Opening costs 150,001 — Operating lease commitments as at

Purchases for the year 3,297 — 31 December 2018 170,379 —

Translation differences 6,783 — Discounted using the Group’s incremental

borrowing rate, 4.40% –8,050 —
Closing accumulated costs 160,081 —
Add: finance lease liabilities recognised as at
Depreciation for the year –21,204 — 31 December 2018 — —
Closing accumulated depreciation –21,204 — Less: short-term leases expensed on a linear basis –3,796 —
Closing balance 138,877 — Less: contracts reassessed as service agreements — —
Add/less: adjustments resulting from different
treatment of extension and termination options 7,919 —
Group
Add/less: adjustments owing to changes in the
Vehicles, IFRS 16 2019 2018
index or rate attributable to variable payments — —
Opening cost 14,893 — Total opening balance, lease liabilities 166,452 —
Purchases for the year 5,349 —
Translation differences 302 —
Closing accumulated costs 20,544 —
Depreciation for the year –8,510 —
Closing accumulated depreciation –8,510 —
Closing balance 12,034 —

Plant and machinery, Group

IFRS 16 2019 2018

Opening cost 3,351 —

Purchases for the year 1,768 —
Translation differences 138 —
Closing accumulated costs 5,257 —
Depreciation for the year –1,508 —
Closing accumulated depreciation –1,508 —
Closing balance 3,749 —

Total closing balance, rights of use 154,660 —

Supplementary information regarding IFRS 16

Group
2019 2018

Interest, IFRS 16 6,121 —

Leases regarding contracts shorter than 12 months 2,756 —
Leases regarding low-value contracts 1,487 —
Variable lease costs — —
Cash flow regarding leases 32,590 —

81
VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 15 | INTERESTS IN GROUP COMPANIES, CHANGES IN CARRYING AMOUNTS

Parent Company
Interests in Group companies 2019 2018

Opening cost 1,992,658 1,992,558

Business combinations — 100
Closing balance 1,992,658 1,992,658

Specification of interests in Group companies Share of equity, % Share of votes, % Carrying amount

Trailer Systems Sweden AB, Sweden 100 100 50

Vänersborgs Släpvagnskopplingar AB, Sweden 100 100 50
VBG Group Truck Equipment AB, Sweden 100 100 21,197
VBG Group Sales AS, Norway 100 100 57
VBG Group Sales A/S, Denmark 100 100 71
VBG Group Sales Ltd, UK 100 100 130
Onspot E.U.R.L, France 100 100 68
Onspot of North America Inc., USA 100 100 68,898
VBG Group Truck Equipment NV, Belgium 100 100 46,500
VBG Group Truck Equipment GmbH, Germany 100 100 34,914
European Trailer Systems GmbH, Germany 100 100 162,002
European Trailer Systems s.r.o., Czech Republic 100 100 47,929
Ringfeder Power Transmission GmbH, Germany 100 100 90,309
  Ringfeder Power Transmission India Private Ltd, India 100 100
  Ringfeder Power Transmission s.r.o., Czech Republic 100 100
  Kunshan Ringfeder Power Transmission Co., Ltd, China 100 100
  Ringfeder Power Transmission Tschan GmbH, Germany 100 100
   Tschan India Private Ltd, India 100 100
Ringfeder Power Transmission USA Corp, USA 100 100 35,995
Henfel Industria Metalurgica Ltda., Brazil 100 100 103,722
Mobile Climate Control Group Holding AB, Sweden 100 100 1,380,766
  Mobile Climate Control Sverige AB, Sweden 100 100
  Mobile Climate Control China Holding AB, Sweden 100 100
   Mobile Climate Control Manufacturing Co Ltd, China 100 100
   Mobile Climate Control Trading Co Ltd, China 100 100
  Mobile Climate Control Corp., USA 100 100
  Mobile Climate Control Inc., Canada 100 100
  Mobile Climate Control Sp. Zo.o., Poland 100 100
  Mobile Climate Control Africa (PTY) Ltd, South Africa 100 100
  Mobile Climate Control Australia (PTY) Ltd, Australia 100 100
  MCC do Brasil Ltda. 100 100
  Mobile Climate Control Thermal Systems India Pvt Ltd 100 100
Mobile Climate Control GmbH 100 100
Total 1,992,658

Corporate identity numbers and domiciles of Group companies Corp. ID No. Domicile

VBG Group Truck Equipment AB 556229–6573 Vänersborg, Sweden

Trailer Systems Sweden AB 556866–1911 Vänersborg, Sweden
Vänersborgs Släpvagnskopplingar AB 559150–9715 Vänersborg, Sweden
VBG Group Sales AS Oslo, Norway
VBG Group Sales A/S Ejby, Denmark
VBG Group Sales Ltd Warrington, UK
Onspot E.U.R.L Montoy-Flanville, France
Onspot of North America Inc. North Vernon, USA
VBG Group Truck Equipment NV Beringen, Belgium
VBG Group Truck Equipment GmbH Krefeld, Germany

82
 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 15 CONT’D.

Corporate identity numbers and domiciles of Group companies Corp. ID No. Domicile
European Trailer Systems GmbH Moers, Germany
Kamenice nad Lipou,
European Trailer Systems s.r.o. Czech Republic
Ringfeder Power Transmission GmbH Gross-Umstadt, Germany
Ringfeder Power Transmission India Private Ltd Chennai, India
Ringfeder Power Transmission s.r.o. Dobrany, Czech Republic
Kunshan Ringfeder Power Transmission Co., Ltd Kunshan, China
Ringfeder Power Transmission Tschan GmbH Neunkirchen, Germany
Tschan India Private Ltd Gurgaon, India
Ringfeder Power Transmission USA Corp Westwood, USA
Henfel Industria Metalurgica Ltda. Jaboticabal, Brazil
Mobile Climate Control Group Holding AB, Sweden 556723–5642 Vänersborg, Sweden
Mobile Climate Control Sverige AB, Sweden 556535–3074 Norrtälje, Sweden
Mobile Climate Control China Holding AB, Sweden 556819–6629 Vänersborg, Sweden
Mobile Climate Control Manufacturing Co Ltd, China Ningbo, China
Mobile Climate Control Trading Co Ltd, China Ningbo, China
Mobile Climate Control Corp., USA Goshen IN, USA
Mobile Climate Control Inc., Canada Toronto, Canada
Mobile Climate Control Sp. Zo.o., Poland Olawa, Poland
Mobile Climate Control Africa (PTY) Ltd, South Africa Durban, South Africa
Mobile Climate Control Australia (PTY) Ltd, Australia Melbourne, Australia
MCC do Brasil Ltda. Brazil
Mobile Climate Control Thermal Systems India Pvt Ltd Bangalore, India
Mobile Climate Control GmbH Renningen, Germany

NOTE 16 | Deferred tax liabilities/assets

Group Parent Company
Deferred tax assets 2019 2018 2019 2018

Deferred tax asset pertaining to pension liability 31,555 20,356 — —

Other temporary differences 36,214 40,735 — —
Deferred tax asset on tax-loss carry forward 8,832 6,547 — —
Total tax assets, gross 76,601 67,638 — —
Offset against deferred tax liabilities –9,342 –3,795 — —
Recognized deferred tax assets 67,259 63,843 — —

Deferred tax liabilities

Deferred tax liabilities relating to tax allocation reserves 30,931 27,992 2,097 1,210
Deferred tax liabilities relating to difference between carrying
amounts of assets and residual values for tax purposes 89,606 80,103 111 4
Deferred tax liabilities on intangible assets identified
in connection with acquisitions 108,443 120,268 — —
Total tax liabilities, gross 228,980 228,363 2,208 1,214
Offset against deferred tax assets –9,342 –3,795 —
Recognized deferred tax liabilities 219,638 224,568 2,208 1,214

As of 2019, the Swedish corporate tax rate was lowered to 21.4% from the previous 22.0%. Deferred taxes have been restated based
on the tax rate in force at the time the deferred tax is expected to be settled. The Parent Company’s deferred tax liability is included in
the line item “untaxed reserves.”

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 17 | INVENTORIES

Group
Inventories 2019 2018

Truck & Trailer Equipment

Raw materials and consumables 69,442 74,605
Semi-finished products and work in progress 30,675 28,523
Finished products and merchandise 64,081 66,239
Total inventory, Truck & Trailer Equipment 164,198 169,367
Mobile Climate Control
Raw materials and consumables 230,182 211,827
Semi-finished products and work in progress 18,158 17,536
Finished products and merchandise 107,007 98,996
Total inventories Mobile Climate Control 355,347 328,359
Ringfeder Power Transmission
Raw materials and consumables 34,529 35,728
Semi-finished products and work in progress 31,103 38,999
Finished products and merchandise 53,485 62,412
Total inventories Ringfeder Power Transmission 119,117 137,139
Total 638,661 634,865

The obsolescence reserve for outgoing inventories amounts to SEK 58,916 thousand (66,037), divided among: Truck & Trailer Equipment,
SEK 21,598 thousand (18,205); Ringfeder Power Transmission SEK 12,402 thousand (20,490); and Mobile Climate Control, 24,916
­thousand (27,342).

NOTE 18 | PREPAID EXPENSES AND ACCRUED INCOME

Group Parent Company

2019 2018 2019 2018

Prepaid lease payments 1,675 1,806 167 330

Prepaid insurance premiums 3,017 2,444 211 —
Prepaid service charges 9,998 5,367 6,530 1,886
Prepaid marketing activities 767 627 0 —
Accrued income 1,054 1,180 0 —
Other items 8,995 8,249 679 1,690
Total 25,506 19,673 7,587 3,906

NOTE 19 | EQUITY

Share capital comprises 26,196,024 shares with a quotient value
of SEK 2.50. Of these, 2,440,000 are Series A shares carrying 10
votes each. The remaining shares, Series B shares, total 23,756,024
and carry 1 vote each.
The Annual General Meeting on 24 April 2002 resolved to
repurchase every tenth Series B share for SEK 31.25 per share.
All shareholders were offered the chance to sell back their shares.
1,191,976 shares were repurchased, which corresponds to 96% of
the number that could be repurchased. At the same General Meeting,
the Board was authorized to use repurchased shares to pay for
acquisitions during the period up until the next AGM in 2003. This
authorization has been extended repeatedly, most recently at the
2019 AGM to apply until the next AGM (2020). This authorization
had not been utilized at year-end, so all redeemed shares are still
owned by VBG Group AB (publ).
There are thus 25,004,048 shares in free float, of which
2,440,000 are Series A shares and 22,564,048 Series B shares.
For the full year, the average number of shares outstanding
was 25,004,048 (25,004,048).
At the AGM on April 25, 2018, a resolution was passed on a
long-term share-based incentive program based on options for the
President, senior executives and certain other key personnel in the
Group, a total of approximately 50 persons. The program contains
at most 375,000 call options, corresponding to approximately
0.9% of the total number of shares in the company.
The price for the call options was established using a Black &
Scholes valuation at SEK 9.63, which corresponds to the market
value of the options at acquisition. During 2018, 33 persons
subscribed a total of 194,500 options at a value of SEK 1,873 M.

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 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 20 | UNTAXED RESERVES

Parent Company
2019 2018

Accumulated difference between recognized depreciation/amortization

and depreciation/amortization in excess of plan 520 20
Tax allocation reserves 9,800 5,500
Total 10,320 5,520

NOTE 21 | PROVISIONS FOR PENSIONS AND SIMILAR OBLIGATIONS

2019 2018

Parent Company
Provisions in accordance with Swedish Pension Obligations Vesting Act
FPG/PRI pensions 12,935 13,060
Group
Provisions in accordance with IAS 19
Defined-benefit pension plans 230,165 196,853

Defined-benefit pension plans

The Group has several defined-benefit pension plans where the employees are entitled to compensation after terminated employment
based on final salary and length of service. The plans that cover the largest number of employees are in Sweden and Germany. Maturity
periods of 20 and 15 years, respectively, were used when calculating the defined-benefit pension plans.

The amounts recognized in the consolidated balance sheet for defined-benefit pension plans have been calculated as follows:
Other
Sweden Germany countries Dec. 31, 2019 Total Dec. 31, 2018 Total

Present value of funded obligations 12,276 12,276 9,230

Fair value of plan assets –12,276 –12,276 –9,230
0 0 0
Present value of unfunded obligations 128,556 102,719 –1,110 230,165 196,853
Total obligation 230,165 196,853

Similar to the preceding year, plan assets essentially comprise externally funded shares and corporate and government bonds.

Amounts recognized in the consolidated income statement for pensions Group

2019 2018

Current service costs 5,235 5,464

Interest expense 4,246 4,151
Costs for defined-benefit plans 9,481 9,615

Costs for defined-contribution plans 26,759 24,337

Total costs recognized in profit or loss 36,240 33,952
Of which
Amount charged to operating profit 31,994 29,801
Amount charged to financial expenses 4,246 4,151
Total costs recognized in profit or loss 36,240 33,952

Interest expense for pension plans is classified as financial expense. Other items are allocated in the operating profit as cost of goods sold,
selling or administrative expenses, depending on the employee’s function.
Other comprehensive income was negatively impacted by SEK 23,929 M (neg: 4,411), net after tax, as a result of the remeasurement of
defined-benefit pension plans.

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 21 CONT’D.

Specification of changes in net debt recognized in the consolidated

balance sheet relating to defined-benefit pension plans Group
2019 2018

Net debt at beginning of year 196,853 185,687

Net cost recognized in profit or loss 9,480 9,614
Benefits paid –8,486 –1,676
Contributions to funded plans –63 –915
Gains (–) losses (+) resulting from changed financial assumptions 29,169 5,750
Gains (–) losses (+) resulting from changed demographic assumptions 3,780 –749
Experience-based gains (–) losses (+) –1,567 –923
Exchange rate differences on foreign plans 999 65
Net debt at year-end 230,165 196,853

Actuarial assumptions regarding significant defined-benefit pension plans

2019 2018
Percentage Sweden Germany Sweden Germany

Discount rate 1.5 1.3 2.4 2.0

Future annual salary increases 2.8 2.8 2.8 2.8
Inflation rate 1.8 1.5 2.0 1.5

The discount rate in Sweden for both 2019 and 2018 is based on
the interest rate for mortgage bonds with a comparable maturity.
Through its defined-benefit pension plans, the Group is exposed
to a number of risks, the most significant of which are described
below:
Change in the return from bonds
A discount rate based on corporate bonds is used to determine
plan liabilities. A reduction in the interest rate on corporate bonds
will entail an increase in plan liabilities. Since most of the payments
are made from unfunded plans, there is no corresponding value
increase of plan assets.
Inflation risk
Pension plans in both Sweden and Germany are linked to inflation.
A higher rate of inflation leads to an increase in liabilities. Because
the Group mainly has unfunded plans, a higher rate of inflation will
increase liabilities without the occurrence of a corresponding rise in
value of plan assets.
Rate of salary increase
The Group’s pension obligation is exposed to changes in the rate of
salary increase. Assumptions relating to the rate of salary increase
reflect the historic trend in salary expense, the short-term outlook
and forecast inflation.

Sensitivity of the defined-benefit obligation to changes in the weighted essential assumptions are:
Impact on defined benefit obligation
2019 Change in assumption Increase in assumption Decrease in assumption

Discount rate 0.5% Decrease of 8.3% Increase of 9.6%

Salary increases 0.5% Increase of 4.7% Decrease of 4.0%
Inflation rate 0.5% Increase of 6.6% Decrease of 6.0%

Impact on defined benefit obligation

2018 Change in assumption Increase in assumption Decrease in assumption

Discount rate 0.5% Decrease of 9.1% Increase of 8.6%

Salary increases 0.5% Increase of 5.8% Decrease of 3.5%
Inflation rate 0.5% Increase of 5.7% Decrease of 8.5%

The above sensitivity analysis is based on the change of one assumption, while all other assumptions remain constant. In reality, it is
improbable that this will occur and changes in some of the assumptions may be correlated. In the calculation of sensitivity in the
defined-benefit obligation for essential actuarial assumptions, the same method was used as for the calculation of pension liabilities
that are recognized in the statement of financial position.

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 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 22 | OTHER PROVISIONS

Group
2019 2018

Warranty obligations 24,317 22,451

Total 24,317 22,451

Warranty obligations
The products sold by the VBG Group are covered by warranties that are valid for a predetermined period. Provisions for such product
warranties are based on historical data plus expected costs for quality problems that are known or can be foreseen.

NOTE 23 | BORROWING

In June 2019, the Group signed a new financing agreement with its
primary bank, a revolving facility of SEK 1,300 M and an overdraft
facility of SEK 100 M. It is a three-year agreement with the option
of two extensions of one year each. In conjunction with the new
agreement, previous loans were replaced with new ones that at
December 31 totaled SEK 741.2 M. The financing agreement is
conditional on net indebtedness/EBITDA. The financing agreement
also allows the VBG Group to utilize the working capital facility
(short-term loans) of SEK 10 M in CAD, that Mobile Climate Control
in Canada has with another bank. At year-end, this credit had been
unutilized.

Maturities of the Group’s financial liabilities including calculated interest payments

Total contracted
Dec 31, 2019 Carrying amount Within 1 year Within 2–3 years Within 4–5 years After 5 years cash flow

Liabilities to credit institutions 741,161 8,243 753,427 — — 761,670

Trade payables 202,988 202,988 — — — 202,988
Lease liability under IFRS 16 156,401 30,828 53,477 29,207 72,047 185,559
Total 1,100,550 242,059 806,904 29,207 72,047 1,150,217

Maturities of the Group’s financial liabilities including calculated interest payments

Total contracted
Dec. 31, 2018 Carrying amount Within 1 year Within 2–3 years Within 4–5 years After 5 years cash flow

Liabilities to credit institutions 824,562 841,334 3,027 — — 844,361

Trade payables 212,744 212,744 — — — 212,744
Total 1,037,306 1,054,078 3,027 — — 1,057,105

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VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 24 | TRADE RECEIVABLES

Group
Age distribution of trade receivables and reserve for doubtful debts 2019 2018

Trade receivables not due 358,640 360,548

Trade receivables due in 1–30 days 70,569 91,386
Trade receivables due in 31–90 days 22,417 28,569
Trade receivables due in more than 90 days 26,245 20,891
Reserve for doubtful debts –10,669 –10,231
Total 467,202 491,163

Reserve for doubtful debts

Reserve for trade receivables 1–30 days –93 –36
Reserve for trade receivables 31–90 days –229 –49
Reserve for trade receivables older than 90 days –10,347 –10,038
Reserve for trade receivables not due — –108
Total –10,669 –10,231

Change for the year in reserve for doubtful debts

Opening reserve –10,231 –5,975
Changes written off as bad debt losses 1,072 759
Reversed unutilized reserves 904 466
New provisions for doubtful trade receivables –2,414 –5,481
Closing reserve –10,669 –10,231

The Group’s bad debt losses normally amount to less than 0.05% of sales.

NOTE 25 | OVERDRAFT FACILITIES

The Group has overdraft facilities amounting to SEK 100 M (100), which remained unutilized at year-end. In addition,
there is a revolving credit facility totaling SEK 1,300 M, of which SEK 559 M was unutilized at year end.

NOTE 26 | ACCRUED EXPENSES AND DEFERRED INCOME

Group Parent Company

2019 2018 2019 2018

Special employer’s contribution 11,017 9,588 1,395 1,482

Accrued personnel costs 88,034 85,186 7,985 8,535
Audit fees 3,959 4,140 319 300
Other accrued expenses 3,627 3,484 — —
Commissions and sales support 5,211 7,111 — —
Accrued interest 104 548 104 548
Other items 43,995 41,194 228 361
Total 155,947 151,251 10,031 11,226

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 NOTES | VBG GROUP ANNUAL REPORT 2019

NOTE 27 | PLEDGED ASSETS

Group Parent Company

2019 2018 2019 2018

Shares in subsidiaries — 2,844,952 — 1,992,658

Total pledged assets — 2,844,952 — 1,992,658

NOTE 28 | CONTINGENT LIABILITIES

Group Parent Company

2019 2018 2019 2018

Guarantees for the benefit of subsidiaries — — 45,688 42,688

Other 1,172 1,115 259 261
Total contingent liabilities 1,172 1,115 45,947 42,949

NOTE 29 | CASH FLOW STATEMENT

Group Parent Company

Other items not affecting liquidity in operating activities 2019 2018 2019 2018
Change in provisions 1,886 961 –125 375
Bad debt losses 3,208 — — —
Scrapping and obsolescence, stock 6,962 — — —
Group contributions received — — 35,964 31,019
Unrealized currency effect 4,258 18,054 11,316 34,291
Other items –5,624 5,849 10 —
Total 10,670 24,864 47,165 65,685
Acquisition of non-current assets
Capital expenditures in intangible assets for the year (Notes 12 and 13) –30,566 –2,211 — —
Capital expenditures in property, plant and
equipment for the year (Notes 12 and 13) –75,386 –45,024 –2,808 –500
Effect of capital expenditures on cash and cash equivalents for the year –105,952 –47,235 –2,808 –500

Cash flow in financing activities Items not affecting liquidity

Changes in
December exchange New Reclassifica- December
Group trend, SEK M 2018 Cash flows Acquisitions Interest rate leases tion 2019
Current liabilities, bank 821,535 –821,619 84 0
Non-current liabilities, bank 1,170 728,396 11,595 741,161
Lease liability under IFRS 16 –34,045 5,805 184,641 156,401
Total financial liabilities 822,705 –127,268 17,484 184,641 897,562

Cash and cash equivalents 371,369 96,402 4,703 472,474

Total cash and cash equivalents 371,369 96,402 4,703 472,474

89
VBG GROUP ANNUAL REPORT 2019 | NOTES

NOTE 30 | SIGNIFICANT ACCOUNTING ESTIMATES AND ASSESSMENTS

Estimates and judgements are continually evaluated. They are
based on historical experience and other factors, including expec-
tations of future events that may have a financial impact on the
entity and that are believed to be reasonable under the circum-
stances. The Group makes estimates and assumptions about the
future with regard to pensions (Note 21), provisions and restruc-
turing costs (Note 22). The accounting estimates that result from
these assumptions will, by definition, seldom correspond to the
actual result. Every year, the Group carries out impairment testing
of goodwill and trademarks with indeterminable lifetimes. Recov-
erable amounts for cash-generating units have been established by
calculation of value in use. Certain estimates must be made for
these calculations (Note 12). The Group recognized a total inven-
tory value of SEK 638,661 thousand (634,865) after obsolescence
reserves of SEK 58,916 thousand (66,037). An obsolescence
reserve is recognized if the estimated net realizable value is lower
than the cost, and in conjunction with this, the Group makes esti-
mates and assessments regarding, for example, future market con-
ditions and the estimated net realizable value. These assessments
are made in accordance with the Group’s obsolescence policy. This
policy takes into account the past rate of scrapping and the time
certain items spend in inventory, which together with the actual
and estimated future sales volumes provide data for the obsoles-
cence reserve.

NOTE 31 | PROPOSED DISTRIBUTION OF PROFITS

In proposing the dividend, the Board of Directors has taken into The following funds in the Parent Company
account the Parent Company’s and Group’s short- and long-term are available for distribution by the AGM:
liquidity requirements, development potential, financial position
and investment needs. In light of these factors, the Board of Directors SEK 2019 2018
of VBG Group AB (publ) proposes that the 2019 AGM resolve on a
Retained earnings 1,194,310,475 1,084,697,423
dividend of SEK 5.00 per share (3.50) and no extra dividend (1.00)
for fiscal year 2019, which entails a disbursement of funds of SEK Net profit for the year 183,027,784 222,122,877
125.0 M (112.5) from the Parent Company, corresponding to 5.1% Total 1,377,338,259 1,306,820,300
of the Group’s equity or 8.4% of the Parent Company’s equity at
year end. The Group reported profit after tax of SEK 299 M (273.0), The Board of Directors proposes that
which means that the proposed dividend comprises 41.7% (41.2) these funds be distributed as follows:
of the net profit for the year for the Group. SEK 2019 2018

dividend to shareholders 125,020,240 112,518,216

to be carried forward 1,252,318,019 1,194,302,084
Total 1,377,338,259 1,306,820,300

90
 SIGNATURES FOR ANNUAL REPORT | VBG GROUP ANNUAL REPORT 2019

The income statements and balance sheets will be submitted to the Annual General Meeting on 28 April 2020 for adoption.

The undersigned ensure that the consolidated accounts and annual accounts have been prepared in accordance
with the International Financial Reporting Standards (IFRS) as approved by the EU and with generally accepted accounting policies
and give a true and fair view of the Group’s and the Company’s results of operations and financial position, and that the
Report of the Directors provides a true and fair view of the performance, financial position and results of operations of
the Group and the Company and describes significant risks and uncertainties faced by the companies included in the Group.

Vänersborg, March 26, 2020

Johnny Alvarsson Anders Birgersson

Chairman of the Board President and CEO

Peter Augustsson Louise Nicolin Jessica Malmsten Mats R. Karlsson

Board member Board member Board member Board member

Jouni Isoaho Cecilia Pettersson

Employee representative Employee representative

Our Audit Report was submitted on March 27, 2020

Öhrlings PricewaterhouseCoopers AB

Johan Malmqvist
Authorized Public Accountant

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VBG GROUP ANNUAL REPORT 2019 | AUDIT REPORT
Auditor’s report
Unofficial translation. To the general meeting of the shareholders of VBG Group AB (publ), corporate identity number 556069-0751
REPORT ON THE ANNUAL ACCOUNTS
AND CONSOLIDATED ACCOUNTS
Opinions
We have audited the annual accounts and consolidated accounts
of VBG Group AB (publ) for the year 2019. The annual accounts
and consolidated accounts of the company are included on pages
39–91 in this document.
In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly, in
all material respects, the financial position of parent company and
the group as of 31 December 2019 and its financial performance
and cash flow for the year then ended in accordance with the
Annual Accounts Act. The consolidated accounts have been pre-
pared in accordance with the Annual Accounts Act and present
fairly, in all material respects, the financial position of the group
as of 31 December 2019 and their financial performance and cash
flow for the year then ended in accordance with International
Financial Reporting Standards (IFRS), as adopted by the EU, and
the Annual Accounts Act. The statutory administration report is
consistent with the other parts of the annual accounts and consoli-
dated accounts.
We therefore recommend that the general meeting of share-
holders adopts the income statement and balance sheet for the
parent company and the group.
Our opinions in this report on the annual accounts and consoli-
dated accounts are consistent with the content of the additional
report that has been submitted to the parent company’s Board
of Directors in accordance with the Audit Regulation (537/2014)
Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards
on Auditing (ISA) and generally accepted auditing standards in
Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are indepen-
dent of the parent company and the group in accordance with
­professional ethics for accountants in Sweden and have otherwise
fulfilled our ethical responsibilities in accordance with these
requirements. This includes that, based on the best of our knowl-
edge and belief, no prohibited services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided to the
audited company or, where applicable, its parent company or
its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinions.
Our audit activities
The focus of the audit and scope of the Audit
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
92
an opinion on the consolidated financial statements as a whole,
taking into account the structure of the Group, the accounting pro-
cesses and controls, and the industry in which the group operates.
When we designed our group audit strategy and group audit
plan, we assessed the scope and degree of the audit activities
required to be executed by the group audit team, respective by
the  component auditors in the PwC network. As a result of the
VBG group’s decentralized finance organization, a significant
­portion of the group’s financial reporting is prepared in units
located outside Sweden. This implies that a significant portion
of the audit needs to be executed by component auditors working
within the PwC network in other countries.
When we assessed the degree of audit activity required to
be executed 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 units. Against
this background, we determined that a complete audit would be
executed as regards, in addition to the parent company’s financial
statements in Sweden, nine subsidiaries’ financial information.
For those units for which a full audit could not be motivated,
specifically defined audit activities were, instead, undertaken by
component auditors on the basis of instructions from the group
audit team (one company). For other units deemed to be individually
insignificant to the group audit, the group team executed analytical
procedures at group level.
In the case the component auditors executed work which was
significant to our audit of the group, we evaluated, in our role as
group auditors, the need and degree of involvement required in
the component auditors’ work, with the aim of determining
whether sufficient audit evidence had been obtains as a basis for
our opinion in the group’s Auditor’s Report. With this aim, the
group audit team regularly visited 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. Misstate-
ments may arise due to fraud or error. They are considered material
if individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
the consolidated financial statements.
Based on our professional judgement, we determined certain
quantitative thresholds for materiality, including the overall group
materiality for the consolidated financial statements as a whole.
These, together with qualitative considerations, helped us to determine
the scope of our audit and the nature, timing and extent of our
audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Key audit matters
Key audit matters of the audit are those matters that, in our
­professional judgment, were of most significance in our audit
of the annual accounts and consolidated accounts of the current
period. These matters were addressed in the context of our audit
of, and in forming our opinion thereon, the annual accounts
and consolidated accounts as a whole, but we do not provide
a separate opinion on these matters.

Key audit matter
Valuation of goodwill
As at 31 December 2019, the group reports a goodwill totaling
MSEK 1 143 which is divided between the group’s four divisions.
The group also accounts for a brand of MSEK 400 with indefinite
useful life.
In accordance with IAS 36, the group tests, at least annually,
for any impairment requirement as regards reported goodwill and
other assets with indefinite useful lives. This testing is undertaken
by the operation’s recoverable value being calculated and com-
pared with the reporting value of the operations.
The recoverable value was determined by company management
on the basis of a calculation of the operation’s capacity to generate
cash flow in the future (so-called value in use).
Impairment testing is important to our audit as goodwill and
the brand with indefinite useful life represents a significant
amount in the balance sheet and, in addition, impairment testing
implies that company management must make significant estima-
tions and judgements regarding future developments.
Based on company management’s impairment testing, the
Board of Directors has concluded that there was no write-down
requirement with regards goodwill or the brand with indefinite
useful lives as at 31 December 2019.
The most significant assumptions applied in this impairment
testing are described in Note 12.
Valuation of inventories
As at 31 December 2019, the group reports inventories in an
amount of MSEK 639.
Company management determine the value of inventories
based on the calculation of the acquisition costs, with deduction
of estimated obsolescence.
The valuation of inventories is significant to our audit as the
valuation includes a number of estimations and judgements and,
in addition, the inventory value is significant.
An important assessment which company management is
required to undertake in the valuation of the inventory refers to
the group’s capacity to be able to sell its products in the ­inventory
at a price in excess of acquisition cost, and, in this ­context, consider
the risk of obsolescence.
With the aim of identifying and consistently calculating the risk
of obsolescence, company management has adopted a group-wide
obsolescence policy. This obsolescence policy considers the histori-
cal scrappage rate, the staying time of individual articles in the
inventory (slow moving articles), which, together with the actual
and assessed future sales volumes, provide company management
with a basis for determining a reasonable obsolescence provision.
The group’s principles for the valuation of inventories and
reporting of obsolescence are described in Note 1. Important
­estimations and judgements applied in the accounting are
described in Note 30 in the annual report.
AUDIT REPORT | VBG GROUP ANNUAL REPORT 2019
How our audit addressed the key audit matter
We have in our audit performed for example the following key
audit activities:
• We have in our audit performed for example the following
key audit activities:
• An assessment of the cash flow calculation’s mathematical
­correctness and a reconciliation of the cash flow forecasts
against the adopted budget for 2020 and against the prepared
business plans for 2021–2022.
• Valuation and assessment to determine whether the company’s
valuation model complies with generally accepted valuation
techniques.
• On the basis of our own executed sensitivity analyses, we have
challenged company management’s assumptions and tested
the safety margins and assessed the risk of an impairment
requirement.
We have also assessed whether the company has provided suf-
ficient disclosures in the annual report regarding the assump-
tions which in the case of a change could lead to a write-down
of goodwill the brand with indefinite useful lives in the future.
Our audit activities included an evaluation of the group’s princi-
ples for calculating obsolescence in the inventories.
With the aim of assessing the reasonableness of the company’s
obsolescence provision, we have instructed our component audi-
tors to examine and report to the group team on any possible
deviations from the statistically calculated obsolescence in accor-
dance with the group-wide obsolescence policy.
In those cases where company management have chosen to
deviate from the statistically calculated obsolescence, we have
undertaken a special testing of the reasonability of such deviations.
We have discussed with management, and examined minutes
from Board meetings and other important management meetings,
with the aim of identifying forecasted changes in the company’s
sales which could result in inventory articles being obsolete.
Finally, we have evaluated to ensure that the group has, in a
­satisfactory manner, described its principles for the valuation of
inventories in the annual report, including the estimations and
judgements made in evaluating the inventory as at 31 December
2019.
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VBG GROUP ANNUAL REPORT 2019 | AUDIT REPORT
Other Information than the annual accounts
and consolidated accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages 1–38 in
this document. The Board of Directors and the Managing Director
are responsible for this other information. Our opinion on the
annual accounts and consolidated accounts does not cover this
other information and we do not express any form of assurance
conclusion regarding this other information. In connection with
our  audit of the annual accounts and consolidated accounts, our
responsibility is to read the information identified above and
­consider whether the information is materially inconsistent with
the annual accounts and consolidated accounts. In this procedure
we also take into account our knowledge otherwise obtained in
the audit and assess whether the information otherwise appears
to be materially misstated. If we, based on the work performed
concerning this information, conclude that there is a material
­misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of the Board of Director’s
and the Managing Director
The Board of Directors and the Managing Director are responsible
for the preparation of the annual accounts and consolidated
accounts and that they give a fair presentation in accordance
with the Annual Accounts Act and, concerning the consolidated
accounts, in accordance with IFRS as adopted by the EU. The
Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable
94
the preparation of annual accounts and consolidated accounts that
are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts,
The Board of Directors and the Managing Director are responsible
for the assessment of the company’s and the group’s ability to
continue as a going concern. They disclose, as applicable, matters
related to going concern and using the going concern basis of
accounting. The going concern basis of accounting is however not
applied if the Board of Directors and the Managing Director intend
to liquidate the company, to cease operations, or has no realistic
alternative but to do so.
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 aggre-
gate, 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 Revi-
sorsinspektionen’s website: www.revisorsinspektionen.se/revisorn-
sansvar. This description is part of the auditor´s report.
 AUDIT REPORT | VBG GROUP ANNUAL REPORT 2019

REPORT ON OTHER LEGAL AND lines and instructions and among other matters take measures that
REGULATORY REQUIREMENTS are necessary to fulfill the company’s accounting in accordance
with law and handle the management of assets in a reassuring
Opinions manner.
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board of Auditor’s responsibility
Director’s and the Managing Director of VBG Group AB (publ) for Our objective concerning the audit of the administration,
the year 2019 and the proposed appropriations of the company’s and thereby our opinion about discharge from liability, is to obtain
profit or loss. audit evidence to assess with a reasonable degree of assurance
We recommend to the general meeting of shareholders that the whether any member of the Board of Directors or the Managing
profit be appropriated in accordance with the proposal in the stat- Director in any material respect:
utory administration report and that the members of the Board of • has undertaken any action or been guilty of any omission which
Director’s and the Managing Director be discharged from liability can give rise to liability to the company, or
for the financial year. • in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Basis for Opinions
We conducted the audit in accordance with generally accepted
Our objective concerning the audit of the proposed appropriations
auditing standards in Sweden. Our responsibilities under those
of the company’s profit or loss, and thereby our opinion about this,
standards are further described in the Auditor’s Responsibilities
is to assess with reasonable degree of assurance whether the proposal
section. We are independent of the parent company and the
is in accordance with the Companies Act.
group in accordance with professional ethics for accountants in
Reasonable assurance is a high level of assurance, but is not a
Sweden and have otherwise fulfilled our ethical responsibilities
guarantee that an audit conducted in accordance with generally
in accordance with these requirements.
accepted auditing standards in Sweden will always detect actions
We believe that the audit evidence we have obtained is
or omissions that can give rise to liability to the company, or that
­sufficient and appropriate to provide a basis for our opinions.
the proposed appropriations of the company’s profit or loss are
not in accordance with the Companies Act.
Responsibilities of the Board of Director’s
A further description of our responsibility for the audit of the
and the Managing Director
administration is available on Revisorsinspektionen’s website:
The Board of Directors is responsible for the proposal for appropri-
www.revisorsinspektionen.se/revisornsansvar. This description is
ations of the company’s profit or loss. At the proposal of a dividend,
part of the auditor’s report.
this includes an assessment of whether the dividend is justifiable
Öhrlings PricewaterhouseCoopers AB, was appointed auditor of
considering the requirements which the company’s and the group’s
VBG Group AB (publ) by the general meeting of the shareholders
type of operations, size and risks place on the size of the parent
on the April 24, 2019 and has been the company’s auditor for
company’s and the group’ equity, consolidation requirements,
more than twenty years.
liquidity and position in general.
The Board of Directors is responsible for the company’s organi-
Göteborg 27 March 2020
zation and the administration of the company’s affairs. This
includes among other things continuous assessment of the company’s
Öhrlings PricewaterhouseCoopers AB
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
Johan Malmqvist
in a reassuring manner. The Managing Director shall manage the
Authorized Public Accountant
ongoing administration according to the Board of Directors’ guide-

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CORPORATE GOVERNANCE
REPORT

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 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2019
Corporate Governance Report
VBG Group AB (publ) is a Swedish limited liability company
whose Series B shares have been listed on the Stockholm Stock
Exchange since 1987, where they are traded on the Nasdaq
Stockholm Mid Cap list. VBG Group AB has applied the Swedish
Corporate Governance Code (the Code) since 1 January 2009.
The Code is a part of corporate Sweden’s self-regulation and
is based on the “comply or explain” principle. This means that
companies that apply the Code can choose not to comply with
certain rules but must explain the reason for each non-compliance.
Division of responsibility
Responsibility for management and control of the Group is
divided between the shareholders at the Annual General Meeting,
the Board of Directors, its elected committees and the President
under the provisions of the Swedish Companies Act, other laws
and ordinances, rules governing stock market companies, the
Articles of Association and the Board’s internal governance docu-
ments.
Shareholders
The share capital in VBG Group AB amounted to SEK 65,490,060
on December 31, 2019, distributed among 2,440,000 Series A
shares and 23,756,024 Series B shares, where each series A share
carries ten votes and each series B share carries one vote, except
for the 1,191,976 Series B shares repurchased by VBG Group AB
in 2002. This amounts to a total of 25,004,048 shares outstanding
with a total of 46,964,048 votes.
At the end of 2019, VBG Group AB had a total of 4,727 share-
holders. At year end, the ten largest owner groups controlled
83.5% of the share capital outstanding, 79.7% of the total
­number of shares issued and 91.2% of the votes. The stake held
by the largest shareholder, the Herman Krefting Foundation
for Allergy and Asthma Research, amounted to 22.6% of the
outstanding share capital and 28.3% of the votes. Other share-
holders with more than 10% of the votes were the SLK Employ-
ees’ Foundation and the VBG-SLK Foundation, whose holdings
of Series A shares represented 24.2% and 10.4% of the votes,
respectively.
More detailed information on the share, the ownership structure,
and so on is provided on pages 34–35.
Articles of Association
The Articles of Association state that VBG Group AB is a public
company whose object is to “engage – on its own or through
wholly and partly owned companies – in industrial activities,
preferably in the area of automotive components and truck
equipment, and other activities consistent therewith”.
General Meeting of Shareholders
The highest decision-making body in VBG Group AB is the
­General Meeting of Shareholders. The Annual General Meeting
(AGM), which is held within six months of the end of the fiscal
year, adopts the financial statements, resolves on a dividend,
elects the Board of Directors and the auditors and establishes
their fees, appoints the Nominating Committee, considers other
statutory matters and passes resolutions on proposals from the
Board of Directors and the shareholders.
Notice convening the Annual General Meeting is given not
earlier than six and not later than four weeks prior to the meet-
ing. The notice contains information on notification of intention
to attend and right to participate in and vote at the meeting, an
itemized agenda with the matters to be discussed, and information
on the proposed dividend and the main content of other proposals.
Shareholders or proxies can vote for the full number of shares
held or represented.
Notice convening an Extraordinary General Meeting where the
Articles of Association will be addressed shall be given not earlier
than six weeks and not later than four weeks prior to the meeting.
Notice convening other Extraordinary General Meetings shall be
given not earlier than six weeks and not later than three weeks
prior to the meeting.
Proposals to the meeting should be addressed to the Board
of Directors and submitted in good time before notice convening
the meeting is given. Information on shareholders’ rights to have
matters addressed at the meeting is provided on the website,
www.vbggroup.com.
Annual General Meeting 2019
VBG Group AB’s Annual General Meeting was held on 24 April
2019 and all presentations were in Swedish. Notice of the meeting,
the agenda, and the minutes with the President’s illustrations
from his address are available on the website. The entire Board
of Directors, the chairman of the Nominating Committee, the
President and the CFO, as well as parts of Group Management
and the company’s auditor, were present at the meeting. Share-
holders were given an opportunity to ask questions during the
meeting. It was not possible to follow or participate in the meeting
from another location with the aid of communication technology.
No change is planned in this respect for the 2020 AGM.
The AGM resolved to adopt the Board’s proposal for an
increased dividend of SEK 4.50 per share for fiscal year 2018
(of which SEK 3.50 in ordinary dividend and SEK 1.00 in extra
dividend), which was an increase of 38.5% over the preceding
year’s dividend of SEK 3.25. The record date was April 26, 2019.
Since Chairman of the Board Peter Hansson declined re-election,
the AGM resolved that the number of Board members would
decrease by one, to six ordinary members without deputies.
The AGM resolved to re-elect Board members Johnny Alvarsson,
Peter Augustsson, Louise Nicolin, Jessica Malmsten, Mats R.
Karlsson and Anders Birgersson.
Norges Bank, with its holding of 165,386 shares (0.416% of
the votes at the meeting) voted against the resolution but without
making a reservation against it. Norges Bank was represented by
proxy Lisa Emanuelsson.
Johnny Alvarsson was elected Chairman of the Board. No
Deputy Chairman was elected.
As a result of the number of Board members decreasing by
one, the Board fees were reduced to SEK 1,750,000 (1,795,000),
of which SEK 600,000 (500,000) to the Chairman of the Board
and SEK 250,000 each (220,000) to the other Board members,
and SEK 100,000 (50,000) to the Audit Committee and SEK
50,000 (50,000) to the Compensation Committee. No fee was
paid to the President.
Öhrlings PricewaterhouseCoopers was re-elected as auditor
for a period of one year, with Johan Malmqvist as auditor in
charge to succeed Fredrik Göransson, who could not be re-elected
owing to the seven-year rule. Moreover, the AGM resolved that
the fees to the company’s auditors for their review of operations
for 2019 would be paid in accordance with approved charges for
work performed.
The AGM authorized the Board to resolve on one or more
occasions up until the 2020 AGM that treasury shares can be
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VBG GROUP ANNUAL REPORT 2019 | CORPORATE GOVERNANCE REPORT

transferred, notwithstanding the shareholders’ pre-emption
rights, and that non-cash payment (apport) can be made for such
transferred shares. This authorization enables the Board to use
the Company’s treasury shares as payment for acquired companies.
The AGM resolved to accept the Board’s proposal for guide-
lines regarding remuneration and other terms of employment for
senior executives.
Furthermore, the AGM resolved to appoint a Nominating
Committee comprising Göran Bengtsson (Herman Krefting
­Foundation for Allergy and Asthma Research), Johnny Alvarsson
(Chairman of VBG Group AB), Per Trygg (SEB Asset Management
SA) and Johan Lannebo (Lannebo Fonder), with Göran Bengtsson
as Chairman.
On April 24, 2019, it was announced that the 2020 AGM
would take place in Vänersborg at 5:00 p.m. on April 28, 2020.
Nominating Committee
The Nominating Committee is appointed by the AGM and, for
the 2020 AGM, consists of the following members:
• Göran Bengtsson, Herman Krefting Foundation for Allergy
and Asthma Research, also the Chairman of the Nominating
Committee
• Johnny Alvarsson, Chairman of VBG Group AB
• Per Trygg, SEB Asset Management SA
• Johan Lannebo, Lannebo Fonder
The task of the Nominating Committee is to present proposals to
the AGM on behalf of the shareholders for election of a Chairman
and other members of the Board of Directors as well as proposals
for fees and other remuneration for Board work and auditors’
fees. The Nominating Committee shall also submit nominations
for election of an auditor based on discussions in the VBG Group’s
Audit Committee and the Board of Directors.
When the Nominating Committee nominates a Chairman
and other members of the Board of Directors, it shall issue a
statement to the effect that the nominated individuals are to
be regarded as independent in relation to the company and the
executive management as well as major shareholders in the
­company. The Nominating Committee’s proposals shall be given
to the VBG Group far enough in advance so that the proposal
can be presented in the notice convening the AGM and at the
same time on the VBG Group’s website.
The Nominating Committee strives for an even gender balance
and diversity in terms of breadth of qualifications, experience and
background, which is also reflected in the current composition.
The Nominating Committee applies rule 4.1 of the Swedish Cor-
porate Governance Code as its policy for diversity on the Board.
Half of the members of the Nominating Committee are inde-
pendent in relation to the company, the executive management
and the shareholder with the most votes, the Herman Krefting
Foundation for Allergy and Asthma Research.
Member Jessica Malmsten declined re-election ahead of the
2020 AGM. The Nominating Committee proposes the re-election
of Johnny Alvarsson, who is also proposed for re-election as the
Chairman of the Board, Peter Augustsson, Louise Nicolin, Mats R.
Karlsson and Anders Birgersson (President), as well as the ­election
of Anna Stålenbring as a new Board member. Anna Stålenbring
has a graduate degree in Business Administration from Växjö Uni-
versity and is presently the owner and Senior Adviser at A Advi-
sory AB. Previously, Anna worked for more than 20 years at Nefab
AB in Jönköping, initially as Chief Accountant, then as CFO and
then EVP Head of M&A and Legal and IR. Anna is on the Board
of Troax AB, FM Mattsson AB and Investment AB Chiffonjén.
The proposal of the Nominating Committee regarding fees to
the Board and the Audit and Compensation Committees entails
an increase to SEK 1,800,000 (1,750,000). Allocation of the fees
is proposed as follows: SEK 600,000 (600,000) to the Chairman
of the Board and SEK 250,000 (250,000) each to the other Board
members.
Of the total fee, SEK 150,000 (100,000) is to be paid to the
Audit Committee and SEK 50,000 (50,000) to the Compensation
Committee, to be distributed by the Board of Directors. No fee is
paid to the President.
Furthermore, the Nominating Committee proposes to the
2020 AGM the re-election of Öhrlings PricewaterhouseCoopers
as auditor for a period of one year, with Johan Malmqvist as
auditor in charge. Fees to auditors are proposed to be paid as
billed, upon approval, for work performed.

Board members as of the 2019 AGM

Independent Independent
in relation to in relation to
Board members Function Elected Committee work the company major shareholders

Compensation Committee
Johnny Alvarsson Chairman 2004 / Audit Committee Yes No
Peter Augustsson Board member 2011 Audit Committee Yes Yes
Louise Nicolin Board member 2014 Audit Committee Yes Yes
Jessica Malmsten Board member 2016 Audit Committee Yes Yes
Compensation Committee
Mats R. Karlsson Board member 2018 / Audit Committee Yes Yes
Board member,
Anders Birgersson President and CEO 2001 Audit Committee No No
5/6 4/6

Employee representatives Function Appointed

Jouni Isoaho, IF Metall Board member 2016

Cecilia Pettersson, Unionen/Swedish Association
of Graduate Engineers/Ledarna Board member 2011
Karin Pantzar, Unionen/Swedish Association of
Graduate Engineers/Ledarna Deputy 2010

Information on the members of the Board is provided on pages 104–105.

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 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2019

Shareholders representing more than 75% of the total number
of votes in VBG Group AB propose that the 2020 AGM appoint
the following persons to the Nominating Committee:
• Göran Bengtsson, Herman Krefting Foundation for Allergy
and Asthma Research, also as the Chairman of the Nominating
Committee
• Johnny Alvarsson, Chairman of VBG Group AB
• Johan Lannebo, Lannebo Fonder
• Per Trygg, SEB Asset Management SA
Composition of the Board of Directors
The members of the Board of Directors are elected annually by
the AGM for the period up until the next AGM. VBG Group AB
has not established a specific age limit for the Board members
nor a time limit for how long someone may sit on the Board.
The 2019 AGM elected Board members Johnny Alvarsson,
Anders Birgersson (President), Peter Augustsson, Louise Nicolin,
Jessica Malmsten and Mats R. Karlsson. Johnny Alvarsson was
elected Chairman of the Board and no Deputy Chairman was
elected. There is a presentation of the Board members and their
assignments on pages 104–105.
In addition to the six members elected by the AGM, the trade
unions Unionen/Swedish Association of Graduate Engineers/
Ledarna and IF Metall each appointed one member and one
­deputy member.
The number of AGM-elected members for the 2020 AGM
who are independent in relation to the company, according to
the requirements for listing on the stock exchange, is judged
to be five. Furthermore, four members are also judged to be
independent of the company’s major shareholders and all six
members meet the requirements relating to experience. The
­President is the only Board member who works actively in the
company.
The work of the Board of Directors
The work of the Board follows an annual plan designed to satisfy
the need of the Board for information. In all other respects, the
work of the Board is subject to the special rules of procedure
the Board has adopted governing the division of responsibilities
between the Board, its committees and the CEO. According to
the adopted rules of procedure, the Board of Directors holds
eight ordinary meetings per year, including the statutory meeting
Attendance at Board meetings in 2019
Board of Audit Compensation
Board members Directors Committee Committee
following the AGM. The Board is also called to attend Extraordinary
Meetings whenever the situation warrants. Company officers take
part in Board meetings as rapporteurs, and the company’s CFO
also serves as secretary.
The company’s auditor reports his observations every year
based on his review and gives his assessment of the company’s
internal control.
Role of the Chairman
The Chairman organizes and leads the work of the Board of Direc-
tors so that it complies with the Swedish Companies Act, other laws
and ordinances, rules governing stock market companies (including
the Code) and the Board’s internal governance documents.
The Chairman monitors the company’s operations via continuous
contacts with the President and is responsible for ensuring that
other Board members receive relevant information and documents.
The Chairman also ensures that an annual evaluation is conducted
of the work of the Board and the President, and that the results
of this evaluation are communicated to the Nominating Committee.
According to the by-laws of the shareholder in the VBG Group
AB with the most votes, the Herman Krefting Foundation for
Allergy and Asthma Research, the company’s Chairman shall be
a member of the board of the Foundation.
Board committees
The Board of Directors appointed both an Audit Committee and
a Compensation Committee for the period up until the 2020 AGM.
Compensation Committee
At the statutory Board meeting in April 2019, the Board of Direc-
tors appointed a Compensation Committee consisting of Johnny
Alvarsson (chairman) and Mats R. Karlsson. The Committee had
two meetings during 2019 where it discussed remuneration and
other terms of employment for the President and senior execu-
tives in the Group. The President was co-opted, but did not
­participate in the discussion when remuneration to the President
was addressed.
The principle applied within the Group is that the manager’s
manager should approve decisions in compensation matters. A
presentation was made at the AGM of the Board’s proposal for
guidelines for remuneration to the President and other senior
executives. The AGM adopted the guidelines in accordance with
the Board’s proposal. Information on the Board’s proposal to the
2020 AGM for guidelines for remuneration to the President and
senior executives is provided on pages 102–103.
Information on remuneration in 2019 is provided in Notes 6
and 7 on pages 76–77.

Peter Hansson1 3 (3) 1 (1) 1 (1) Audit Committee

Johnny Alvarsson 9 (9) 3 (3) 2 (2) At the statutory Board meeting in April 2019, the Board of Direc-
Peter Augustsson 8 (9) 2 (3) tors appointed an Audit Committee consisting of the entire Board
Louise Nicolin 9 (9) 3 (3) with Johnny Alvarsson as Chairman. In 2019, the Audit Commit-
tee held three meetings of record, one before and two after the
Jessica Malmsten 9 (9) 3 (3)
statutory Board meeting.
Mats R. Karlsson 9 (9) 3 (3) 1 (1) The Audit Committee has a supervisory role with regard to
Anders Birgersson 9 (9) 3 (3) the company’s system for internal control and risk management
of the financial reporting. The Committee’s Chairman maintains
Employee representatives ongoing contact with the company’s auditors in order to ensure
Jouni Isoaho, IF Metall 7 (9) 1 (3) that the company’s internal and external accounting meets the
requirements made on a listed company and to discuss the scope
Cecilia Pettersson,
Unionen/Swedish Associa- and content of the audit work.
tion of Graduate Engineers/ The Committee had consultations with and received reports
Ledarna 7 (9) 2 (3) from the company’s external auditors on three occasions in 2019.
The auditors’ reports have not occasioned any special measure
1
Left the Board of Directors in conjunction with the 2019 AGM. on the part of the Audit Committee.

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VBG GROUP ANNUAL REPORT 2019 | CORPORATE GOVERNANCE REPORT
Board activities in 2019
Prior to each Board meeting, an agenda is sent out to the Board
members along with in-depth information on the business at
hand. Nine (12) meetings were held during the 2019 fiscal year,
of which four (February, April, August and October) were held
in connection with the publication of the company’s quarterly
reports. One meeting in March was held to adopt the 2018
­Year-end/Annual Report and the annual statutory Board meeting
was held immediately after the AGM. In conjunction with the
October meeting, the Board visited BusWorld 2019, the major
international bus exhibition, in Brussels, Belgium. The business
plan for 2020 was adopted at the December meeting. The other
two Board meetings in September and November primarily
address issues related to acquisitions.
Operational activities
The President is responsible for the VBG Group AB’s day-to-day
administration, and rules established by the Board of Directors
govern the President’s power of decision regarding investments
and financing matters.
President and CEO
President Anders Birgersson, MSc. Eng., has been employed by the
VBG Group AB since 2001 and has been active in the engineering
industry since 1984 with a focus on logistics, production, product
development and senior management at ABB, SKF and ESAB.
As President of VBG Group AB, Anders Birgersson is also a
member of the boards of the Herman Krefting Foundation for
Allergy and Asthma Research, the SLK Employees’ Foundation
and the VBG-SLK Foundation, in keeping with the by-laws of the
owner foundations.
The President holds 1,017 shares and 20,000 warrants.
Group Management
Group Management comprises four persons from the Parent
Company: President and CEO Anders Birgersson; Chief Financial
Officer Claes Wedin; Bo Hedberg, Senior Vice President of Busi-
ness Development; and Christina Holgerson, Senior Vice Presi-
dent of HR and Corporate Responsibility. Anders Erkén, Executive
Vice President of VBG Group and Division Manager Truck &
Trailer Equipment with responsibility for the Ringfeder Power
Transmission division, is also part of Group Management. Former
Group Management member Clas Gunneberg, Executive Vice
President VBG Group and Division Manager, Mobile Climate
Control left the Group during the year and Anders Birgersson
took up the post as manager of the division.
Group Management holds regular monthly meetings and deals
with such matters as earnings performance and reports prior to
and after Board meetings, strategy and business planning, discus-
sions of goals, investments, internal control, policies and review
of the market situation, the economic trend and other external
factors that affect the business. Furthermore, Group and division-­
related major projects are discussed and decided on.
Information on Group Management is provided on pages
106–107.
Internal governance processes
Governance of the VBG Group is based on the vision, business
concept and strategies of the Group and its divisions. Under the
Board of Directors, the CEO and the Group Management,
responsibility for operational activities has been decentralized to
the three divisions. Responsibility for the coordination of certain
functions such as accounting and finance, HR, IT, legal affairs,
intellectual property, and acquisition-related matters rests with
the Parent Company.
100
Over the short term, the Group works on one annual business
plan (operations and finance) per division, which are then moni-
tored monthly and for rolling twelve months. With each quarterly
report, the divisions and the Group provide an outlook for the
remainder of the fiscal year. This provides the Parent Company
and the Board with the documentation for any decisions on
adjustments or the need for necessary measures. For the longer
planning horizon, the business plans also contain bigger activities
and financial information for an additional two years, which is
important for strategic governance and financial planning by the
Group over the slightly longer term.
Different business processes such as marketing, sales, purchasing
and production are used to manage the operational activities in
each division in order to achieve the activity goals that have been
established.
Earnings are followed up through regular financial reports, and
the results of adopted measures are followed up through supple-
mentary follow-up reports.
Auditors
The auditing firm of Öhrlings PricewaterhouseCoopers AB (PwC)
was elected by the 2019 AGM as auditor for a period of one
year, with authorized public accountant Johan Malmqvist as
auditor in charge.
The audit includes a statutory annual audit of VBG Group AB’s
annual accounts, a statutory audit of the Parent Company and
all significant subsidiaries (where required), an audit of internal
report packages, an audit of the year-end closing and a general
review of one interim report. Reviews of internal control are
included as a part of the work.
In the autumn, a meeting and dialogue is held with executive
management and, where necessary, the Chairman of the Audit
Committee for analysis of the organization, operations, business
processes and balance sheet items for the purpose of identifying
areas involving an elevated risk of errors in the financial report-
ing. A general review of the year-end closing is performed for the
period January–September. An early warning review of the third
quarter accounts is conducted in October-November, followed
by an early warning meeting with company management and
the Audit Committee where important issues for the annual
­closing are raised. Review and audit of the year-end and annual
reports is performed in January–March.
During 2019, in addition to the audit assignment, the VBG
Group consulted PwC on taxes, transfer price matters and
accounting matters. The amount of remuneration paid to PwC
in 2019 is shown in Note 7 on page 78.
PwC is obliged to assess its independence prior to providing
independent advice to the VBG Group in addition to its auditing
assignments.
Report on internal control
This section contains the Board’s annual report on how internal
control is organized in so far as it pertains to financial reporting.
The point of departure for the description has been the Code’s
rules and the guidance provided by working groups within the
Confederation of Swedish Enterprise and FAR.
The Board’s responsibility for internal control is described in
the Swedish Companies Act, and the internal control regarding
financial reporting is covered by the Board’s reporting instruction
to the President. The VBG Group’s financial reporting complies
with the laws and rules that apply to companies listed on the
Stockholm Stock Exchange and the local rules that apply in each
country where business is conducted.
Besides external rules and recommendations there are internal
instructions, directions and systems, as well as an internal
 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2019
­ ivision of roles and responsibilities aimed at good internal con-
d Information and communications
trol in the financial reporting.
Control environment
The control environment is the foundation for internal control.
VBG Group AB’s control environment consists of organizational
structure, instructions, policies, guidelines, reporting and defined
areas of responsibility. The Board has overall responsibility for the
internal control of the financial reporting. The Board of Directors
has adopted written rules of procedure that clarify the Board’s
responsibility and define the division of labor between the Board
and its committees. In its role as Audit Committee, the Board
of Directors has the principal task of ensuring that established
principles for financial reporting and internal control are complied
with and that good relations are maintained with the company’s
auditors. The Board of Directors has prepared an instruction for
the President and agreed on the economic reporting to the Board
of Directors of VBG Group AB.
The President and the Group’s CFO reports the results of his
internal control work to the Chairman of the Audit Committee,
who subsequently brings relevant issues and observations to
the attention of the Audit Committee for possible decision on
proposed measures.
VBG Group AB’s essential governing documents in the form
of policies, guidelines and manuals are, to the extent they per-
tain to the financial reporting, kept continuously updated and
communicated via relevant channels to the Group companies.
Systems and procedures have been created to provide the
management with the necessary reports concerning business
results in relation to established objectives. The necessary
­information systems are in place to ensure that reliable and
up-to-date information is available for the management to be
able to perform its duties in a correct and efficient manner.
Risk assessment
The VBG Group’s risk assessment regarding the financial report-
ing is aimed at identifying and evaluating the most significant
risks that affect the internal control of the financial reporting
in the Group’s companies, divisions and processes. The most
­significant risks identified in the Group’s internal control of the
financial reporting are managed by control structures based
on reporting of non-compliances with adopted standards, for
example, valuation of inventories and other significant assets.
Internal control of the financial reporting
Financial statements are prepared monthly and quarterly in the
Group, the divisions and their subsidiaries. In conjunction with
this reporting, analyses are conducted with comments and
updated forecasts aimed at ensuring that the financial reporting
is accurate. Accounting functions and business controllers with
functional responsibility for accounting, reporting and analysis
of financial developments are found in the Parent Company and
at division and major unit levels.
The VBG Group’s internal control work is aimed at ensuring
that the Group fulfills its financial reporting goals. The financial
reporting shall:
• be accurate and complete and comply with relevant laws,
rules and recommendations
• provide a fair and true description of the company’s business
• support a rational and informed valuation of the business
In addition to fulfilling these three goals, internal financial reporting
shall provide support for correct business decisions at all levels in
the Group.
Internal information and communications have to do with creating
an awareness among the Group’s employees concerning external
and internal governance instruments, including powers and
responsibilities. Information and communications regarding inter-
nal governance instruments for financial reporting are available
for all concerned employees. Important tools for this are the VBG
Group’s policies, manuals and courses.
Control activities
The Group’s companies are organized into three divisions. Each
division management has a CFO/business controller who has a
central role for analysis and follow-up of the division’s financial
reporting and earnings. The Parent Company has a Head of
­Consolidated Accounts for continuous analysis and follow-up
of the Group’s, the divisions’ and the subsidiaries’ financial
reporting. The Parent Company’s CFO is responsible for optimizing
cash management (the Group’s handling of cash, cash equivalents
and foreign currency), receives weekly reports and communicates
with all the companies in the Group. A finance conference is held
annually to which key persons from the subsidiaries are invited
in order to review important areas in financial reporting, cash
management and so on. All the companies are linked up to and
report to the Group’s consolidation system.
Follow-up
The Board of Directors is informed on a monthly basis about the
Group’s development in terms of sales, earnings and other key
events and activities via a written report from the President.
On a quarterly basis, in connection with the interim report, the
Board of Directors receives comprehensive information regarding
the Group’s and divisions’ performance, earnings, financial position
and cash flow via a report package comprising outcomes, fore-
casts and comments.
Internal audit
VBG Group AB has a relatively simple operational structure with
three divisions, each consisting of small or medium-sized legal
entities with varying platforms for internal control. Compliance
with the governance and internal control systems established
by the company are regularly monitored by the CFO and the
controllers at the division and Parent Company level. In addition,
the companies’ reporting and economic outcomes are routinely
analyzed for the purpose of determining trends.
In view of the above, the Board of Directors has chosen not
to have a special internal audit.
Investor relations
The VBG Group’s information to shareholders and other stake-
holders is provided via the annual report, year-end report,
interim reports and press releases as well as via the company’s
website, vbggroup.com. Some ten or so meetings with investors,
analysts and shareholders’ clubs around Sweden were held
during 2019.
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VBG GROUP ANNUAL REPORT 2019 | CORPORATE GOVERNANCE REPORT
PROPOSAL FOR GUIDELINES REGARDING REMUNERATION
AND OTHER TERMS OF EMPLOYMENT FOR SENIOR
­EXECUTIVES (ITEM 11)
The Board of Directors proposes that the 2020 AGM resolve to
adopt the guidelines below for remuneration to senior executives.
Scope and application of the guidelines
The guidelines pertain to remuneration and other terms of
employment for the Group Management of VBG Group and
other senior executives. The Board’s proposal conforms to the
remuneration policies of previous years and is based on agree-
ments already signed between the company and the respective
executives. The preparation of remuneration issues is managed
by the Compensation Committee, which completes the tasks the
Committee has under the Swedish Corporate Governance Code.
The guidelines are to be applied to contracted remuneration,
and to changes in previously contracted remuneration after
adoption by the 2020 AGM.
The guidelines do not cover remuneration resolved by the
General Meeting such as Board fees and share-based incentive
programs.
How the guidelines promote VBG Group’s business strategy,
long-term interests and sustainability
Briefly put, VBG Group’s business strategy within selected prod-
uct and market segments entails acquiring, owning and develop-
ing industrial companies in business-to-business commerce with
strong brands and good growth potential. VBG Group strives to
be the number one or number two player in these niches. Based
on a long-term commitment and with a focus on growth and
profitability, the VBG Group’s shareholders will be offered
­zattractive value growth. The business concept is a tried and
tested one, having proved very successful over time.
To successfully implement VBG Group’s business and sustain-
ability strategy and safeguard VBG Group’s long term interests,
it will be necessary for VBG Group to recruit and retain manage-
ment with strong competence and the capacity to reach the
goals it has set. This requires VBG Group’s ability to offer com-
petitive remuneration. These guidelines promote VBG Group’s
business strategy, long-term interests and sustainability by pro-
viding the company with the possibility of offering senior execu-
tives competitive remuneration.
Forms of remuneration
VBG Group’s remuneration system must be market-related and
competitive. Remuneration can be paid in fixed cash salary,
­variable remuneration, pension and other customary forms.
Fixed remuneration shall be individual to each senior executive
and based on the executive’s areas of responsibility and perfor-
mance.
102
Variable remuneration is to be limited and based on the finan-
cial performance of the Group or respective division compared
with established goals. For senior executives, the annual variable
portion will depend on position and contract. Variable remunera-
tion can amount to a maximum of 50% of the senior executive’s
fixed annual salary.
Pension benefits in general will correspond to pension benefits
as provided by law and collective agreement (the ITP plan). It is,
however, possible for the executive to opt for other pension
arrangements at the same cost to VBG Group. Pension benefits
can amount to a maximum of 35% of the senior executive’s fixed
annual salary.
Other benefits could entail a company car, health care and
other similar benefits. Other benefits will comprise a smaller
share of total remuneration, and can correspond to a maximum
of 12% of the senior executive’s fixed annual salary.
For conditions of employment covered by laws and regulations
in a country other than Sweden, reasonable adjustments as far as
pension and other benefits can be made to comply with compul-
sory laws or local practices, whereupon the overall purposes of
these guidelines must be satisfied to the greatest extent possible.
Criteria for disbursement of variable remuneration
The criteria forming the basis for disbursement of variable remu-
neration are to be adopted yearly by the Board for the purpose of
ensuring the criteria are in line with VBG Group’s current business
strategy and earnings targets. The criteria may be individual or
shared, financial or otherwise and must be designed in a way that
they promote VBG Group’s business strategy, sustainability strat-
egy and long-term interests, which means the criteria must be
clearly linked to the company’s business strategy and objectives.
The financial criteria forming the basis of any variable remu-
neration must be based on earnings per share and operating
profit (EBIT, or alternately EBITA).
The non-financial criteria forming the basis of any variable
remuneration must be linked to clear and measurable opera-
tions-related targets, such as ones that benefit the general finan-
cial criteria, earnings per share and operating profit. The targets
can also be at the level of specific divisions, and linked to the
division’s business development, business plan or other significant
activities decided on by the Board or Group Management. The
criteria can also be linked to the employee themselves, for exam-
ple personal goals to be fulfilled under a performance plan.
The period forming the basis for assessing whether or not the
criteria have been met (the measurement period) must be at least
one year. The extent to which the criteria have been met will
be determined by the Compensation Committee after the con-
clusion of the measurement period. The assessment of whether
or not criteria have been met must be based on the latest financial
information released by VBG Group. The Board of Directors
 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2019

decides on disbursement of variable remuneration in accordance
with preparations by the Compensation Committee.
In accordance with its agreements, the company does not have
the possibility of demanding repayment of variable remuneration.
Salaries and conditions of employment for employees
For the purpose of assessing the reasonability of the guidelines,
the Board took salaries and conditions of employment for VBG
Group’s employees into account when preparing these guidelines.
In this connection, the Board of Directors has examined information
regarding total remuneration to employees, the forms the remu-
neration consists of, how remuneration levels have changed over
time and at what pace.
Period of notice and severance pay
Senior executives are permanently employed. The period of
notice from the company is 6–12 months, and from the senior
executive 3–6 months.
Severance pay in addition to salary during the period of notice
may not exceed the senior executive’s fixed annual salary. The
sum total of fixed salary during the period of notice and severance
pay may not exceed an amount corresponding to the senior exec-
utive’s fixed salary for 24 months.
Remuneration may be paid for a non-competition commit-
ment. Such remuneration must compensate for any loss of
income, and will only be paid to the extent the former senior
executive lacks the right to severance pay. Remuneration can
total a maximum of 60% of the senior executive’s fixed salary
at the time notice is given, if not otherwise stipulated by law,
the mandatory provisions of a collective bargaining agreement
or established practice. Such remuneration may be paid during
the period the non-competition obligation is in force, which may
be a maximum of twelve months after the termination of
employment.
For conditions of employment covered by laws and regulations
in a country other than Sweden, reasonable adjustments as far
as periods of notice, severance pay and remuneration for non-­
competition obligations can be made to comply with compulsory
laws or local practices, whereupon the overall purposes of these
guidelines must be satisfied to the greatest extent possible.
that the General Meeting is to resolve on and regarding remuner-
ation structures and levels in VBG Group.
The Board of Directors will prepare proposals for new guide-
lines when substantial changes to the guidelines are required, but
at least once every four years. The Board of Directors will present
the proposal for resolution at the AGM. The guidelines will be in
force until new guidelines are adopted by the General Meeting.
For the purpose of avoiding conflicts of interest, senior executives
will not be present while the Board of Directors addresses and
decides on issues related to remuneration, to the extent such
issues concern them.
Departure from the guidelines
The Board of Directors may decided to temporarily depart from
the guidelines if, in an individual case, there are particular reasons
for doing so and a departure is necessary to provide for VBG
Group’s long-term interests and sustainability, or to ensure VBG
Group’s financial strength.
Particular reasons may, for example, consist of a departure
being deemed necessary to recruit or maintain key persons, or
under extraordinary circumstances such as VBG Group achieving
a given desired result in less time than planned, VBG Group sign-
ing a given agreement in less time and under better conditions
that anticipated, or VBG Group increasing in value or increasing
its sales or profits to a greater extent than forecast.

Decision-making procedure for establishing, reviewing and

implementing the guidelines
The Board of Directors has established a Compensation Committee
tasked with preparing the Board’s decisions on issues of remuner-
ation policy, remuneration and other conditions of employment
for senior executives; monitoring and evaluating programs for
variable remuneration to senior executives, both ongoing and
concluded during the year; and monitoring and evaluating the
application of the guidelines for remuneration to senior executive

103
VBG GROUP ANNUAL REPORT 2019 | BOARD OF DIRECTORS
Board of Directors
MEMBERS JOHNNY ALVARSSON
Position on Chairman
the Board
Current position Chairman of Manava
­konsult AB since 2017.
Education MSc. Eng., Industrial Eco-
nomics, Institute of Technol-
ogy at Linköping University.
Elected 2004
Born 1950
Other Board Chairman of FM Mattsson
assignments Mora Group AB, Manava
Konsult AB and Dacke
Industri AB. Board member
of Beijer Alma AB, Instalco
Intressenter AB and Sdiptech
AB.
Work experience President and CEO of
Indutrade AB, 2004–2017.
President of the listed com-
panies Elektronikgruppen BK
AB (2000–2004) and Zeteco
AB (1988–2000). Chief
Engineer at Ericsson Tele-
com, 1975–1987.
Remuneration1, SEK 640,000
Attendance at
9 (9)
Board meetings
Own shareholding
and shareholding of 1,000
related parties
Independent of the
Yes
company
Independent of major
No
shareholders
1
Remuneration approved at the 2019 AGM, including remuneration allocated by the Board from the respective committees.
104
ANDERS BIRGERSSON
Board member
President and CEO of VBG
Group AB since 2001.
MSc. Eng., Mechanical Engi-
neering, Chalmers University
of Technology. Business
Administration, University
of Skövde.
2001
1958
Board member of Elos Med-
tech AB, Sparbanken Lid-
köping AB, the Herman
Krefting Foundation for
Allergy and Asthma
Research, the VBG-SLK
Foundation and the SLK
Employees’ Foundation.
Has worked in the engineering
industry since 1984 in logis-
tics, production, product
development and senior man-
agement. Production Man-
ager, President and Business
Area Manager in the ESAB
Group 1997–2001. Production
Manager and Technical Man-
ager in the SKF Group 1989–
1997. Production and Logistics
in the ABB Group 1979–1988.
— 270,000
9 (9)
1,017
No
No
LOUISE NICOLIN
Board member
President and owner of
Nicolin Consulting AB since
2011.
MSc. Eng., Molecular Biotech- MSc. Eng., Mechanical Engi-
nology, Uppsala University.
Executive MBA, Stockholm
School of Business. Interna-
tional Directors Program
(IDP-C), INSEAD, Fontaine-
bleau.
2014
1973
Chairman of AB
Better Business World Wide,
Sweden. Board member of
Volati AB, Enzymatica AB,
Optinova (Finland), and
(until 2019) Dellner Cou-
plers, Simris Alg AB and
Uppdragshuset Sverige AB.
Consulting assignments for
such companies as AstraZen-
eca, Maquet Critical Care,
Octapharma, Recipharm, GE
Healthcare, Pfizer and Phar-
madule 1998–. Marketing
Manager and Business Area
Head at Plantvision 2007–
2011.
9 (9)
— 1,100
Yes
Yes
PETER AUGUSTSSON
Board member
Chairman of Peter Augustsson
Development AB since 2005.
neering, Chalmers University
of Technology.
2011
1955
Chairman of Smoltek Nano-
tech Holding AB, AXsensor
AB, Mechanum Sverige AB
and Fortaco Group Oy.
Board member of Walle-
niusrederierna AB and
Ljunghäll Group AB.
Has worked in the automo-
tive and component industry
since 1978. Saab Automobile
AB 1998–2005. SKF AB
1994–1998. Volvo Person-
vagnar AB 1978–1994.
270,000
8 (9)
Yes
Yes

JESSICA MALMSTEN
Board member
Senior Manager Customer
Relationship Management
Volvo Bil AB since 2017.
MSc. Eng., Electronic Engi-
neering, Chalmers University
of Technology.
2016
1964
— Chairman of the Board of
Has held various senior
­positions in business and
operations development.
GöteborgsOperan AB,
2007–2017. Volvo Person­
bilar Sverige AB and Volvo
Personvagnar Norden AB,
2001–2007. Volvo Person-
vagnar AB 1987–2001.
270,000
9 (9)
100
Yes
Yes
DEPUTY MEMBERS OF THE BOARD
Karin Pantzar
Vänersborg, born 1977
Deputy Board member since 2010.
Employee representative white-collar employees.
Employed since 1998.
BOARD OF DIRECTORS | VBG GROUP ANNUAL REPORT 2019
MATS R. KARLSSON CECILIA PETTERSSON JOUNI ISOAHO
Board member Board member and Board member and
employee representative employee representative
white-collar employees blue-collar employees
Chairman of Mats R. Employee in the purchasing International Welding
­Karlsson & Partners AB and logistics division of Specialist (IWS) at Truck &
since 2017. Truck & Trailer Equipment. Trailer Equipment. Employed
Employed since 1998. since 1996.
MSc. Eng., Industrial Three-year economics Upper secondary welding
­Economics, Institute of program. education, Artur Lund-
Technology at Linköping qvistskolan.
University.
2018 2011 2016
1958 1968 1959
— —
Ideation AS, Enequi AB
and Askalon AB.
Board member of Fire
­Fighting Systems AS.
President and CEO of Axel — —
Johnson International,
2008–2016. President of
AxFlow, 2004–2008.
­Business Area President of
Munters Humicool Europe,
1998–2004. Business Area
Manager, Primus-Sievert,
1993–1998. Head of Busi-
ness Development at Sanitec
(1990–1993) and Atlas
Copco (1985–1990).
295,000 — —
9 (9) 7 (9) 7 (9)
— — —
Yes — —
Yes — —
AUDITOR
Öhrlings PricewaterhouseCoopers AB
Johan Malmqvist
Auditor in charge
Born 1975
Authorized Public Accountant
Auditor of the company since 2019. 105
VBG GROUP ANNUAL REPORT 2019 | GROUP MANAGEMENT

Group Management

MANAGEMENT ANDERS BIRGERSSON CLAES WEDIN BO HEDBERG

Current position President and CEO, and acting CFO, Director of Investor Relations Senior Vice President of Business
­Division Manager of Mobile and IT Development
Climate Control.

Born 1958 1956 1957

Education MSc. Eng., Mechanical Engineering, MSc. Econ., School of Business, MSc. Eng., Mechanical Engineering,
Chalmers University of Technology. Economics and Law at Gothenburg Luleå University of Technology.
Business Administration, University University.
of Skövde.

Employed 2001 1997 1996

Work experience Has worked in the engineering indus-
try since 1984 in logistics, produc-
tion, product development and senior
management. Production Manager,
President and Business Area Manager
in the ESAB Group 1997–2001.
­Production Manager and Technical
Manager in the SKF Group 1989–
1997. Production and Logistics in the
ABB Group 1979–1988.
Director of Finances at the Älvsborg
County Council 1992–1997. CFO and
Executive Vice President at Mill-
er-Nohab 1986–1992. Controller and
Business Analyst at Volvo Flygmotor
1982–1986. Economist at Union
­Carbide 1979–1982.
Various positions within the VBG
Group, including Director of R&D
and Marketing. Marketing Director
at Mark IV Automotive 1994–1996.
Various positions within Saab
­Automobile 1981–1994, including
Platform Manager in the purchasing
division.

Board assignments Board member of VBG Group since Secretary of VBG Group AB (publ) —
2001. Board member of Elos Med- since 1997.
tech AB, Sparbanken Lidköping AB,
the Herman Krefting Foundation for
Allergy and Asthma Research, the
VBG-SLK Foundation and the SLK
Employees’ Foundation.

Own shareholding and

shareholding of related 1,017 2,000 2,012
parties

Warrants 20,000 10,000 7,500

106
 GROUP MANAGEMENT | VBG GROUP ANNUAL REPORT 2019

CHRISTINA HOLGERSON ANDERS ERKÉN

Senior Vice President of HR and Cor- Executive Vice President, VBG Group
porate Responsibility and Division Manager Truck & Trailer
Equipment, with overall responsibility
for Ringfeder Power Transmission.

1965 1964

Engineering, specializing in mechani- MSc. Eng., Mechanical Engineering,

cal engineering, Nils Ericson Luleå University of Technology.
Upper-Secondary School. Qualified
Human Resources Specialist, FEI.

1986–1996 and from 2000 2007

Various positions within the VBG Branch Manager, Imaje AB 2004–

Group, including Design Engineer, 2007. Production and logistics in
Quality Manager Purchasing and ESAB AB, 1990–2003.
Quality and Environmental Manager.
Many years of experience from the
automotive industry, including in the
Brink Group as Quality and Environ-
mental Manager 1996–2000.

Deputy Chairman of the Scandina- —

vian Automotive Supplier Association
(FKG) since 2019. Board member of
FKG since 2012.

— 1,107

5,000 15,000

107
VBG GROUP ANNUAL REPORT 2019 |   SIGNATURES AND ANNUAL GENERAL MEETING
Vänersborg, March 26, 2020
Johnny Alvarsson
Chairman of the Board
Peter Augustsson Louise Nicolin
Board member Board member
Jouni Isoaho
Employee representative
Auditor’s report on the corporate governance report
To the general meeting of the shareholders in VBG Group AB
(publ), corporate identity number org.nr 556069-0751
Engagement and responsibility
It is the board of directors who is responsible for the corporate
governance report for the year 2019 on pages 96–108 and that it
has been prepared in accordance with the Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance with FAR’s
auditing standard RevU 16 The auditor’s examination of the cor-
porate governance statement. This means that our examination
Göteborg. March 27 2020
Öhrlings PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
WELCOME TO THE 2020 ANNUAL GENERAL MEETING
The Annual General Meeting of VBG Group AB (publ) will be held
at 5:00 p.m. on Tuesday, 28 April 2020 in the company’s offices at
Herman Kreftings Gata 4 in Vänersborg, Sweden.
Notification
Shareholders wishing to attend the meeting must:
• be listed in the share register kept by Euroclear Sweden AB
by not later than 22 April 2020.
• notify the company by not later than 4:00 p.m. on
22 April 2020.
Notification may be given in writing to VBG Group AB (publ),
Kungsgatan 57, SE-461 34 Trollhättan, Sweden; by telephone to
+46 521 27 77 00; or by e-mail to anmalan2020@vbggroup.com.
The notification of attendance must include a name and personal
or corporate identity number.
Shareholders who are represented by a proxy should send a
power of attorney with the notification of attendance. Anyone rep-
resenting a legal entity must present a power of attorney, a copy of
the registration certificate or equivalent documents showing the
person(s) authorized to sign on behalf of the legal entity.
108
Anders Birgersson
President and CEO
Jessica Malmsten Mats R. Karlsson
Board member Board member
Cecilia Pettersson
Employee representative
of the corporate governance report is different and substantially
less in scope than an audit conducted in accordance with Interna-
tional Standards on Auditing and generally accepted auditing
standards in Sweden. We believe that the examination has pro-
vided us with sufficient basis for our opinions.
Opinions
A corporate governance report has been prepared. Disclosures
in accordance with chapter 6 section 6 the second paragraph
points 2–6 the Annual Accounts Act and chapter 7 section 31 the
second paragraph the same law are consistent with the annual
accounts and the consolidated accounts and are in accordance
with the Annual Accounts Act.
Shareholders whose shares are registered to a nominee must
have the shares re-registered in their own name by the nominee
(voting rights registration) in good time before 22 April 2020.
Dividend
The Board of Directors and President propose that an increased
ordinary dividend of SEK 5.00 per share (3.50) and no extra divi-
dend of (1.00) be approved, thereby establishing a total dividend
of SEK 5.00 per share (4.50), with a record date of 30 April 2020.
If the AGM approves this proposal, the dividend is expected to
be distributed by Euroclear Sweden AB starting 6 May 2020.
Report dates
28 April Interim report January–March
23 July Interim report January–June
22 October Interim report January–September
February 2021 Year-end report 2020
The VBG Group welcomes inquiries about the Group and its
­ evelopment. Contact persons are: Anders Birgersson, President
d
and CEO, telephone: +46 521 27 77 67, and Claes Wedin, CFO,
telephone: +46 521 27 77 06. More information is available at
vbggroup.com.

TRUCK & TRAILER EQUIPMENT
Sweden
VBG GROUP TRUCK EQUIPMENT AB
Box 1216
SE-462 28 Vänersborg
Tel +46 521 27 77 00
Germany
VBG GROUP TRUCK EQUIPMENT GMBH
Postfach 13 06 55
DE-47758 Krefeld
Tel +49 2151 835-0
EUROPEAN TRAILER SYSTEMS GMBH
Im Moerser Feld 1f
DE-47441 Moers
Tel +49 2841 6070 700
Denmark
VBG GROUP SALES A/S
Industribuen 20–22
DK-5592 Ejby
Tel +45 64 46 19 19
Norway
VBG GROUP SALES AS
Postboks 94 Leirdal
NO-1009 Oslo
Tel +47 23 14 16 60
UK
VBG GROUP SALES LIMITED
Unit 9, Willow Court
West Quay Road, Winwick Quay
Warrington, Cheshire WA2 8UF
Tel +44 1925 23 41 11
Belgium
VBG GROUP TRUCK EQUIPMENT NV
Industrie Zuid Zone 2.2
Lochtemanweg 50
BE-3580 Beringen
Tel +32 11 60 90 90
Czech Republic
EUROPEAN TRAILER SYSTEMS S.R.O.
Ke Gabrielce 786
CZ-39470 Kamenice nad Lipou
Tel +420 565 422 402
USA
ONSPOT OF NORTH AMERICA, INC.
P.O. Box 1077
North Vernon, IN 47265-5077
Tel +1 800 224 2467
ADDRESSES | VBG GROUP ANNUAL REPORT 2019
VBG GROUP
Sweden
VBG GROUP AB (publ)
Kungsgatan 57
SE-461 34 Trollhättan
Tel +46 521 27 77 00
www.vbggroup.com
MOBILE CLIMATE CONTROL India
MOBILE CLIMATE CONTROL THERMAL
Sweden INDIA PVT. LTD.
MOBILE CLIMATE CONTROL Plot No. 4B
GROUP HOLDING AB Road No.2, Phase-I
Kungsgatan 57 KIADB Industrial Area Narasapura
SE-461 34 Trollhättan Kolar – 56313, Karnataka
Tel +46 521 27 77 00
Brazil
MOBILE CLIMATE CONTROL SVERIGE AB MCC DO BRASIL LTDA
Sikvägen 9 Rua Silverio Finamore, 920-Gp 3
SE-761 21 Norrtälje Louveira- SP, 13.290-000
Tel +46 521 27 77 00 Tel +55 19 3878 2058
Germany
MOBILE CLIMATE CONTROL GMBH RINGFEDER POWER TRANSMISSION
Jägerstraße 33
DE-712 72 Renningen Germany
Tel +49 715 993 087–0 RINGFEDER POWER TRANSMISSION GMBH
Werner-Heisenberg-Straße 18
Canada DE-64823 Groß-Umstadt
MOBILE CLIMATE CONTROL INC. Tel +49 6078 9385-0
7540 Jane St.
Vaughan, Ontario RINGFEDER POWER TRANSMISSION
L4K 0A6 TSCHAN GMBH
Tel +1 905 482 2750 Postfach 2166
DE-66521 Neunkirchen
MOBILE CLIMATE CONTROL INC. Tel +49 6821 866 0
6659 Ordan Drive
Mississauga, Ontario Czech Republic
L5T 1K6 RINGFEDER POWER TRANSMISSION S.R.O.
Tel +1 905 482 2750 Oty Kovala 1172
CZ-33441 Dobrany
USA Tel +420 377 201 511
MOBILE CLIMATE CONTROL CORP.
P.O. Box 803 USA
Goshen, Indiana 46527 RINGFEDER POWER TRANSMISSION
Tel +1 574 534 1516 USA CORPORATION
165 Carver Avenue
MOBILE CLIMATE CONTROL CORP. Westwood, N.J. 07675
3189 Farmtrail Road Tel +1 201 666 3320
York, PA 17406
Tel +1 717 767 6531 India
RINGFEDER POWER TRANSMISSION
MOBILE CLIMATE CONTROL CORP. INDIA PRIVATE LTD.
27 Corporate Circle Suite 1 Plot No. 4, Door No. 220
East Syracuse, NY 13057 Mount Poonamallee High Road
Tel +1 315 434 1851 Kattuppakkam
Poland Chennai-600056
MOBILE CLIMATE CONTROL S.P.Z.OO Tel +91 44 2679 1411
Ul. Szwedzka 1 China
55-200 Oława KUNSHAN RINGFEDER POWER
Tel +48 71 3013 701 TRANSMISSION CO., LTD.
China No. 406, Jiande Road
NINGBO MOBILE CLIMATE CONTROL Zhangpu 215321
MANUFACTURING/TRADING CO., LTD Kunshan, Jiangsu Province
No.88 Jinchuan Rd., Tel +86 512 5745 3960
Zhenhai, Ningbo, 315221 Brazil
Tel +86 574 863 085 77 HENFEL INDÚSTRIA METALÚRGICA LTDA.
South Africa Major Hilario Tavares Pinheiro, 3447
MCC AFRICA PTY (LTD) Cep 14871 - 300
Unit 7B, Rinaldo Industrial Park Jaboticabal, SP
50 Moreland Drive, Red Hill Tel +55 16 3209 3422
4071 Durban
Tel +27 31 569 3971
VBG Group is an active long-term owner of
industrial companies that operate internationally.
The Group’s three wholly owned divisions,
which operate in 18 countries with some 1,600
employees, are managed with considerable

Solberg • Photo: Peter Bartholdsson and others • Printed by: Göteborgstryckeriet

industrial expertise, a strong corporate culture
and financial resilience.