VBG GROUP

ANNUAL REPORT
2017
 VBG GROUP ANNUAL REPORT 2017

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

This is the VBG Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
From the Managing Director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The VBG Group is an international
Niches and products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 industrial group with some 1,500
The VBG Group as an investment. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
employees in 18 countries. The
Cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Parent Company VBG Group AB is
CONTENTS

Financial position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
a long-term owner that provides
CASE Same role – new time zone. . . . . . . . . . . . . . . . . . . . . . . . . 22 active management of the Group’s
Sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Our divisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
four wholly owned divisions
VBG Truck Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 through considerable industrial
CASE Several paths to organic growth. . . . . . . . . . . . . . . . . . . . 34
expertise, a strong corporate
Edscha Trailer Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Mobile Climate Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 culture and financial resilience.
CASE Collaboration for a better climate. . . . . . . . . . . . . . . . . . 44
Ringfeder Power Transmission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
The share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Five-year summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Financial reports, table of contents . . . . . . . . . . . . . . . . . . . . . . . . 53

Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Consolidated Income Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Consolidated Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Consolidated Cash Flow Statement. . . . . . . . . . . . . . . . . . . . . . . . 67
Parent Company Income Statement . . . . . . . . . . . . . . . . . . . . . . . 68
Parent Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Parent Company Changes In Equity . . . . . . . . . . . . . . . . . . . . . . . 70
Parent Company Cash Flow Statement. . . . . . . . . . . . . . . . . . . . 70
Alternative Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . 71
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Audit Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Auditor’s statement on the Sustainability Report. . . . . . . . . . 101
From the Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Corporate Governance Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Addresses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

The cover image shows coupling mouths for VBG couplings on the way out of a powder
box in the coating process at the VBG Truck Equipment production facility in Vänersborg.
 THE YEAR IN FIGURES | VBG GROUP ANNUAL REPORT 2017

DOUBLED SALES AND

FAVOURABLE EARNINGS

SEK  3002
The Group’s annual sales
 M SEK  351 M

Operating profit rose to

SEK  9.62
Earnings per share
passed SEK 3 billion. SEK 351.1 M with a amounted to SEK 9.62.
margin of 11.7 per cent.

• The Group’s net sales increased by
94.4 per cent to SEK 3,002.0 M
(1,543.9).
• Adjusted operating profit
increased to SEK 358.6 M
(196.7).
• Items affecting comparability for
the year amounted to a net ex-
pense of SEK 7.5 M (expense:
12.7) relating to reorganisation
costs in Edscha Trailer Systems.
• Reported operating profit increased
to SEK 351.1 M (184.0).
• Profit after financial items increased
to SEK 315.6 M (168.2).
• The Group’s profit after tax increased
to SEK 220.5 M (120.8).
• Earnings per share for the year
(average number of outstanding
shares) amounted to SEK 9.62
(9.66).
• A fully subscribed preferential
share issue 1:1 was completed in
the first quarter, doubling the
number of outstanding shares
and contributing SEK 778.6 M
net in equity to the company.
• The Board of Directors proposes a
dividend of SEK 81.3 M (43.8),
which after the implemented
new share issue in 2017 is equiv-
alent to SEK 3.25 per out-
standing share (1.75).

KEY FIGURES
2017 2016 2015 2014 2013

Net sales, SEK M 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4

Operating profit before depreciation/amortisation (EBITDA), SEK M 428.3 231.6 178.0 171.6 195.1
Operating profit before amortisation (EBITA), SEK M 382.8 196.2 145.9 130.4 170.9
Operating profit (EBIT), SEK M 351.1 184.0 134.7 120.9 162.8
Profit after financial items 315.6 168.2 134.5 112.7 151.7
Profit after tax, SEK M 220.5 120.8 95.5 78.9 112.5
Earnings per share, SEK (average no. outstanding shares) 9.62 9.66 7.64 6.31 9.00
Cash flow from operating activities, SEK M 243.7 251.0 118.0 137.2 160.3
Return on equity (ROE), % 12.3 12.7 11.3 10.1 16.5
Equity/assets ratio, % 54.7 28.7 69.2 67.6 68.8
Average number of employees 1,446 764 636 559 518
Average number of outstanding shares during the year 22,920 12,502 12,502 12,502 12,502
Number of outstanding shares 25,004 12,502 12,502 12,502 12,502

1
 VBG GROUP ANNUAL REPORT 2017 | THIS IS THE VBG GROUP
VBG GROUP IN BRIEF
The VBG Group is an international industrial Group comprising the Parent
Company VBG Group AB and four divisions: VBG Truck Equipment, Edscha
Trailer Systems, Mobile Climate Control and Ringfeder Power Transmission.
THIS IS THE VBG GROUP
The Group has total sales of SEK 3 billion and 1,500 employees in 18 countries.
VBG Group AB has been listed on Nasdaq Stockholm since 1987.
Stable, long-term principal owners
The VBG Group’s principal owners comprise three foundations
set up by the Group’s founder, Herman Krefting. The largest –
both in terms of shareholding and votes – is the Herman Krefting
Foundation for Allergy and Asthma Research. The other two,
the SLK Employees’ Foundation and the Foundation VBG-SLK,
have a smaller shareholding but significant voting rights as all
Series A shares are owned by the foundations.
Together with a number of institutional owners, the Group’s
three foundations create a good ownership structure that pro-
vides reliability and stability. The stable ownership structure
makes it possible to govern the Group and its divisions based on
a long-term perspective. This structure has historically also pro-
vided a high degree of financial stability, which in turn has
resulted in solid total returns for shareholders.
Strategic governance and development
The Parent Company’s employees work with overall Group-level
issues such as strategic development, financing, acquisition and
policy matters. They also work closely with the Group’s opera-
tional activities relating to the strategic governance of its divisions,
which encompass everything from business development and
quality control to strategic work within IT and HR, as well as
financial control. The Parent Company approves and monitors the
goals and strategies that the divisions set and base their work on.
Focus on attractive niches
For many years, the Group’s strategy has been to identify inter-
nationally emerging niches in which the divisions can distinguish
themselves by means of sought-after brands and products. Every
division is to be, or to have the potential to establish themselves
in the long term as, the number one or number two player in
their respective niches, with good long-term growth and profit-
ability as a result.
Long-term financial strength
The VBG Group’s development has been very stable since its initial
listing on the stock exchange in 1987. In the period before the
2 of each business activity.
acquisition of Mobile Climate Control in November 2016, the
Group thus had an extremely strong financial position, which was a
precondition for making the acquisition. A bridge loan of SEK 800
M was taken out pending the new share issue in the corresponding
amount that was to take place in February 2017. The bridge financ-
ing impacted the Group’s equity/assets ratio, but after the new
share issue took place the equity/assets ratio strengthened; by the
end of 2017 it stood at 54.7 per cent. The Group’s financial posi-
tion remains strong, which creates conditions for acquisitions and
investments, even during periods of economic downturn.
High level of industrial expertise
In accordance with the owner foundations’ regulations, the VBG
Group’s Managing Director 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
means there are strong connections between the Management,
Board of Directors and principal owners in VBG Group, and in par-
ticular considerable industrial expertise among the principal own-
ers. The Parent Company works systematically to map out areas of
development and to identify good examples that can be broadly
utilised within the Group. One example is in the field of digitalisa-
tion, where VBG Truck Equipment successfully began marketing
the Onspot brand through digital channels. The new work method
has begun to be transferred to other brands in the Group. Another
example is Mobile Climate Control’s experience in mechatronics,
electrification and connected products, where transfer of knowl-
edge to other divisions could be of great significance.
A culture that paves the way for success
The VBG Group is characterised by a down-to-earth corporate
culture that can be summarised in the company’s shared values
– Keystones. The Keystones cover Overall View, Business Orienta-
tion, Professionalism and Teamwork. The culture is also reflected
in the Group’s Code of Conduct. Together, the Keystones and
Code of Conduct form a compass for strategic decisions and
day-to-day work at both the Group level and in the divisions.
At the same time, it is vital to maintain, nurture and strengthen
the attributes that support the unique competitive advantages

OUR VISION
We are number one or two
globally in the industrial
niches where we are active.
We make a difference by
creating the products and
services of the future.
1 ,500 EMPLOYEES IN
18
Own companies
Importers/Agents
VBG Truck Equipment
Edscha Trailer Systems
Mobile Climate Control
Ringfeder Power Transmission
THIS IS THE VBG GROUP | VBG GROUP ANNUAL REPORT 2017
KEYSTONES OUR DIVISIONS
– OUR VALUES • VBG Truck Equipment
• Overall view • Edscha Trailer Systems
• Business orientation • Mobile Climate Control
• Professionalism • Ringfeder Power Transmission
• Teamwork Read more on page 28.
COUNTRIES
The Group’s founder,
Herman Krefting, was an
active member of society
and highly interested in
traffic safety issues. It
was an interest that in
1951 prompted him to found the
company that developed into the
VBG Group. Today, this interest in
traffic safety issues is a natural part of
the Group’s identity and a driving
force in the development of new
products.
3
 VBG GROUP ANNUAL REPORT 2017 | FROM THE MANAGING DIRECTOR
ANOTHER STRONG YEAR BEHIND US
AND NEW MANAGEMENT IN PLACE
We have taken the
FROM THE MANAGING DIRECTOR
step into important
growth markets
outside Europe and
North America
I am pleased to be able to say that we have succeeded in follow-
ing, to the letter, the finance plan we drew up last year ahead of
the acquisition of Mobile Climate Control. After this transforma-
tive acquisition, our focus in 2017 was on re-creating a healthy
financial structure in the Group, ensuring at the same time that
the divisions were delivering in line with our business plans. Evi-
dence that we have succeeded is that we strengthened our posi-
tions in several geographical markets and in several customer
segments during the year, and that we have taken the step into
important growth markets outside Europe and North America.
In 2017 we experienced a strong market, which contributed
to the favourable performance, but we also noticed the typical
consequences in the form of a great deal of pressure on the
Group’s production facilities, higher prices for raw materials and
longer delivery times among our suppliers.
Development of the divisions
VBG Truck Equipment continued to perform very strongly during
the year, which led to the division posting its highest sales levels
and operating profit ever. I am not surprised, as VBG Truck
Equipment has a stable industrial structure at heart and an abil-
ity to meet new challenges and customer needs through continuous
improvements. As a result of VBG Truck Equipment finding itself
in a very strong market situation, the division chose to establish
itself in Brazil and China during the year as well as to invest
heavily in product development and digitalisation. These initia-
tives are in line with both ambitions for growth and with my
understanding of when we are in a position for major invest-
ments – in a strong market, building for the future is important.
4
Mobile Climate Control has also used the favourable market
situation for future initiatives, for example by establishing opera-
tions in India and Brazil, as well as further developing products
for electric-powered vehicles. As a consequence of these invest-
ments, the rate of profit for the division fell somewhat while sales
and growth increased. Mobile Climate Control therefore had an
operating margin for 2017 that was lower than the goal for the
Group, but this is something I expect will turn around in 2018.
Even if the market is also strong for Edscha Trailer Systems,
we see great volatility there. The division is dependent on a
few suppliers and customers, and has thus very obviously been
affected by the negative effects of the boom. Shortage of
capacity and problems with quality in two of the most crucial
suppliers affected profitability somewhat during the autumn.
All in all, however, I can state that for the full year, Edscha Trailer
Systems’ profitability ended up at an acceptable level.
During the year, Ringfeder Power Transmission reaped the
positive effects of the action programme begun in 2016 for the
purpose of increasing profitability in the division. Earnings and
sales continued to grow in 2017, and both the German and US
markets developed very well during the year. Even though the
division displayed a healthy earnings trend, the restructuring
efforts are continuing according to plan, and I expect to see the
most significant effects from the action programme during 2018.
A forerunner in sustainability
Another thing that marked 2017 was our increased focus on sus-
tainability issues. During the year, we formulated long-term sus-
tainability goals for the Group for the first time, based on the
stakeholder and materiality analysis we also conducted during the
year. The fact is, however, that ideas around sustainability have
existed ever since the Group’s founder, Herman Krefting, began
operations in 1951. Mr Krefting endeavoured to construct robust
drawbar couplings to increase safety on the roads, and traffic
safety – with a focus on people’s well-being – has been a guiding
light for the Group since then. Our efforts have developed over
the years, and today VBG Truck Equipment is driving the trend
towards sustainable transportation solutions in the form of longer,
heavier vehicles – and is taking part in projects aimed at reducing
carbon emissions, among other results. I would also like to call
attention to the work of Mobile Climate Control on adapting its
HVAC systems to electric-powered vehicles. In this ongoing shift
in technology, Mobile Climate Control is contributing effective
solutions and pursuing this trend with its customers. Another
important aspect for us as regards social sustainability is that the
Group has grown drastically over the last few years. Today, we
have employees in countries where the same requirements are not
 FROM THE MANAGING DIRECTOR | VBG GROUP ANNUAL REPORT 2017

placed on healthy working conditions as in our home markets. I

consider it extremely important for us to be concerned about all
our employees in the Group, not taking it for granted that all our
workplaces around the world are the same. Herman Krefting was
a forerunner here as well, since in the statutes for the three foun-
dations he formed at the end of his career he describes how the
foundations would work to promote employment security and
social welfare for all employees in the Group.

New Group Management with focus on increased cooperation

Another important event is that, at the end of 2017, we carried
out a reorganisation with the goal of creating a business struc-
ture that encourages both inter-organisational collaboration and
utilisation of competence in the Group. In conjunction with this,
we established a new overarching Group Management in which
the heads of the two largest divisions, VBG Truck Equipment and
Mobile Climate Control, were given a more central role in the
work on running and developing the Group. Additionally, Divi-
sion Manager of VBG Truck Equipment Anders Erkén was given
overall responsibility for the Group’s other two divisions. Anders
Erkén has very good experience in structuring international pro-
duction and logistics operations, which is exactly the type of
challenge faced by Ringfeder Power Transmission. For Edscha
Trailer Systems, he will be able to contribute his knowledge and
experience in purchasing. The Division Managers for Ringfeder
Power Transmission and Edscha Trailer Systems, however, will
continue to manage their operations and have retained responsi-
bility for business plans and earnings.

Sights set on more acquisitions

In summary, market trends over the year have been favourable
and VBG Group is growing. This has laid a good foundation for
continued global growth in 2018 as well. With another strong
year behind us and the new organisation in place, I am convinced
that we have favourable conditions for being able to optimally
develop the Group in order to meet our future financial growth
and profitability targets. Going forward, our focus will be on
increased digitalisation, where above all we see that connected
products will represent an increasing portion of our business. In
2017, organic growth dominated over structural growth. We are
now looking forward, and in line with our growth strategy we are
putting our ambitions for additional acquisitions into a higher
gear for 2018–2019. Add-on acquisitions linked to VBG Truck
Equipment and Mobile Climate Control are the most obvious.

Anders Birgersson
Managing Director and CEO, VBG Group

5
 VBG GROUP ANNUAL REPORT 2017 | STRATEGY

SUPPORT FOR VALUE CREATION

The Parent Company is responsible for the strategic governance of the Group
as a whole. This entails the approval and follow-up of divisional targets and
strategies, providing support in the form of industrial expertise and identifying
and conducting acquisitions.
STRATEGY

BUSINESS MODEL

The VBG Group acquires, owns and develops industrial companies in business-to-busi-
ness commerce with strong brands and good growth potential. They operate in well-se-
lected product and market niches. What distinguishes VBG Group from its competitors
is that we are particularly strong in development, sales, and after-market services.

DEVELOPMENT MANUFACTURING AND AFTER-MARKET

Our product development work is
characterised by close collaboration
with customers in order to offer
leading-edge, customised
technological solutions.
ASSEMBLING
The production equipment in the
Group’s plants is modern and, relatively
speaking, highly automated. Production
is largely LEAN-based, and the ambition
is for all production to be so.
Product development and sales are
characterised by close relationships
with customers; with products that
need replacement or servicing, the
Group generally has a naturally
strong and well-developed after-
market business.

PURCHASING
In purchasing, focus lies on total
cost rather than lowest price.
Another distinguishing quality is our
long-standing and fruitful
relationships with suppliers, which
has resulted in their building up
knowledge of needs and thus also
being able to play a part in
development.
SALES
Central sales strategies aim to create
demand through close relationships
with end users and to offer complete
solutions instead of individual
products.

6
 STRATEGY | VBG GROUP ANNUAL REPORT 2017

GROUP-WIDE STRATEGIES

Our ambition is for every division to be – or to have the potential to establish themselves in the long
term as – the number one or number two player in their respective niches. As support for these
efforts, there are four Group-wide strategies with a clear focus on long-term growth and profitability.

STRATEGY EFFECT ON EFFECT ON EXAMPLES OF ACTIVITIES EXAMPLES OF FOCUS

GROWTH ­PROFITABILITY IN 2017 FOR 2018

Strong brands Easier to realise Enhanced bargaining Marketed the Onspot brand digitally, Digitalisation of mar-
and leading transactions. position in the value and introduced digital marketing of keting of VBG brand.
market posi- chain. the VBG brand.
tions in Additional sales
selected niches through already- Captured market shares in the North
strong brands. American segment for buses in
Mobile Climate Control.
Easier to acquire.

High customer Higher sales value. Good resistance to New Group Management to facili- Develop systems offer-
value in the price pressure. tate collaboration among the divi- ings of sliding roofs for
products sions around crucial development tipper vehicles in
Generates opportuni- issues such as mechatronics and Edscha Trailer Systems.
ties for long-term sta- electrification.
ble sales.
Developed systems offerings in
Ringfeder Power Transmission in
both Brazil and Germany.

Launched a new sliding roof for

­tipper vehicles in Edscha Trailer
­Systems.

Diversified Not dependent on Strong bargaining Established operations in new geo- Identify acquisition
customer base a small number of position. graphical markets in both Mobile candidates that com-
income sources. Climate Control (India and Brazil) plement the product
and VBG Truck Equipment (China range of existing
and Brazil). ­operations.

International New markets and Increased volumes Established VBG Truck Equipment Establish the divisions
expansion additional income that provide econo- in the Chinese market by launching in new markets using
sources through mies of scale. Ringfeder couplings there. each others’ existing
new customers. positions.

7
 VBG GROUP ANNUAL REPORT 2017 | STRATEGY

FINANCIAL GOALS

Through growth we achieve a position of strength in relation to other players in the value chain:
suppliers, distributors and competitors. Growth that is sustainable and profitable also creates the
necessary conditions for long-term financial strength and healthy returns for shareholders.
STRATEGY

GROWTH TARGET SUSTAINABLE GROWTH

10%
MSEK %
3,000 30
>
Average annual sales growth over a five-year
period, of which 5 per cent attributable to 2,000 20

actual organic growth and 5 per cent to

structural growth.
1,000 10
OUTCOME

22.1% 0

2013 2014 2015 2016 2017

0

–5
In 2017, sales increased 94.4 per cent, of which 84.8 per
cent was structural growth and 9.6 organic growth. Total Acquired sales Growth over a five-year period, CAGR
average growth over five years was 22.1 per cent, of Organic sales Target over a five-year period
which 4.7 per cent was organic growth and 19.8 per cent
structural growth.

PROFITABILITY TARGET SUSTAINABLE PROFITABILITY

12%
%

>
15

Average operating margin (EBIT), rolling five

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

OUTCOME 5

11.6%
In 2017, the EBIT margin totalled 11.7 per cent. The
0
2013 2014 2015 2016 2017

Annual EBIT margin Target, rolling five-year

­margin was 11.6 per cent over a rolling five-year period. EBIT margin, rolling five-year

8
 STRATEGY | VBG GROUP ANNUAL REPORT 2017

ACQUISITION STRATEGY

For many years, our strategy has been to identify internationally emerging niches in which our divisions can distinguish themselves by
means of sought-after brands and products. Our ambition is for every division to be, or to have the potential to establish themselves in the
long term as, the number one or number two player in their respective niches, with good long-term growth and profitability as a result.

We work systematically to identify attractive and Must fit in to the culture

well-managed companies with strong brands that
may be relevant for acquisition. These are divided
into two categories:
Over the past decade, the VBG Group has acquired
five companies. The acquisition frequency has
increased over the last few years, with acquisitions in
2012, 2014, 2015 and 2016. We have also refrained
from the opportunity to make an acquisition on a

1
Companies that complement our existing
number of occasions. Our aim is not to grow for the
operations in terms of product range,
sake of growth – it is important that we acquire the
production, logistics and geographical
right company. A critical part of our analysis of
coverage. Typical complementary acqui-
acquisition candidates is assessing whether the com-
sitions for us are operations with annual
pany fits in with the VBG Group’s business model
sales of SEK 50–300 M.
and culture. We are a committed and long-term
industrial owner – our companies should be prosper-
ous and develop in a healthy manner.

2
Companies in new fields of operation that
Currently, we are focusing on complementary
can form a separate division. In this respect,
acquisitions in the range of SEK 250–500 M.
we seek companies with annual sales of
approximately SEK 500 M and upwards. The

500 M
companies must have strong brands, prefer-
ably proprietary products and their own dis-

SEK 
tribution operations. They should not be
dependent on a small number of major cus-
tomers or suppliers.

9
 VBG GROUP ANNUAL REPORT 2017 | NICHES AND PRODUCTS

CRITICAL SOLUTIONS
FOR SOCIETY
The VBG Group’s divisions strive to be the number one or number two player within attractive
market niches, by generating high customer value and substantial competitive advantages. The
path there runs through efficient product development, manufacturing, marketing and distribution.
NICHES AND PRODUCTS

Some examples are presented here of niches where we lead the market with products that create
value for customers, users and society in general.

DRAWBAR COUPLINGS AUTOMATIC TYRE CHAINS SLIDING ROOFS

Through their robust design, our automatic
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 1,000 million per
year. VBG Truck Equipment is the world leader,
with a market share of about 55 per cent.
Our automatic tyre chains for commercial traf-
fic increase road safety and help the drivers of
trucks, fire trucks, school buses and ambu-
lances to arrive in time, even in difficult winter
weather conditions.
Market position
The market for automatic tyre chains is valued
at approximately SEK 200 M per year. VBG
Truck Equipment is the world leader, with a
market share of approximately 65 per cent.
Our sliding roof for tarpaulin-covered trailers
and tipper vehicles, and our sliding bow roof
for railway wagons, contribute to faster loading
and unloading, which enhances the efficiency
of transport activities. The roofs also contribute
to a safer work environment 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. Edscha
Trailer Systems produces more than 40,000
roofs for these trailers and thus has more than
40 per cent of the market.

55% 1st* 65%

1st* 40%
1st*
10

FRICTION SPRINGS
Our friction springs are used in many different
fields. In aircraft, they are used as damping
components in the mechanism that adjusts the
position of the wing flaps, and also in aircraft
doors. In buildings, they are used to reduce
vibrations, for example from earthquakes. This
protects the building and potentially saves
human lives.
Market position
The industrial market for friction springs is val-
ued at approximately SEK 100 M per year.
Ringfeder Power Transmission holds approxi-
mately 45 per cent of the market.
45%
1st*
NICHES AND PRODUCTS | VBG GROUP ANNUAL REPORT 2017
CLIMATE CONTROL SYSTEMS
(HVAC SYSTEMS)
Our climate control systems ensure an optimal climate for
buses, off-road, utility vehicles and defence vehicles, in
markets with differing needs. The climate control systems
create a good work environment for drivers and a pleasant
environment for passengers, but also contribute to reducing
the negative impact on the environment by using innovative
technology to reduce the vehicle’s fuel consumption.
Market position
The North American market for climate control systems for
buses, which accounts for about 56 per cent of the division’s
total sales, is valued at approximately SEK 2,000 M per year.
Mobile Climate Control is the market leader, with a market
share of approximately 40 per cent.
40%
1st* * The figures provided, linked to the size of
the markets and the market shares of the
VBG Group’s divisions, are based on a
combination of public statistics and the
Groups’ own estimates.
11
 VBG GROUP ANNUAL REPORT 2017 | THE VBG GROUP AS AN INVESTMENT

POSITIVE PERFORMANCE AND

STABLE YIELD

1 S table yield In accordance with established dividend

policy, VBG Group will in normal circumstances distrib-
3  Secure, stable ownership situation Together with sev-
eral major institutional owners, the three foundations
VBG GROUP AS AN INVESTMENT

ute 30 per cent of the Group’s net earnings. Over the
last ten years, we have distributed on average 36.8 per
cent of net earnings, and the yield has amounted on
average to 2.15 per cent per year. The total yield for
2017 was 22.3 per cent, and the aggregate total yield
for the last ten years totalled 83.0 per cent.
established by Group founder Herman Krefting that are
now the principal owners of VBG Group create an excel-
lent ownership structure for the Group. It provides long-
term security and stability, and promotes long-term
commitment and continuity in implementing strategies.

2 S trong brands in several different niches Over many

years, VBG Group has built up and acquired many
4  L ong-term financial strength The VBG Group’s
strong brands, which to a great degree enabled the
divisions’ positions as world leaders in their respective
industrial niches. Our operations aim to have a
diversified customer base, which promotes better risk
spread, a stronger negotiating position, and a healthy
earnings capacity.
ownership model has provided a high degree of financial
stability over the years with a high equity/assets ratio
and healthy finances. A balance between providing the
owners with a stable yield and allowing the earnings to
remain in the Group and work, in combination with
strong operations, has created a stable financial
foundation for continued development of operations
as well as expansion through acquisitions.

TOTAL RETURN
% SEK

90 150

60 100

30 50

0 0

–30

–60
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total yield, % Adjusted share price, SEK

Read more about the shares’ performance on pages 50–51.

12
 THE VBG GROUP AS AN INVESTMENT | VBG GROUP ANNUAL REPORT 2017

CFO CLAES WEDIN ANSWERS QUESTIONS

FROM INVESTORS

HOW WOULD YOU SUMMARISE 2017 ON

THE STOCK EXCHANGE FOR VBG GROUP?
The year started very positively with the 1:1 preferential rights
issue being oversubscribed, which meant that as of March the
company had doubled the number of outstanding shares (Series
A and Series B) from 12,502,024 shares to 25,004,048 shares.
With the addition of the 1,191,976 shares that VBG Group AB
has owned since 2002 (the repurchase programme), the total
number of shares after issue was 26,196,024. The company’s net
equity increased by SEK 778.6 M less issue expenses, and we
could thus pay back the bridge loan of SEK 800 M raised in con-
junction with the acquisition of Mobile Climate Control. The final
share price for 2016 was SEK 160.50, but the adjusted price in
consideration of the new share issue was SEK 111.19; with a final
share price for 2017 of SEK 132.00, the price rose 18.7 per cent
over the year. We clearly feel that interest in VBG Group from the
stock market has increased, which we naturally welcome.

YOU HAVE INTRODUCED EBITA AND THE PROPOSED DIVIDEND IS NEARLY

EBITDA AS LEVELS OF OPERATING EARN-
INGS. WHAT WAS THE REASON FOR THIS?
As previously, the profitability target for the Group as a whole
has been set based on the average operating margin (EBIT), roll-
ing five years, and must exceed 12 per cent. Since 2017, as a
result of the acquisition of Mobile Climate Control, however, we
monitor the divisions for EBITA and EBITA margin, which pro-
vides a better comparison between the divisions since we thus
eliminate the effect of amortisation on acquired intangible sur-
plus values. EBITDA (earnings before total depreciations, amorti-
sations and impairments) is a measurement we have been
reporting for the Group for a while. It is sometime used in the
covenants we have in relation to our lenders. We also use
EBITDA when we calculate the divisions’ return on operating
capital (ROOC). mits its proposal for dividends to the Annual General Meeting.
TWICE AS HIGH THIS YEAR. CAN YOU
­COMMENT ON THAT?
Our dividend policy is that in normal circumstances we will dis-
tribute 30 per cent of the Group’s net earnings. Bearing the
acquisition of Mobile Climate Control in mind, it is therefore
quite natural for the proposed dividend this year to be signifi-
cantly higher than the preceding year. Last year, we distributed
SEK 43.8 M, which after the share issue was SEK 1.75 per share
and 36.3 per cent of the Group’s net earnings. The Board of
Directors is now proposing that the dividend for the year be set
at SEK 3.25 per share, which is SEK 81.3 M and 36.9 per cent of
net earnings. We have stable finances and a strong cash flow,
and we expect the 2018 financial year to remain strong. These
are important factors that come into play when the Board sub-

13
 VBG GROUP ANNUAL REPORT 2017 | FINANCIAL PERFORMANCE

FOCUS ON GROWTH WITH

HEALTHY PROFITABILITY
YIELDS GOOD EARNINGS
The VBG Group has a distinct focus on enhancing efficiency at the
divisional level to reduce tied-up capital and increase profitability.
FINANCIAL PERFORMANCE

This is achieved through rationalisation throughout the chain – from

product development, purchasing and production to marketing and
sales, as well as distribution and after-market services. Here, you Net sales
can see the financial results of activities carried out in 2017. Organic growth of 9.6 per cent
and structural growth of 84.8 per
cent (the annual effect of the
acquisition of Mobile Climate Con-
MSEK
trol) amounted to total growth of
94.4 per cent.
3,200
3,002.0

2,800 Gross margin Selling, administration

The gross margin decreased to 35.6 per cent
(40.6) due to the fact that Mobile Climate
Control has a different cost structure than the
rest of the Group, with a higher share of pro-
2,400
duction costs and thus a gross margin of just
under 30 per cent.
2,000
and R&D expenses
The total costs for selling, adminis-
tration and R&D increased by SEK
251.4 M (58.1%), but in relation to
Group sales the cost constituted
22.8 per cent (28.0), which is just
over five percentage points lower
than in the previous year. It thus
compensates for the decrease in
gross margin that arose as a result
of Mobile Climate Control having a
different cost structure than the
other divisions in the Group.

1,600

Cost of reorganisation
1,200 1,067.9
A reorganisation expense of SEK
35.6%
7.5 M arose in the Edscha Trailer
–1,934.2 Systems division in conjunction
with changes to the management
structure, including the appoint-
800 ment of a new Division Manager.
–332.1

358.6 351.1
400 –245.9 11.9% 11.7%
–106.4 –24.9 –7.5
–35.5

0
Net sales Cost of Gross Selling Administration Research Other Adjusted Cost of EBIT Net
goods profit expenses expenses and operating operating reorganisation financial
sold development income/ profit items
expenses

14
 FINANCIAL PERFORMANCE | VBG GROUP 2017 ANNUAL REPORT

Net financial items Other comprehensive income

The credit agreements signed in conjunction
with the acquisition of Mobile Climate Control
means that the net interest expense for the year
was SEK 40.1 M (expense: 10.8), but a positive
currency effect on loans in foreign currency of
SEK 4.7 M resulted in a net financial expense of
SEK 35.1 M (expense: 15.8). foreign subsidiaries, SEK 28.8 M.
recognised directly in equity
Items recognised directly in equity without going via
profit or loss were as of 31 December 2017:
• effect of translation of defined-benefit pension
plans, SEK –5.8 M.
• translation difference of the Group’s net assets in
• translation differences pertaining to hedge
accounting for net investments in foreign opera-
tions, SEK 1.2 M.

SEK 220.5M Dividends paid 2017

Dividends amounting to SEK 43.8 M were paid during
the year, corresponding to SEK 1.75 per outstanding
share. To the 2018 Annual General Meeting, the Board
Net profit for the year of Directors proposes a dividend of SEK 3.25, amount-
Net profit for the year of SEK 220.5 M, placed in ing to a payment of SEK 81.3 M that corresponds to
relation to the average number of outstanding 36.9 per cent of the Group’s net profit for 2017. This is
shares (21.9 million shares), amounted to earn- more than the 30 per cent that the Group’s dividend
ings per share of SEK 9.62. policy indicates as a normal dividend.

Tax
The tax expense for the year was New share issue
equivalent to a tax rate of 30.1 per
cent (28.2), in which a part of the The Group (Parent Company VBG
increase was due to deferred tax Group AB) received a contribution of
assets in the US being impaired by SEK 778.6 M net, after deduction
SEK 3.8 M as a consequence of the for issue expenses, to equity through
decrease in corporate taxation a preferential share issue during the
there. first quarter.

778.6 979.5

315.6 220.5
10.5% (Profit per
share 9.62) 24.2
200.9
–91.3 –3.8 –43.8

Profit Tax Tax effect owing Net profit Other Dividend Change in New share Change in
before tax to new tax for the comprehensive paid equity issue, equity for
regulations in year income 2017 before new February the year
the US recognised share issue 2017
directly in equity
15
 VBG GROUP ANNUAL REPORT 2017 | CASH FLOW

HIGH PROFITABILITY THE BASIS

FOR STRONG CASH FLOW

The foundation of a strong cash flow is healthy,

profitable growth in divisional operations. The EBIT, EBITA and EBITDA
trend in working capital, the levels of investment Based on the Group’s EBIT (operating
profit) of SEK 351.1 M, the cost of
and financing of the Group are other important amortising intangible assets (primarily
brands and customer relations) is elimi-
components in the cash flow described here. nated, which yields an EBITA of SEK
382.8 M (12.8 per cent). If depreciation
CASH FLOW

of tangible assets is also removed, the

Group’s EBITDA is SEK 428.3 M (14.3
per cent), which is a rough measure-
ment of operating cash flow sometimes
used in evaluating a company via multi-
MSEK ple calculation.

500

450 428.3
45.5 14.3%

400
382.8 –15.7
31.7 12.8%
351.1
11.7% –40.1
350

300
274.3

–98.3
250 –11.8

200

150

100

50

0
EBIT Amortisation EBITA Depreciation EBITDA Other items Net Taxes Cash flow Increase in
intangible tangible not interest paid before change inventories
assets assets affecting paid in working
liquidity capital

16
 CASH FLOW | VBG GROUP ANNUAL REPORT 2017

Change in working capital Cash flow from operating activities

Strong growth during the year meant that working capital also increased, Cash flow from operating activities was SEK 243.7
inventories rose by SEK 11.8 M and – above all – trade receivables increased M, which was SEK 7.3 M less than the previous year
by SEK 71.5 M. Liabilities also increased, both as regards trade payables (by owing to the major difference between the years as
SEK 19.9 M) and other operating liabilities (by SEK 33.0 M). All together, this regards the trend in working capital.
meant that working capital in total increased by SEK 30.5 M. Last year, work-
ing capital decreased by SEK 30.0 M, which meant a difference affecting cash
flow of SEK 60.5 M between the years.

SEK
Cash flow before change
in working capital
Apart from depreciation and amor-
tisation, there were other items in
operating profit (EBIT) that did not
affect liquidity and reduced the
cash flow by SEK 15.6 M. Addition-
ally, the cash flow was charged with
SEK 40.1 M in net interest paid and
SEK 98.3 M in taxes paid, which
means that the Group reported Cash
flow before changes in working
capital of SEK 274.3 M.
44.4M
Cash flow for the year
After paid capital expenditures of SEK
60.3 M and a net outflow from financ-
ing operations of SEK 139.0 M, cash
flow for the year was SEK 44.4 M. With
the addition of translation differences of
SEK 0.6 M, cash and cash equivalents at
year-end was SEK 321.4 M.
321.4

276.4

33.0 243.7

19.9

–71.5 –60.3

–21.4

–73.9

44.4
–43.8

Increase Increase Increase Cash flow Net New share Net Dividends Cash flow for Cash and Cash and cash
in trade in trade other from investments emission amortisations paid 2017 the year cash equivalents at
receivables payables operating operating SEK 778.6 M of loans equivalents end of year
liabilities activities and repayment at start
of bridge loan of year
SEK –800.0 M 17
 VBG GROUP ANNUAL REPORT 2017 | FINANCIAL POSITION

STABLE FINANCIAL BASIS

AND FAVOURABLE LIQUIDITY

The VBG Group has built up a very strong financial position over many years with
good access to cash and cash equivalents, which enabled the acquisition of Mobile
Climate Control in November 2016. The acquisition had a significant impact on VBG
FINANCIAL POSITION

Group’s borrowing and financial position, mainly as the Group still had SEK 800 M
in bridge financing remaining at the beginning of 2017. This loan was repaid in full
at the end of February 2017, after the completion of the new share issue. Below is a
schematic illustration of how assets and liabilities developed during 2017.

 A C
Trade receivables Cash and cash
The drastic growth in sales during the year also equivalents
resulted in trade receivables increasing by SEK Cash and cash equivalents
73.0 M, which compared with the end of the increased by SEK 44.4 M
previous year was an increase of 21.1 per cent. to SEK 321.4 M.

2, 004.9
B
Loan liabilities
The Group’s loan liability decreased by SEK
915.0 M during 2017. The largest part by far,
SEK M
SEK 800.0 M, was repayment of the bridge loan Equity at the end of the year.
raised in conjunction with the acquisition of
Mobile Climate Control. The bridge loan could
be repaid thanks to the SEK 778.6 M the com-
pany received from the new share issue. During
the year, approximately SEK 80.0 M was also
repaid on term loans, and the remainder is
attributable to currency fluctuations in USD.

18
 FINANCIAL POSITION | VBG GROUP ANNUAL REPORT 2017

Equity 2017
With comprehensive income for the Group of SEK 244.7 M and
after a contribution from the new share issue of SEK 778.6 M
as well as payment of dividends to shareholders of SEK 43.8
M, equity increased to SEK 2,004.9 M. The equity/assets
ratio increased to 54.7 per cent.

MSEK

ASSETS 2016 ASSETS 2017 EQUITY LIABILITIES 2017 LIABILITIES 2016

3 576.9 3 663.6 2 004.9 1 658.7 2 551.6

+ –
+ Other liabilities 65.1 –
Cash and cash Accrued expenses Other liabilities 71.0
Cash and cash equivalents 145.8
equivalents
C 321.4 C Trade payables
Accrued expenses
123.9
276.4
176.2 Trade payables
Other receivables 86.5 154.0
Other receivables 101.2

Trade receivables
Trade receivables
345.2
418.2 B B
A A
Loans
878.0

Inventories Inventories
479.7 496.0

Tax assets1 67.9 Tax assets1 48.1

54.7% Tax liabilities1
207.9
Loans
1 793.0

= Pension provisions
185.7

Increase of
SEK 979.6 M of which
new share issue
SEK 778.6 M
Goodwill Goodwill
1 122.3 1 118.9

Tax liabilities1
234.0

Pension provisions
175.7

Brands, etc. Brands, etc.

858.0 827.9 Proposed dividend
The proposed dividend for 2018 of
Equity 2016 SEK 3.25 per share amounts to a
1 025.3
total payment of SEK 81.3 M, which
is an increase of 86 per cent against
SEK 43.8 M from the preceding year.
Plant and equipment Plant and equipment
155.1 167.2

Buildings and land Buildings and land 81.3

171.1 179.3 MSEK

1
Deferred

19
 VBG GROUP ANNUAL REPORT 2017 | EMPLOYEES

THE WHOLE WORLD

AS A WORKPLACE

FOCUS FOR 2018 Gender distribution, % Age distribution, %

Women < 30 yrs

• Formulate Group-wide policies and procedures as a stage 9 16
21 Men 30–40 yrs
in the work on establishing a shared corporate structure.
24 40–50 yrs
• Maintain a high level of expertise, for example, through 23
50–60 yrs
education initiatives in the VBG Group Talent Programme.
> 60 yrs
EMPLOYEES

• Continue to work on profiling VBG Group as an attractive 79 28

employer.

Length of employment, % Geographic distribution, %

11
< 5 yrs 41 Europe
Sickness absence and employee turnover 7
10 5–10 yrs North America
10–15 yrs South America
2017 2016 2015 48
45
15 15–20 yrs 40 Asia
Sickness absence, % 3.4 3.9 4.8
> 20 yrs Africa
Employee turnover, % 10.6 10.9 10.4 19

After the acquisition of Mobile Climate Control,
focus in 2017 was on bringing together two
strong corporate cultures as part of our shared
values. This work will continue during 2018,
together with additional initiatives on strengt­
hening VBG Group’s brand as an employer
through continued investments in skills develop­
ment and healthy work environments.
HR efforts in VBG Group are primarily directed towards support-
ing the divisions and ensuring they have the competency
required to maintain profitable growth. Examples of this are our
continuing initiatives in competency development such as lead-
ership and manager training, and our values, which were devel-
oped for the purpose of creating participation and a better work
environment for the Group’s 1,500 employees.
Corporate culture with a starting point in the
Code of Conduct and Keystones
As VBG Group grows, defining our corporate culture becomes
increasingly important – especially in order to strengthen our
brand as an employer. Being perceived as down-to-earth, open,
and having a focus on the individual are important success fac-
tors in our continuing to retain employees and attract new com-
petency.
The VBG Group’s values can be summarised in our shared val-
ues, or Keystones, which are Overall View, Business Orientation,
Professionalism and Teamwork. Together with the Code of Con-
duct, these serve as a compass for how we will act on various
issues, both internally and externally.
Developing talents – an important part
of the competency supply
With operations in 18 countries, there are good chances for our
employees to grow, both in their own companies and across divi-
sion boundaries, at home or abroad. Continually strengthening
the expertise and skills of our employees not only contributes to
many of them choosing to stay on with us for a long period of
time but also increases the Group’s diversity, efficiency and com-

20

Employees who
feel happy and
enjoy their work
contribute to
success
petitiveness. That is why we attach great importance to compe-
tency development at both a general and an individual level.
To ensure the competency supply, looking inward into the
organisation and capturing talents who have the desire and the
ability to grow – perhaps in a role other than the one they have
today – is becoming increasingly important. In 2017, the VBG
Group’s Talent Programme was inaugurated, in which we initially
offer an employee the opportunity to combine studies in Indus-
trial Management at KTH Royal Institute of Technology’s Execu-
tive School with in-depth practical experience in strategic opera-
tional issues at several companies in the Group. In 2018, we
expect to be able to provide more employees with the chance
for development in our Talent Programme.
Competency development in close collaboration
with KTH and Chalmers
In the VBG Group Academy – the Group’s platform for compe-
tency development – we offer training initiatives aimed at Group
Management and senior officers in our divisions, as well as other
key individuals who need management development or leader-
ship training. The courses are offered by KTH Executive School
and Chalmers Professional Education. In 2017, three employees
EMPLOYEES | VBG GROUP ANNUAL REPORT 2017
began management training at KTH Executive School. Anders
Birgersson, Managing Director of VBG Group, has been a wel-
come lecturer on the course for the last two years.
General training courses are also held within the Group as
part of the VBG Group Academy. For example, employees in
several of our divisions are offered courses in English during
working hours.
Apart from the competency development the Group offers,
one of VBG Group’s owner foundations – the SLK Employees’
Foundation – offers a training scholarship that all employees in
the Group can apply for. Some 54 applications were received in
2017, and 17 scholarship recipients received a total of SEK
300,000 that can be used for courses in subjects such as lan-
guages, LEAN methods or leadership.
Focus on a better work environment
The long-term perspective of VBG Group contributes to the
Group being considered a stable, secure employer – and we
know that employees who feel happy and enjoy their work
enable success. Measures for creating a good work environment
are therefore high on the agenda, at both divisional and Group
levels. Some examples are well-established safety rounds, efforts
to achieve good sound absorption in office environments, and
proper ergonomics in the production environment.
Employee turnover was 10.6 per cent in 2017, which is a slight
decrease compared with the preceding year.
Sick leave in VBG Group has historically been low compared
with the industry, and in 2017 it decreased further to 3.4 per
cent. This is confirmation that our efforts to create a healthy
work environment are doing some good.
Attractive employer – a success factor
One major challenge for VBG Group and the industry, both in
Sweden and in the rest of Europe, is the shortage of competency
in technology and engineering. That is why we actively profile
the Group and divisions as attractive employers, for example
through our collaboration with universities and colleges and par-
ticipation in various labour-market fairs. To strengthen our brand
as an employer, it is important that we maintain a down-to-earth
culture characterised by an open, pleasant and caring atmo-
sphere. Other success factors in the competition for existing and
potential employees include the continued ability to offer com-
petitive salaries and the opportunities to grow within the Group.
21
VBG GROUP ANNUAL REPORT 2017 | EMPLOYEES
SAME ROLE – NEW TIME ZONE
Jenniefer Petell began working at Mobile Climate Con-
trol in 2013, right after her studies. After having worked
temporarily as a substitute Financial Controller for an
employee on parental leave, she was given the chance to
advance in her role as Group Controller – an opportunity
that took her all the way to Canada.
With 80 per cent of production and sales in North America,
it was a natural step for Mobile Climate Control to move
the division’s Group Finance in 2017 from Stockholm to the
company’s offices in Vaughan, outside Toronto. The move
agreed well with Jenniefer’s plans for the future.
“I’d always wanted to test out living and working in a
city bigger than Stockholm, so when the chance came to
move to Toronto – and stay in the same role – I didn’t hes-
itate for a second,” she says.
The fact that her role remained the same was a source
of security when everything else around her was new. She
has had great help from a co-worker in Stockholm, who
made the same move five years ago. Her spot on a volley-
ball team has also played an important role, especially
socially.
As Group Controller for Mobile Climate Control, Jen-
niefer is in close contact with the heads of finance for the
subsidiaries in her division, and reports on a continual
basis to the parent company, VBG Group. Even if her role
22
has not changed, by and large, since her move to Canada,
the proximity to her supervisor and other co-workers
mean a number of practical changes.
“Even now, I have a large amount of e-mail to go
through when I get to work, from co-workers in other
time zones – Sweden, China, Poland and South Africa.
However, the fact that several of the people I work closest
with have the same hours I do makes it easier. Moreover,
it’s a lot more fun to sit in a bigger office. In Stockholm,
there were often just five of us,” Jenniefer says.
The fact that both VBG Group and her own division are
positively disposed towards employees growing and test-
ing new things, both within and across national and cor-
porate boundaries, is one of the reasons Jenniefer believes
so many people choose to stay with the company a long
time. And even though her work visa is valid until 2020,
she is quite certain that she will stay here longer – in
Toronto, and in Mobile Climate Control.
Name Jenniefer Petell
Age 29
Lives in Toronto, Canada
On her business card Group Controller, Mobile Climate Control
Number of years in the Group 5
Education Bachelor’s degree in Business Economics
Leisure activities Playing volleyball
 SUSTAINABILITY | VBG GROUP ANNUAL REPORT 2017

SUSTAINABILITY AGENDA
WITH STRONG LINKS
TO CORE BUSINESS

SUSTAINABILITY
VBG Group’s sustainability agenda is built on
our Code of Conduct, which has its starting
point in the UN’s Principles for Corporate Social
Responsibility. In 2017, we defined long-term
sustainability goals for the Group based on a
stakeholder and materiality analysis.

Issues of sustainability have a central place in the VBG Group,
both in our analyses in conjunction with new acquisitions and in
daily operations. Sustainability issues are also an integral part of
our business strategy. We know that corporate social responsi-
bility, 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 minimises risks.
We have chosen to report on our sustainability activities, both
in this section on sustainability (pages 23–27) and on page 61 in
the Report of the Directors, which describes in more detail the
stakeholder and materiality analysis conducted in the Group
during the year. Sustainability risks, and how they are managed,
are presented together with other risks in Note 2 Risks and risk
management, on page 80. All three sections are part of the stat-
utory 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 Code of Conduct – a guiding principle
inside and outside the Group
Our sustainability efforts are built on the VBG Group Code of
Conduct, adopted by the Board of Directors of VBG Group in
2010. The purpose of the Code is to elucidate the approach we
take in relation to our stakeholders, both internal and external,
and what demands we place on ourselves and on others.
The Code of Conduct covers all divisions in the Group. It can
be regarded as a guiding principle for our employees and collab-
orating partners. By applying the Code, we are complying with
current laws and ordinances in the countries where we operate,
the UN’s Global Compact for corporate social responsibility, the
UN’s Convention on the Rights of the Child and other interna-
tional agreements and guidelines.

23
 VBG GROUP ANNUAL REPORT 2017 | SUSTAINABILITY

Materiality model

ENVIRONMENTAL
Significance for and impact on stakeholders

RESPONSIBILITY
 Waste products,
HIGH

consumption and emissions

SUSTAINABILITY

 Environmental impact
of product during use
 Transportation
SOCIAL RESPONSIBILITY
 Human rights
 Non-discriminatory
workplace
 Safe, healthy workplace
LOW

BUSINESS ETHICS
 Compliance with laws
LOW HIGH  Anti-corruption
Significance for and impact on VBG Group  Fair competition

Products and services that make a difference
Nine people work at the head office of VBG Group, while the
Group has a total of 1,500 employees. The Parent Company
thus has a limited direct impact in comparison with the Group as
a whole. The greatest possibilities for impact in the area of sus-
tainability are in our capacity as an active, responsible owner,
and through the products and services from our divisions.
Traffic safety has been the cornerstone of the VBG Group’s
operations ever since the company was founded in 1951. Our
products and services help increase safety and efficiency in sev-
eral areas of society, all over the world. But while we are contrib-
uting to positive social trends, our operations unavoidably leave
an environmental footprint. That is why we must use our
resources as efficiently as possible, and manufacture our prod-
ucts with as little impact on the climate and the environment as
possible. We are also responsible for providing a safe and secure
workplace for our employees, and for ensuring that our opera-
tions do not constitute a risk to the inhabitants of the places
where we operate.
Sustainability goals up to 2022
During 2017, we deepened our strategic sustainability efforts
and formulated long-term goals at the Group level up to 2022.
We have chosen to report on our sustainability efforts in three
reporting areas, which include the five main areas in the Swedish
Annual Accounts Act.
For 2017, we have also expanded the section on risk with
material sustainability risks linked to the respective main areas;
refer to Note 2 Risks and risk management, on page 80. VBG
Group’s goals are supplemented with detailed objectives at the
local level in the respective divisions.
VBG Group’s sustainability efforts, and its long-term sustain-
ability goals, are built on a stakeholder and materiality analysis
conducted in the Group during 2017. We identified customers,
employees, suppliers and owners as particularly important
stakeholders whom we are in continual dialogue with. Through
our community involvement, local communities where our com-
panies operate – both in Sweden and abroad – are also an
equally important stakeholder to us. VBG Group’s stakeholder
and materiality analysis is presented on page 61.
ENVIRONMENTAL
RESPONSIBILITY
In VBG Group, we work actively to reduce our environmental
impact at all stages of our operations. Products and processes
must be designed so that energy and raw materials are used as

24
 SUSTAINABILITY | VBG GROUP ANNUAL REPORT 2017
Facts – Environmental responsibility
Energy consumption, kW1 Total waste products, kg 1
2017 2016 2017 2016
15.6 17.0 2.7 3.1
Environmental certification2 Recyclable waste
2017 products, kg 1
7 of 10 2017 2016
plants 2.0 2.3
Environmentally hazardous
waste products, kg 1
2017 2016
0.5 0.5
1) per production hour
2) u
 nder ISO 14001 or the equivalent
efficiently as possible, and in a way that minimises the occur-
rence of waste and waste products during the useful life of our
products. We apply the precautionary principle, which means
that we avoid materials and methods that could constitute a risk
to health or the environment. Our objective is to reduce both
energy consumption and waste production by 10 per cent from
2017 up until 2022.
There are procedures in VBG Group for continual monitoring
and reporting of the environmental performance of our opera-
tions. This work includes continuous evaluation of potential
risks for current and future products and operations. We have
an explicit objective that all of the Group’s production plants
are to be environmentally certified by 2022 at the latest. At the
end of 2017, seven out of ten of the Group’s plants were certi-
fied. Non-certified production plants and collaborating partners
are also continually monitored to ensure that they are working
in accordance with the Code of Conduct.
As VBG Group is a global company, business travel cannot be
completely avoided. To reduce travel in the Group, we are
investing in digital meeting tools. As part of our strategic sus-
tainability activities, we will also be initiating a survey in 2018
of the types of energy being used in the Group. The primary
purpose of the survey is to ensure that we are formulating
Group-wide climate objectives that are relevant to us.
COLLABORATING FOR A MORE
TRANSPORT-EFFICIENT SOCIETY
From a traffic safety perspective, VBG Truck Equipment
has acquired extensive knowledge as a result of its
long-standing contacts with national and international
authorities, political bodies and legislators. Apart from
providing many strategic advantages for its own strat-
egy and product development efforts, the division also
impacts developments concerning traffic safety by
working together with government authorities in order
to attain harmonisation around legislation.
Longer, heavier loads produce fewer emissions
VBG Truck Equipment is taking part in several different
projects – both under its own management and together
with other players – in order to promote development
toward more sustainable transport solutions. One exam-
ple is the Volvo Trucks research project on high-capacity
transport, which VBG Truck Equipment has been taking
part in since 2009. The project is financed in part by
Vinnova, and the results show major positive environ-
mental gains with longer, heavier vehicles than those
currently used in Sweden. The objective of the project is
to produce proposals for longer, heavier vehicle combi-
nations that are safe and trafficable on the Swedish road
network, and at the same time to reduce energy con-
sumption by 15–30 per cent per ton shipped.
In 2018, VBG Truck Equipment – together with Kin-
narps and Volvo Lastvagnar – will be testing DUO trans-
ports on selected municipal road networks. The vehicle
combinations used are expected to increase load volume
by 50 per cent – equivalent to 30 per cent fewer trans-
ports – and to reduce carbon emissions by 20 per cent.
The effects of heavier loads in forestry are also being
tested as part of this project, under the name “ETT – en
trave till” (One More Stack). The results show that one
lumber truck equipage of 90 tons holds 50 per cent
more timber while carbon emissions decrease by 20 per
cent per ton freighted, compared with a conventional
timber equipage of 60 tons.
25
 VBG GROUP ANNUAL REPORT 2017 | SUSTAINABILITY

SOCIAL RESPONSIBILITY
Facts – Social responsibility
VBG Group supports and respects human rights, and works to
counteract all forms of bullying and harassment. We employ and Sickness absence, % Persons in senior positions
2017 2016 in VBG Group, %
manage our employees in a way that is not discriminatory as
regards gender, age, nationality, religion, political opinion, dis- 3.4 3.9 17
Women
SUSTAINABILITY

Men
ability, membership in an association, sexual orientation, and
social or ethnic origin. Diversity in the workplace is encouraged
at all levels throughout the Group.
Our employees are our most important asset, and we work to 83
be able to offer a safe and healthy work environment. There is
zero tolerance in VBG Group towards work-related injuries. We Employee turnover, % By 2022, the goal is for VBG
have well-established procedures for both work environment 2017 2016 Group to have 21 per cent
and machine safety rounds. We also place great demands on women in senior positions, a

protective equipment, but we can state that despite these mea-

sures and procedures, accidents occur. Some 53 work-related
injuries were reported in 2017, which is a drastic increase com-
pared with the 33 reported injuries for 2016. The increase
occurred primarily in one of the Group companies. This is some-
thing we take very seriously, which is why in 2018 we will carry
out targeted efforts within this company to bring down the
number of work-related injuries.
VBG Group operates in a traditionally male-dominated indus-
try, and this is reflected in the gender distribution within the
Group: 79 per cent of employees are men, 21 per cent are
women. We aim for a good balance between the sexes, and
workplaces in parts of the Group are carefully designed so that
they suit both women and men. This could mean, for example,
seeing to it that the workplace is constructed in such a way that
heavy lifting is made easier. We also strive for a higher propor-
tion of women in senior positions. During 2017, women had just
over 17 per cent of the senior positions in the Group. Our objec-
tive is for women employees to have 21 per cent of the senior
positions, which is the same proportion as the percentage of
women employees in the Group overall. Criteria for an employee
to be regarded as holding a senior position are that the
employee is part of a management group, has subordinate
employees, holds an influential position with major impact fac-
tors or has specialist competence in one or more areas. At least
one of these criteria must be met before the person can be clas-
sified as senior.
Internships and apprenticeship positions are encouraged in
VBG Group as a natural part of the competence supply. Freedom
of association and the right to collective negotiations and agree-
10.6 10.9 share equal to the proportion
of female employees in the
Group overall.
ments are respected. Furthermore, no form of slavery, compul-
sory labour or child labour is tolerated, and we place the same
stringent demand on our suppliers and collaborating partners to
comply with this.
All the managers in VBG Group are responsible for communi-
cating and complying with the content of the Code of Conduct
in their respective operations, and for encouraging employees to
report behaviour that could be incompatible with the principles
of the Group. In 2018, we will implement a Group-wide whis-
tle-blower function that will be managed by an external party.
This means that employees can anonymously call attention to
potential irregularities in the Group.
Several of VBG Group’s divisions are heavily involved in their
communities. VBG Truck Equipment primarily sponsors various
local athletic clubs and sporting events, for example in floor
hockey, cycling and ice hockey. One requirement always placed
on the clubs in order to receive sponsorship is that they have
both boys’ and girls’ teams. Mobile Climate Control’s sponsor-
ship is primarily of a charitable nature, with donations to socio-
economically vulnerable adults and children, as well as to cardiac
and brain research.

26
 SUSTAINABILITY | VBG GROUP ANNUAL REPORT 2017

Facts – Business ethics

Age distribution, % Length of employment, % Anti-corruption training

2017

99%
< 30 yrs < 5 yrs
9 16 11
30–40 yrs 5–10 yrs
10
24 40–50 yrs 10–15 yrs
23 45
50–60 yrs 15 15–20 yrs Share of employees selected
> 60 yrs > 20 yrs who underwent VBG Group’s
28 19 anti-corruption training.

Gender distribution, %
Women
21 Men

79

BUSINESS ETHICS requirements on our suppliers and collaborating partners as we

do on ourselves.
Our accounting and financial reporting must be carried out
In all the countries where VBG Group conducts operations, we
correctly, in accordance with generally accepted accounting
will adhere to current laws and ordinances. If a situation should
practices. This includes always providing information that is
arise where we cannot find guidance from the law, we will fol-
accessible, truthful, relevant, comprehensible and current.
low our Group-wide standards and principles. VBG Group must
Employees and members of the Board of Directors of VBG
have an honest approach in relation to its business partners and
Group must handle their private (and other external) activities
other stakeholders. Employees in VBG Group may not take pay-
and economic interests in a way that does not result in a conflict
ments, gifts, or other forms of remuneration from third parties
of interest arising in relation to the Group.
that could affect their objectivity in business decisions. In 2017,
VBG Group is also politically neutral, and therefore does not
the Board of Directors of VBG Group, the Group’s company
permit names or assets belonging to the Group and its compa-
management teams, Accounting, HR, Sales and Marketing, Pur-
nies being used to promote the interests of political parties or
chasing and other employees with contacts among customers
candidates.
and suppliers underwent anti-corruption training.
Respect for human rights is not only a social issue, but also
important from the perspective of business ethics. Our zero tol-
erance approach to discrimination and all forms of slavery,
forced labour or child labour is becoming increasingly relevant in To read the Auditors’ statement on the preparation of
pace with the Group expanding globally. Especially in connec- the statutory sustainability report under the Swedish
tion with establishment in developing countries, we must make a Annual Accounts Act, refer to page 101.
positive contribution to social improvement and create opportu-
nities for the local population by placing the same stringent

27
 VBG GROUP ANNUAL REPORT 2017 | OUR DIVISIONS
INTERNATIONAL LEADERS
IN SELECTED NICHES
The VBG Group’s four divisions hold
leading positions in their respective
niches in the global market. Each
division develops, manufactures and
distributes products of great value
OUR DIVISIONS
for customers. The products are
marketed under strong brands that
are aimed at different customer
segments.
28
DIVISIONS BRANDS
VBG Truck Equipment
By virtue of its own strong brands, the
division is an internationally leading
supplier of coupling equipment for
trucks with heavy trailers. The division
accounts for more than 55 per cent of
the global market via the Ringfeder
and VBG brands. The division also has
the Onspot brand – automatic tyre
chains with a world-leading position in
its niche.
Edscha Trailer Systems
By virtue of its own strong brands,
the division is an internationally
leading supplier of sliding roofs to
tarpaulin-covered trailers and tipper
vehicles, as well as sliding bow roofs
to railway wagons. The division
accounts for 40 per cent of the
global market for sliding roofs via
the Edscha Trailer Systems and
Sesam brands.
Mobile Climate Control
By virtue of its own strong brand, the
division is an industry-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
defence vehicles.
Ringfeder Power Transmission
By virtue of its own strong brands, the
division is a recognised global market
leader in selected niches within mechanical
power transmission and energy and
shock absorption. The division’s brands
are Ringfeder, Tschan, Henfel and
Gerwah. The customers are found in
such widely disparate industrial markets
as construction, machinery, power and
mining.
 OUR DIVISIONS | VBG GROUP ANNUAL REPORT 2017

SHARE OF NUMBER OF EMPLOYEES FINANCIAL

SALES GROUP SALES AND SHARE OF THE GROUP1 KEY FIGURES

837M 28% 278 (19%)

Sales growth
SEK 
Sweden 24%
Other Nordic countries 16%
10.5%
EBITA margin 
Germany 14%
Rest of Europe 24%
North America 11%
South America 1%
20.4%
ROOC 3
Asia 1%
Oceania 8%
Rest of the world 1% 78.0%

260M 9% 88 (6%)
Sales growth
SEK 
Germany 57%
-4.0%
EBITA margin 2
Rest of Europe 42%
Rest of the world 1%
10.1%
ROOC 3

30.3%
1,427M 47% 785 (52%)
Sales growth4
SEK 
Sweden 2%
11.8%
EBITA margin 
Other Nordic countries 2%
Germany 2%
Rest of Europe 11% 10.4%
North America 81% ROOC 3

43.8%
Rest of the world 2%

479M 16% 342 (23%)

Sales growth
SEK  
Nordic countries 2%
15.5%
EBITA margin
Germany 36%
Rest of Europe 13%
North America 21%
Brazil 14%
13.4%
ROOC 3
Asia 11%
Oceania 2%
Rest of the world 1% 27.2%
1
As of 31 December 2017. Excluding nine employees in the Parent Company.
2
Excluding items affecting comparability.
3
Return on operating capital; definition, page 78.
4
Also includes the period before the acquisition, Jan–Nov 2016.
29
 VBG GROUP ANNUAL REPORT 2017 | VBG TRUCK EQUIPMENT

A RECORD YEAR LAY THE

GROUNDWORK FOR CONTINUED
FUTURE INITIATIVES
VBG TRUCK EQUIPMENT

Largest product groups

In 2017, VBG Truck Equipment reported its
DRAWBAR COUPLINGS highest sales and earnings ever. Sales growth
AUTOMATIC TYRE CHAINS stood at 10.5 per cent. This contributed to the
DRAWBARS
DRAWBEAMS division setting a new profitability record with
UNDERRUN PROTECTION an EBITA margin of 20.4 per cent. In addition,
VBG Truck Equipment entered the markets in
Sales by region Brazil and China.
Sweden 24%
Other Nordic countries 16%
Germany 14%
Complete system supplier in a world-leading position
Rest of Europe 24%
North America 11% VBG Truck Equipment develops, manufactures and sells drawbar
South America 1% couplings and equipment for trucks with heavy trailers under its
Asia 1% own brands, VBG and Ringfeder, which together account for 55
Oceania 8%
per cent of the world market. The division also holds a world-lead-
Rest of the world 1%
ing position in automatic tyre chains with its own Onspot brand,
which represents a market share of approximately 65 per cent.

30
 VBG TRUCK EQUIPMENT | VBG GROUP ANNUAL REPORT 2017

SIGNIFICANT EVENTS IN 2017 FOCUS FOR 2018

• Operations established in China and Brazil
• Digital marketing of Onspot remains successful
• Positive effects from the revised business model in Europe
• Increased functionality and an expanded product offering
• Continued development of digital marketing for more brands
• Increase productivity in the form of more manufactured cou-
plings per hour worked
• Continued growth in China and Brazil
• Global growth with Onspot

Net sales EBITA and EBITA margin Operating cash flow

MSEK % MSEK 184.6
170.8 22.1%
1,000
837
200 171
20 200 169.8
757 20.3% 20.4%
149 132.4
750 650 637 698 150 120
15 150 15.8%
117 –27.3
100 –24.6
500 100 10 100
250 50 5 50
0 0 0 0
13 14 15 16 17 13 14 15 16 17 EBIT EBITA EBITDA WC CAPEX Cash flow

Though VBG Truck Equipment has its base in the European
market, with production and product development concentrated
in Vänersborg, the division today is a global player with opera-
tions in the US, South America, Australia and China through its
own companies, retailers or distributors.
One important reason that VBG Truck Equipment has been
able to grow globally while maintaining profitability is its ability
to change over from developing, manufacturing, and selling com-
ponents to also meeting growing demand for systems solutions.
Proximity to customers is another important success factor.
Widespread customer base in several segments
VBG Truck Equipment has a widespread customer base in several
market segments. As regards drawbar couplings, body builders
are the largest customer group. Other important customer
groups include large international truck manufacturers and play-
ers in the aftermarket.
In automatic tyre chains, users of commercial goods vehicles
and emergency vehicles, as well as school buses in the US, are
the primary customer groups.
Few competitors
There are only a small number of competitors in each product
category. For drawbar couplings, the primary competitors are
Rockinger of Germany and Orlandi of Italy. For automatic tyre
chains, the German company RUD is the primary competitor.
Continual focus on traffic safety
VBG Truck Equipment’s products and services contribute signifi-
cant value for both customers and end users in the form of
increased reliability, personal safety and more efficient logistics
processes. But VBG Truck Equipment is not just a product sup-
plier. Owing to its many years of contact with both national and
international government authorities, political bodies and legis-
lators, the division has a good understanding of the policy pro-
cesses driving the market, which in turn provides crucial insight
into its own strategy and product development initiatives. By
working together with government authorities for more har-
monised legislation – primarily in the EU – VBG Truck Equipment
has the opportunity to affect developments in traffic safety. The
division’s employees contribute benefits such as important
expertise in various international forums concerning the devel-
opment of standards for enhanced traffic safety.

31
VBG GROUP ANNUAL REPORT 2017 | VBG TRUCK EQUIPMENT

OPPORTUNITIES AND CHALLENGES

STRENGTHS
• Strong brands and well-known products
• Business model with proximity to customers and end users
• Leading role in technological advances
• Owning the entire chain: product development,
­manufacture, and sales
OPPORTUNITIES
• Trend towards longer, heavier vehicles
• New regulations for heavy vehicles (standards, c­ ertification, etc.)
• New applications for the division’s products in segments
outside road transport as well
• Strengthened relationships with end users through
digitised marketing

AREAS OF IMPROVEMENT CHALLENGES

• Increase the division’s focus on systems solutions • Maintaining continued profitable growth
• Continued efficiency enhancements • Develop a digital product offering

Working for longer, heavier transports Digitalisation can be seen not only in marketing, but also in
Discussions are in progress in the EU concerning how truck product development. By adding digital functions to coupling
transportation is to be designed so as to take heavier loads, equipment – for example, in the form of sensor technology – the
thereby promoting reduced fuel consumption per ton shipped. driver can obtain important information while driving, which pro-
The EU has a target of reducing carbon emissions by 30 per cent motes increased traffic safety and reduced wear on components.
up until 2030. Trailers, with a weight of 40 tons, remain the Digital information also facilitates service work for workshops,
most common form of truck equipage in the EU. Research in the and enables hauliers to become more productive.
area shows that fuel consumption per ton shipped decreases by As part of its digitalisation, VBG Truck Equipment is also involved
over 35 per cent if 90-ton combined transport is used instead. in developing product solutions for autonomous vehicles.
Both within and outside Europe, the market is characterised by a
clear trend towards longer, heavier transports. VBG Truck Equip-
ment is well positioned to meet changed customer needs as a
consequence of this trend, and participates actively in different
projects that support the development towards longer and
heavier vehicles. Read more about ongoing development proj-
ects in which VBG Truck Equipment participates on page 25.

Digitalisation creates new opportunities

Another important trend is digitalisation. In 2017, VBG Truck
Equipment expanded its efforts in digital marketing for the
Onspot brand, and also continued its work on digitalising mar-
keting and sales of the division’s other brands.

32

COMMENTS BY THE DIVISION MANAGER
Focus on traffic
safety drives
development
VBG Truck Equipment set sales and profitability records
in 2017. Can you explain how you succeeded at that?
The fact that conditions in the truck industry are generally
strong plays an important role, at the same time as we captured
market shares in major markets such as Germany, Eastern
Europe and Australia. Moreover, we see that sales of drawbar
couplings accelerated in China at the end of the year, and that
our automatic tyre chains are gaining ground globally.
In the autumn of 2017, you signed a distribution
agreement with Hyva China Mechanics. What does the
agreement mean for you?
Simply put, China has opened itself up, through new regula-
tions, to the possibility of using drawbar couplings with combi-
nations of heavy vehicles. Since the autumn of 2017, our entire
product range in the Ringfeder brand has been available in the
Chinese market, which was already noticeable in sales during
the fourth quarter. The business in China is strategically import-
ant for enabling us to grow while maintaining profitability out-
side Europe as well, and for reaching our growth targets.
VBG TRUCK EQUIPMENT | VBG GROUP ANNUAL REPORT 2017
Anders Erkén, Division Manager of VBG Truck Equipment
Traffic safety is a priority issue for you – but how
important is it for the market?
Focus on traffic safety drives development in the market to a
very great degree. In 2019, for example, new regulations con-
cerning underrun protection for trucks will be introduced in
Europe. With stricter requirements for design and durability,
tests and certification will be in demand – and that means posi-
tive business opportunities for us.
How do you view the possibility of finding areas of
application for your products outside traditional road
transportation?
I see major opportunities here. Especially in logistics centres and
industries with a great degree of internal transportation such as
steel mills and paper and pulp mills. Our solutions could pro-
mote both increased productivity and increased safety there.
Could you speak briefly about your establishment in
Brazil, which began in 2017?
We recruited one person with thorough knowledge of the indus-
try and drew up a plan in which we initially concentrated on a
few select segments with our product range of Ringfeder cou-
plings. In 2018, I expect we will be able to establish ourselves in
the forestry, agriculture, and utility segments.
33
VBG GROUP ANNUAL REPORT 2017 | VBG TRUCK EQUIPMENT

34
 VBG TRUCK EQUIPMENT | VBG GROUP ANNUAL REPORT 2017
SEVERAL PATHS TO ORGANIC GROWTH
In order to achieve VBG Group’s overall growth target of
10 per cent, organic growth is also strategically important
alongside continued acquisitions. In 2017, VBG Truck
Equipment laid down several important pieces of the puz-
zle in the Group’s joint work on increasing organic growth.
  “2017 was a successful year for us. Not only did we suc-
ceed in setting sales records in drawbar couplings and
strengthening our position as systems suppliers in Central
and Western Europe, we also launched a digital marketing
initiative and established ourselves in China,” says Anders
Erkén, Division Manager of VBG Truck Equipment.
Collaboration that creates new opportunities in China
In the autumn of 2017, VBG Truck Equipment signed a
distribution agreement with Hyva China Mechanics –
thanks to Chinese government authorities introducing
new regulations permitting the use of drawbar couplings
for combinations of heavy vehicles in China. The new
regulations will enable the country to lower its logistic
costs, which are currently equivalent to 17–19 per cent
of GDP compared with 7–9 per cent in Europe and the
US. Through this agreement, VBG Truck Equipment has
obtained broad geographical coverage in China with
over 200 service points around the country.
  “This has led to a breakthrough for us in China. We
had previously collaborated with the Hyva Group in
other markets, and we knew we shared views on issues
such as traffic safety, for example. That makes things
easier now that sales have gained momentum, and we
are going to train the sales organisation and the end
users,” Anders says.
Systems suppliers in Central and Western Europe as well
China was not the only region where VBG Truck Equip-
ment strengthened its positions in 2017. In Central and
Western Europe, the division revised its business model
to resemble more how it works in the Nordic market. By
more clearly establishing itself as a systems supplier and
offering certified solutions to end users and body build-
ers, it can take a spot higher up on the value chain and
simultaneously increase its volumes. The new strategy
was a strong contributing factor to the division’s 2017
sales record.
Strengthened positions in digital channels
In pace with the requirements for accessibility increas-
ing, traditional channels for reaching customers can no
longer be relied on. This is why VBG Truck Equipment
initiated efforts in 2016 to digitalise marketing for the
Onspot brand. The new approach was in full swing
during 2017.
  “By focusing on digital channels and content adapted
to target audiences, we can meet customers on their
terms with current and relevant information. Over the
year, sales of Onspot’s automatic tyre chains increased
markedly at the same time as we were able to lower our
marketing costs. For the next step, we will market the
VBG brand in 2018 under the same concept,” Anders
concludes.
35
 VBG GROUP ANNUAL REPORT 2017 | EDSCHA TRAILER SYSTEMS

COST EFFICIENCY CREATES

CONDITIONS FOR IMPROVED
PROFITABILITY
EDSCHA TRAILER SYSTEMS

Edscha Trailer Systems had a strong start to 2017,

Main market segments

TARPAULIN-COVERED TRAILERS but the profitability trend was broken during the
TIPPER VEHICLES year due to rising costs for purchased materials
RAILWAY WAGONS
and delivery problems with two key suppliers.
In addition, the division incurred costs from a
Sales by region reorganisation. Sales decreased 4.0 per cent
Germany 57% year-on-year and the EBITA margin amounted to
Rest of Europe 42%
Rest of the world 1%
7.2 per cent. Since the division has overcome its
supplier problems and continued its work on
making operations more cost-efficient, however,
there are good conditions for better profitability
going forward.

Global market leader for sliding roofs

Edscha Trailer Systems introduced sliding roofs back in 1969.
Today, the division is a technological leader worldwide with the
market’s broadest product portfolio for the conversion of tarpau-
lin-covered trailers and tipper vehicles. In the tarpaulin-covered

36
 EDSCHA TRAILER SYSTEMS | VBG GROUP ANNUAL REPORT 2017

SIGNIFICANT EVENTS IN 2017 FOCUS FOR 2018

• Completed launch and secured first OEM contract
for sliding roofs for tipper vehicles
• Strengthened with new resource in India
• New Division Manager appointed
• Continued international growth
• Investments in digitalised business processes
• Sustained development of aftermarket in
the railway wagon segment
• Launch of an electric version of tipper vehicle roof

Net sales EBITA and EBITA margin* Operating cash flow

MSEK % MSEK
300 271 260 40 12 40 31.7
255 35 28.2
220 222 26.3 12.2%
30 27 26 9 10.9%
30 21.1 10.1%
200 8.1%
–1.0
–2.6
20 19 6 20
12
100
10 3 10

0 0 0 0
13 14 15 16 17 13 14 15 16 17 EBIT EBITA EBITDA WC CAPEX Cash flow
* Before items affecting comparability

trailers market segment, Edscha Trailer Systems’ global market
share is over 40 per cent. The division also offers sliding bow
roofs for railway wagons.
The products are manufactured under the Edscha Trailer Sys-
tems and Sesam brands, both of which are well positioned
among customers as well as end users. Edscha Trailer Systems’
products all provide effective, flexible protection of freighted
goods while improving the second-hand value of the vehicle.
and ability to transform the customers’ varying needs into a
unique roof solution that meets high demands on quality.
Three main competitors
There are three main competitors in Edscha Trailer Systems’ mar-
ket segment: TSE (owned by the German trailer manufacturer
Schmitz), Versus Omega and Autocar. There are also a number
of smaller players with a strong local position.

Two different customer groups New opportunities await outside Europe

Edscha Trailer Systems offers both standard and tailored cus-
tomer solutions. The highest sales volumes are linked to the pro-
duction of functional roof solutions for standard trailers – a seg-
ment that is dominated by a few trailer manufacturers that
target end customers who order large volumes. Edscha Trailer
Systems is well positioned here as a total supplier with the
broadest product range in the market.
Tailored customer solutions for trailers is a more fragmented
segment, with a large number of strong players locally or region-
ally. Significantly lower volumes of orders are placed here,
though with a higher degree of customisation and better busi-
ness margins. As regards tailored solutions, Edscha Trailer Sys-
tems stands strong because of the division’s technical expertise
Europe, spearheaded by Germany, is the most important market
for Edscha Trailer Systems. Only 1 per cent of sales comes from
the rest of the world. Even though Europe will remain important
for the division moving forward, stricter requirements for cov-
ered loads also outside of Europe are expected to open up new
business opportunities over the next few years. One example is
India, where the division has strengthened its position through
increased market presence in 2017. Greater geographic distribu-
tion is strategically important for Edscha Trailer Systems, both to
minimise risks and to increase profitability.

37
VBG GROUP ANNUAL REPORT 2017 | EDSCHA TRAILER SYSTEMS

OPPORTUNITIES AND CHALLENGES

STRENGTHS OPPORTUNITIES
• Leading position with strong brands • Geographical expansion beyond Western Europe
• Broad product range • Build relationships with existing customers and more
• High delivery precision ­easily reach out to new customers through greater
focus on digitalisation

AREAS OF IMPROVEMENT CHALLENGES

• Shorten time-to-market for new products • Overcapacity in the market resulting in price
• Automation of production processes pressure and greater competition
• Skills supply, particularly in production

Rising demand expected as trailer fleet ages In 2018, Edscha Trailer Systems will also invest in new technol-
Demand for sliding roofs for trailers is impacted by the need for ogy for digital business processes designed to strengthen the rela-
heavy transports in society. The trailer fleet in Western Europe tionship with existing customers and reach new customer groups.
amounts to some 2 million vehicles and, as the average fleet age
steadily increases, demand is expected to rise for new trailers in Automation – a prerequisite for solving skills supply
the future. One challenge facing Edscha Trailer Systems and the industry as
As regards the railway wagon segment, demand varies to a a whole is a shortage of labour, particularly in production. Com-
higher extent between years. The main driver in the railway petition for qualified employees is becoming tougher, and
wagon segment is the economic climate. Edscha Trailer Systems is active in efforts to automate its pro-
duction processes to ensure that it can continue to meet cus-
Digitalisation and electrification increasingly important to tomer demand in the future.
meet customer requirements
During 2017, Edscha Trailer Systems signed an agreement for the
division’s first OEM contract for a newly developed sliding roof
for tipper vehicles. In the next stage of product development,
the division will conduct tests in 2018 of an electric version of
the roof that is expected to further streamline haulage work for
customers when it reaches the market.

38
 EDSCHA TRAILER SYSTEMS | VBG GROUP ANNUAL REPORT 2017
COMMENTS BY THE DIVISION MANAGER
Customers want a
stable and reliable
business partner
2017 was not as strong as last year. Why is that?
Overall, 2017 was a relatively good year for Edscha Trailer Sys-
tems, even if we fell short of the levels set in 2016. One reason
for this is that two of our key suppliers experienced delivery
problems, which gave rise to extra costs for us, though these
problems have now been overcome. We also incurred some
costs for the continued implementation of our new production
line, which is based on a modular concept. During 2017, both
the old and the new product range were available to our cus-
tomers, which has temporarily burdened internal processes and
led to an increase in costs. The new modular range of products
will be introduced among most customers during 2018, which
will reduce both inventory value and complexity in production.
What opportunities do you see with the digital
development in the industry?
It is important to be aware of the level required to develop the
company. I believe progress for us will take place gradually, as
changes create new duties and tasks for which employees will
need training.
Volker Biesenbruck, Division Manager of Edscha Trailer Systems
What are the key success factors for meeting increasingly
tougher competition in the market?
To build long-term relationships, you must offer more than only
products at low prices. We can see that customers are more
interested in a stable and reliable business partner with a good
mix of strong brands, products at the cutting edge, good service
and cost-effective solutions.
In 2017, you launched a sliding roof for tipper vehicles.
What is your next step?
Our new sliding roofs for tipper vehicles underwent widespread
testing in 2017 and were well received by the market. During
the year we secured our first OEM contract, which laid the foun-
dation for continuing growth in the segment. In 2018, we are
launching an electric version of the roof that we hope will help
our customers to further streamline haulage work. We have also
begun to develop a system offering in this area, and initiated
assembly and service training for service partners of the tipper
vehicle roofs. The aftermarket for this type of roof is substantial,
which is, of course, an advantage to us.
39
 VBG GROUP ANNUAL REPORT 2017 | MOBILE CLIMATE CONTROL

AN EVENTFUL YEAR FOR THE

NEWCOMER TO THE GROUP

FINANCIAL FACTS IN BRIEF

MOBILE CLIMATE CONTROL

In 2017, Mobile Climate Control established

Largest market segments

BUSES operations in India and Brazil. The past year was

OFF-ROAD VEHICLES also marked by continued development of
UTILITY VEHICLES
DEFENCE VEHICLES
connected products and a breakthrough order
of electrical climate control systems for public
Sales by region transportation in Los Angeles. This, together with
Sweden 2% several new orders in North America, contributed
Other Nordic countries 2%
Germany 2% to full-year sales of SEK 1,426.7 M. The EBITA
Rest of Europe 11%
margin amounted to 10.4 per cent.
North America 81%
Rest of the world 2%

40
 MOBILE CLIMATE CONTROL | VBG GROUP ANNUAL REPORT 2017

SIGNIFICANT EVENTS IN 2017 FOCUS FOR 2018

• Strengthened position in North America and Europe • Continue to invest in electrification of products
• Continued growth in North America with several new orders, • Work further on digitalising both business processes and products
including electric climate control systems for public buses in • Grow in climate control units for buses in Europe
Los Angeles
• Cultivate the markets in India and Brazil
• Established operations in India and Brazil
• Fully-developed connected products with technological
­solutions for large volumes of collected data

Net sales1 EBITA and EBITA margin1 Operating cash flow

MSEK % MSEK
1,600 1,427 200 12 160.8
1,264 1,276 200 149.0
159
1,200 978 1,022 150
152 149
9 127.9 10.4% 11.3%
150 9.0% 113.5
98 107 8.0%
800 100 6 –38.4
100 –8.8
400 50 3
50
0 0 0
13 14 15 16 17 0
13 14 15 16 17
EBIT EBITA EBITDA WC CAPEX Cash flow

Market leader within and outside North America
Mobile Climate Control develops, manufactures and sells com-
plete climate control systems for buses, off-road vehicles, utility
vehicles and defence vehicles. Under its own brand, Mobile Cli-
mate Control offers customised solutions in air conditioning,
heating and ventilation. The offering also includes electronic con-
trol systems, as well as a wide range of associated components.
The division’s most important market is North America, which
represents just over 80 per cent of sales, while Europe accounts
for about 17 per cent. Other sales are mainly in China, South
Africa and Brazil.
Mobile Climate Control is the market leader in climate control
systems for buses and defence vehicles in North America, and
for heating systems for buses in Europe. In off-road vehicles, the
division is the second largest player in both North America and
Europe.
Electrification and better work environment drive demand
The market for climate control systems, in which Mobile Climate
Control operates, is valued at close to SEK 4.5 billion per year in
North America and around SEK 5 billion in Europe. It is affected
by global trends such as urbanisation and electrification of the
automotive industry, something that in turn is contributing to
the ongoing shift in technology with increased demand for more
complex, electric, and qualitative climate control systems.
Another important trend is the rapidly growing global middle
class that is placing greater demands on comfort for both drivers
and passengers, which in turn drives demand for more advanced
climate control systems.
Mobile Climate Control’s customers are found primarily in
four market segments: Buses, which can be divided into transit,
coach, school and shuttle buses; Off-road vehicles in infrastruc-
ture, agriculture, forestry, mining, and materials handling; Utility
vehicles such as emergency and service vehicles; and Defence
vehicles for troop transports.

1
 he columns for 2013–2016 relate to the time before
T
VBG Group acquired Mobile Climate Control.

41
VBG GROUP ANNUAL REPORT 2017 | MOBILE CLIMATE CONTROL

OPPORTUNITIES AND CHALLENGES

STRENGTHS OPPORTUNITIES
• Strong development and testing resources • Ongoing shift towards increasingly complex, electric
• Broad and balanced customer portfolio and and more expensive climate control systems
customer value-based selling • Good growth potential for compact vehicles in
• High level of vertical integration the ­off-road vehicle segment
• Global presence • Good growth potential in India, Brazil and Africa
• Connected products

AREAS OF IMPROVEMENT CHALLENGES

• More project management resources • Rising prices for raw materials, especially for copper
within the organisation • Downward pressure on prices in the industry, even
• Increase capacity in development of in growth markets
bus products in Europe • Skills supply of electrical engineers

Customisation a crucial competitive advantage

The competitive situation varies among Mobile Climate Con-
trol’s geographical markets and customer segments. In the bus
segment in North America, Thermo King is a major competitor.
For other segments in North America, Bergstrom and Red Dot
are the principal competitors. In the bus segment and the
­segment for off-road vehicles in Europe, the division’s
­principal competitors are Heavac/Aurora, Pedro
Sanz and Konvekta. Regardless of m ­ arket and
customer group, one of Mobile C ­ limate
­Control’s most important success factors is the
ability to offer its customers a high degree of customis-
ation through its own development, design, manufacturing
and ­programming. The division has strong resources in research
and development, with more than 10 per cent of its employees
active in product development. This creates good conditions for
Mobile Climate Control to be on the leading edge of technology
and also to continue to be able to offer climate control systems
that meet its customers’ various needs.

42
 MOBILE CLIMATE CONTROL | VBG GROUP ANNUAL REPORT 2017
COMMENTS BY THE DIVISION MANAGER
Connected
products give us
greater insight
You started operations in places like Brazil in 2017 – can you
tell us what’s happened so far?
In Brazil, we recruited a few key employees and established our-
selves in suitable premises. In 2018, we’re starting installation of
climate control systems that will be sold to customers in both the
bus and off-road segments.
Mobile Climate Control has received an order for climate con-
trol systems for public transportation in Los Angeles. The deal
has been referred to as a breakthrough order – in what way?
The Los Angeles County Metropolitan Transportation Authority,
which is responsible for public transportation in Los Angeles,
previously had one of our competitors as their supplier, and it
was difficult for us to make our way in. Thanks to a deal with
the US bus manufacturer Eldorado National, to whom we will
deliver climate control systems for some 600 CNG-powered
buses, we got our foot in the door. The fact that the climate
control systems are electric, and are built on technology that will
be the standard in the future, makes this deal even more import-
ant for us.
Clas Gunneberg, Division Manager for Mobile Climate Control
What do you think of connected products?
This is an incredibly important area for us. Some of the many
benefits of connected products are that it gives us greater
insight into how the product works for the customer, and it cre-
ates greater possibilities for improving our business model with
more attractive offerings – long-term service contracts, for
example.
One important issue you’re highlighting ahead of 2018 is the
investment in climate control systems for buses in Europe. Why
did this not happen earlier?
Quite simply, it wasn’t of immediate interest to us, the market
wasn’t attractive. But thanks to the electrification under way in
the industry, and the fact that we have now brought in the right
kind of competence, we see the time is right to fully engage this
segment and do so with credibility.
43
VBG GROUP ANNUAL REPORT 2017 | MOBILE CLIMATE CONTROL

44
 MOBILE CLIMATE CONTROL | VBG GROUP ANNUAL REPORT 2017
COLLABORATION FOR A BETTER CLIMATE
– INSIDE AND OUTSIDE BUSES
In the autumn of 2017, Mobile Climate Control signed
an agreement with bus manufacturer Eldorado
National. The deal – worth USD 13 M – includes deliv-
ery of electrical climate control systems for approxi-
mately 600 CNG-powered buses that will run in Los
Angeles public transportation.
Mobile Climate Control has noticed a clear trend in the
transport sector, in the form of a shift from conventional
climate control systems to electric. In contrast to a con-
ventional system driven by a compressor linked to a
motor, an electric system is built on advanced battery
technology. The trend entails new business opportuni-
ties for Mobile Climate Control. To meet changed cus-
tomer needs, with strict requirements for functionality
and performance, the division has developed an electric
climate control system that promotes both optimal cli-
mate in buses and less environmental impact than its
predecessors through lower energy consumption – and
thereby reduced fuel consumption – in buses.
“Even though electric climate control systems are
generally 30 per cent more expensive than conventional
systems, they have many important advantages. They
weigh less, consume less energy, and don’t require as
much maintenance. In addition, our electric climate con-
trol systems are far better priced, which was crucial
when bus manufacturer Eldorado National chose us over
our competitors in the autumn of 2017,” says Clas Gun-
neberg, Division Manager for Mobile Climate Control.
The deal with Eldorado National is worth USD 13 M
and is part of a public procurement in which the Los
Angeles County Metropolitan Transportation Authority
– responsible for the city’s public transportation – is the
client. Mobile Climate Control and Eldorado National
had previously been collaborating on heating products,
but for air conditioning systems Eldorado National had
been using a different supplier. Similarly, the Los Angeles
public transportation authority had previously preferred
another supplier for the air conditioning system. In
Mobile Climate Control, the deal is regarded as a break-
through order and confirmation that the investments in
research and development were strategically correct.
“Being part of driving the development of electric cli-
mate control systems in buses not only strengthens our
position as systems supplier for commercial vehicles; it
also creates conditions for continued growth in a seg-
ment that is increasingly important to us. Electric climate
control systems are expected to become the future stan-
dard, which makes the deal with Eldorado National par-
ticularly interesting. Then, of course, satisfied customers
who place increased trust in us is always gratifying,”
Clas concludes.
45
 VBG GROUP ANNUAL REPORT 2017 | RINGFEDER POWER TRANSMISSION

MEASURES TO IMPROVE
PROFITABILITY REFLECTED IN
EARNINGS
FINANCIAL FACTS IN BRIEF
RINGFEDER POWER TRANSMISSION

2017 was marked by strong growth in both

Main market segments

GEARBOXES FOR ­ earnings and sales for Ringfeder Power

INDUSTRIAL USE Transmission. One contributing factor was that
MINING INDUSTRY the markets in Germany and the US have been
STEEL PRODUCTION AND strong. Another was the upheaval experienced
METAL INDUSTRY
by the division, with extensive measures to
ENERGY PRODUCTION
improve profitability. Ringfeder Power
INDUSTRIAL AUTOMATION
Transmission’s sales increased 15.5 per cent.
EBITA increased sharply to SEK 64.4 M, with an
Sales by region
EBITA margin of 13.4 per cent.
Nordic countries 2%
Germany 36%
Rest of Europe 13%
North America 21%
Brazil 14%
Asia 11%
Oceania 2%
Rest of the world 1%

46
 RINGFEDER POWER TRANSMISSION | VBG GROUP ANNUAL REPORT 2017

SIGNIFICANT EVENTS IN 2017 FOCUS FOR 2018

• Continued implementation of action programme • Continue measures to enhance efficiency and profitability
to improve profitability • Increase focus on digital marketing
• Measures to enhance liquidity • Develop more customised offerings
• Broader product offering in Brazil
• Streamlined product portfolio

Net sales EBITA and EBITA margin Operating cash flow

MSEK %
479 MSEK
500 80 16
396 415 64 100 76.7
4.9 –21.3
375 330 60 12 60.3 64.4 16.0% 60.2
267 75 12.6% 13.4%
38 39 12.6%
250 40 38 8
34
50
125 20 4
25
0 0 0
13 14 15 16 17 13 14 15 16 17 0
EBIT EBITA EBITDA WC CAPEX Cash flow

Market leader with a focus on quality and precision
Ringfeder Power Transmission develops, manufactures and sells
a wide range of products for advanced applications in mechani-
cal power transmission and energy and shock absorption. The
division has some 20 product lines that are marketed under its
own Ringfeder, Tschan, Henfel and Gerwah brands. Overall,
products can be divided into three product areas: shaft-hub
­couplings, shaft-shaft couplings and friction springs.
Shaft-hub couplings include locking assemblies and shrink discs
for mechanical power transmission. Shrink discs are common in
gearboxes for industrial use. Locking assemblies are used in a vari-
ety of different areas, such as cranes, hoisting devices (e.g. used
in ports), turbines in hydropower plants and various industrial
pumps. Shaft-shaft couplings are mainly used in the food, pack-
aging and automation industries. Friction springs are also used for
shock absorption in aircraft and to earthquake-proof buildings,
bridges and power plants. You will also find friction springs in
drilling equipment and used in rolling mills in industry.
The division’s operations are conducted from wholly owned
companies in Germany, the Czech Republic, the US, Brazil, India
and China. Customers are reached through the division’s own
sales personnel or through a network of agents and distributors.
One important success factor for Ringfeder Power Transmission
is the ability to offer customers products that meet strict
requirements for precision, reliability and quality.
Fragmented market
Ringfeder Power Transmission’s market is fragmented, with only
a few major players. Some of the most important market seg-
ments are the mining industry, metals production, energy pro-
duction and industrial automation.
Industrial manufacturing is steadily growing in the Asian and
South American growth markets, which drives demand for the
division’s products. In the more mature markets of Western
Europe and North America, the greater focus on efficiency
enhancements is creating favourable business opportunities for
Ringfeder Power Transmission in industrial automation.
2017 was a positive year for the German export industry,
which has benefitted Ringfeder Power Transmission as a subcon-
tractor – even if it was a major challenge to meet growing mar-
ket demand at the same time as undergoing restructuring. An
action programme to enhance profitability in the division was

47
VBG GROUP ANNUAL REPORT 2017 | RINGFEDER POWER TRANSMISSION

OPPORTUNITIES AND CHALLENGES

STRENGTHS OPPORTUNITIES
• Strong brands with attractive products • Increase profitability by specialising plants for different
•Global market leader in several product areas types of production
• Technical expertise that enables tailored solutions and • Global market
applications • Business in Brazil – when the economic situation recovers
• Customer-oriented organisation

AREAS OF IMPROVEMENT CHALLENGES

• Shorten time-to-market for new products
• Increase efficiency in production, logistics and sales
• Automate the marketing process
• Digitalise business and production processes
• Increasing competition from low-cost manufacturers
• Consolidation among competitors
• Efficient logistics process and short delivery times com-
bined with an expanded product offering to a broad cus-
tomer base

implemented in the autumn of 2016. The programme includes

efficiency enhancements for logistics and production processes
as well as a reduction in the number of employees and the
streamlining of its product portfolio to focus on the more profit-
able products with greater added value. Work towards greater
profitability will continue in 2018.

Global player with a local presence

Ringfeder Power Transmission’s ambition is for growth markets
to account for a larger share of total sales, and that the division
will increase its local presence around the world, primarily via its
own sales resources. With its established operations in Brazil, the
division holds a strategically important position with the right
conditions to expand to other markets in South America.

48
 RINGFEDER POWER TRANSMISSION | VBG GROUP ANNUAL REPORT 2017
COMMENTS BY THE DIVISION MANAGER
We have
streamlined our
product range to
enhance
profitability
You have expanded a great deal in recent years, though
profitability has declined at the same time. How have you
worked during the year to reverse the negative trend?
In 2017, we worked hard in line with the action programme
launched at the end of 2016 that aims to enhance profitability at
Ringfeder Power Transmission. Within the scope of the pro-
gramme, we have optimised stocking and specialised our plants
for different types of production – one with flexible manufactur-
ing in smaller series and one for more large-scale production. We
also streamlined our product range towards products where we
can see greater profitability potential. Moreover, I am convinced
that our transfer of Ringfeder products to Henfel and the Brazil-
ian market, as well as the cross-selling we initiated between
Tschan and Ringfeder, mainly in the German market, will have a
positive impact on the division’s profitability in the future.
What do you see as the main challenge facing
Ringfeder Power Transmission?
The business model we have chosen to follow means we own
the entire chain – from idea to sales – and we can therefore pro-
vide a broad range of products to many, widely disparate cus-
Thomas Moka, Division Manager of Ringfeder Power Transmission
tomer segments. This is one of our strengths, though it is also a
challenge to manage the business model, as it makes demands
on a very high level of quality in all parts of the chain, at the
same time as we must distinguish ourselves as a business,
towards our competitors, by offering both specialised product
solutions and exceptional service.
Your broad range of products means you have customers in
widely disparate industrial markets. Have you had any exciting
customer collaborations during the year?
Most exciting during the year, I think, was the sale of a complete
system solution for a robot system to a customer in the automa-
tion industry and where we are now the sole supplier of these
components to the robot system. We have also delivered our
Tschan TNR coupling to the world’s largest cement mill for a
customer in Bangladesh. Another different and successful collab-
oration during the year was in helping Siemens AG in China to
secure power supply to its facilities in the event of an earth-
quake, by installing our shock-absorbing friction springs along
an almost 2,000-kilometre transmission line that runs through
the country.
49
 VBG GROUP ANNUAL REPORT 2017 | THE SHARE

LONG-TERM STABLE
RETURNS

VBG Group has been listed on Nasdaq Stockholm since 1987. The share is
traded on the Mid Cap List in the Industrials Sector. In 2017, the VBG
Group’s Series B share rose 18.7 per cent to SEK 132.00. Over the past five
years, the value of the share has increased 109.4 per cent.
THE SHARE

The VBG Group’s Series B share rose by 18.7 per cent to SEK
132.00 in 2017 (111.19 adjusted price at year-end), compared
with a rise of 6.4 per cent for Nasdaq Stockholm. The highest
share price was noted on 20 October (SEK 159.50) and the low-
est on 11 February (SEK 109.50). A total of 4,698,584 of the
VBG Group’s Series B shares were traded during the year, equiv-
alent to a turnover rate of 20.8 per cent (44.0). The VBG Group’s
market capitalisation at year-end was approximately SEK 3.3 bil-
lion (2.0).
Total return
The VBG Group’s overall objective is sustainable and profitable
growth, which should also lead to long-term healthy returns for
the shareholders. The total return, meaning the change in share
price including the dividend paid, for the VBG Group’s Series B
share during 2017 was 22.3 per cent. Over the past ten-year
period, the total return for the VBG Group’s Series B share was
83.0 per cent.
Share capital
After the preferential share issue was completed at the begin-
ning of the year, the share capital in VBG Group AB amounted
to SEK 65.5 M on 31 December 2017, distributed among
26,196,024 shares with a quotient value of SEK 2.50 per share.
There are two classes of shares: 2,440,000 Series A shares and
23,756,024 Series B shares. Each Series A share carries ten votes
owned by institutions, including the three foundations and the
VBG Group’s repurchased shares.
Dividend and dividend policy
Since the company’s initial listing on the stock exchange in 1987,
and including the dividend of SEK 81.3 M proposed to the 2018
Annual General Meeting, the company has paid an average divi-
dend amounting to 33.6 per cent of the net profit. In March
2012, the Board of Directors adopted a dividend policy stipulat-
ing 30 per cent as the level of the dividend the shareholders can
expect under normal circumstances. The proposed 2018 divi-
dend corresponds to 36.9 per cent (36.3) of the Group’s net
profit.
Contacts with the stock market
The VBG Group’s contacts with the stock market are mainly
based on quarterly financial reports, press releases and presen-
tations of the VBG Group. During 2017, around a dozen meet-
ings were held with investors and analysts in Sweden. Financial
reports and other financial information are available at the
Group’s website, vbggroup.com.
The person in charge of Investor Relations is Claes Wedin, CFO,
telephone +46 521 27 77 06, e-mail claes.wedin@vbggroup.com.

36.9% 
and each Series B share carries one vote, except for the Series B
shares bought back by VBG Group AB, which carry no votes.
Following the buy-back programme that was implemented in
2002, VBG Group AB owns 1,191,976 Series B shares represent-
ing 4.6 per cent 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. The proposed 2018 dividend corresponds to
Shareholders
36.9 per cent of the Group’s net profit.
The VBG Group had 4,670 (4,595) shareholders at year-end.
The Series A shares, which represent 52 per cent of the votes in
the VBG Group, are held by three foundations: the Herman
Krefting Foundation for Allergy and Asthma Research, the SLK
Employees’ Foundation and the VBG-SLK Foundation. Of the
total number of shares in the company, 89.18 per cent are

See the diagram for total return on page 12.

50
 THE SHARE | VBG GROUP ANNUAL REPORT 2017

TEN BIGGEST SHAREHOLDERS AT 29 DECEMBER 2017

Series A Series B s Capital, Votes,
Shareholders shares hares Holding per cent per cent

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 3,326,426 3,326,426 12.70 7.08
SEB fonder 2,716,000 2,716,000 10.37 5.78
Swedbank fonder 2,336,000 2,336,000 8.92 4.97
Nordea fonder 1,690,034 1,690,034 6.45 3.60
IF Skadeförsäkring AB (publ) 1,099,192 1,099,192 4.20 2.34
Didner & Gerge Småbolag 851,000 851,000 3.25 1.81
Lindtor Maskin AB 400,000 400,000 1.53 0.85
Ten largest shareholder groups 2,440,000 17,541,694 19,981,694 76.28 89.31
Total other shareholders 5,022,354 5,022,354 19.17 10.69
Total number of outstanding shares 2,440,000 22,564,048 25,004,048 95.45 100.00
VBG Group AB, own holding 1,191,976 1,191,976 4.55
Total number of registered shares 2,440,000 23,756,000 26,196,024 100.00

SHAREHOLDER CATEGORIES SIZE OF SHAREHOLDINGS SHAREHOLDERS IN SWEDEN AND ABROAD

Percentage Percentage Percentage
29 Dec. 2017 of capital 29 Dec. 2017 of capital 29 Dec. 2017 of capital
Share Share
Foreign shareholders 13.66 holding holders Sweden 86.34
Swedish shareholders 86.34 Other European countries 12.56
< 500 3,599 1.68
Of which: Rest of world 1.10
500–5,000 940 5.50
Institutions 89.18
> 5,000 131 92.82
Private persons 10.82
Total 4,670 100.00

DATA PER SHARE

2017 2016 2015 2014 2013

Earnings, SEK 9.62 9.66 7.64 6.31 9.00

Dividend, SEK 3.251 3.50 (1.75 2) 3.25 3.00 2.75
Share price, SEK 132.00 160.50 121.00 103.75 126.00
Share price adjusted, SEK (as regards new share issue) 132.00 111.19 83.83 71.88 87.29
P/E ratio 13.7 16.6 15.8 16.4 14.0
Equity, SEK 80.18 82.01 69.71 65.40 58.99
Cash flow before change in working capital, SEK 10.63 20.08 9.43 10.97 12.82
Dividend yield, % 2.46 2.18 2.69 2.89 2.18
Total number of outstanding shares (thousands) 25,004 12,502 12,502 12,502 12,502
Average number of outstanding shares (thousands) 22,920 12,502 12,502 12,502 12,502
1
Proposed dividend per share.
2
Dividend per share based on doubling of the number of outstanding shares to 25,004,048 after the new share issue in February 2017.

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

160 Series B share

150
OMX Stockholm_PI
140
130 Number of shares
2,600
traded, thousands
120 2,400
2,200
110
2,000
100 1,800
1,600
90 1,400
1,200
80 1,000
800
70 600
400
200
Källa: ©
60 0
2013 2014 2015 2016 2017

51
VBG GROUP ANNUAL REPORT 2017 | FIVE-YEAR SUMMARY

FIVE-YEAR SUMMARY

Definitions, see Note 1 on page 74.

SEK M 2017 2016 2015 2014 2013

Sales , earnings and profitability

Net sales 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4
Operating profit before depreciation/amortisation
(EBITDA), SEK M 428.3 231.6 178.0 171.6 195.1
Operating profit before intangible assets (EBITA), SEK M 382.8 196.2 145.9 130.4 170.9
Operating profit (EBIT), SEK M 351.1 184.0 134.7 120.9 162.8
Operating margin (EBIT), % 11.7 11.9 10.2 10.2 13.9
Profit after financial items 315.6 168.2 134.5 112.7 151.7
Profit margin, % 10.5 10.9 10.2 9.5 13.0
Profit after tax 220.5 120.8 95.5 78.9 112.5
Financial position
Balance sheet total 3,663.6 3,576.9 1,258.8 1,208.7 1,072.2
Capital employed 3,064.0 2,994.1 1,062.5 1,029.4 911.0
Return on capital employed, % 10.7 12.7 13.0 12.5 18.5
Equity 2,004.9 1,025.3 871.5 817.6 737.5
Return on equity, % 12.3 12.7 11.3 10.1 16.5
Risk-bearing capital 2,164.6 1,077.9 907.4 848.9 757.2
Risk-bearing capital ratio, % 59.1 31.1 72.1 70.2 70.6
Equity/assets ratio, % 54.7 28.7 69.2 67.6 68.8
Cash flow
Cash flow before change in working capital 274.3 221.0 145.2 122.7 128.8
Cash flow from operating activities 243.7 251.0 118.0 137.2 160.3
Cash flow from investing activities –60.3 –1,295.2 –128.3 –39.9 –23.6
Cash flow from financing activities –139.0 1,162.6 –40.7 –39.4 –70.1
Cash flow for the year 44.4 118.4 –51.1 57.9 66.6
Data per share
Earnings, SEK 9.62 9.66 7.64 6.31 9.00
Dividend, SEK 3.25 1 3.50 (1.75 2) 3.25 3.00 2.75
Share price, SEK 132.00 160.50 121.00 103.75 126.00
Adjusted share price, SEK 132.00 111.19 83.83 71.88 87.29
Dividend yield, % 2.46 2.18 2.69 2.89 2.18
Other
Number of employees at year-end 1,502 1,401 748 612 523
Average number of employees 1,446 764 636 559 518
1
Proposed dividend per share.
2
Dividend per share based on doubling of the number of outstanding shares to 25,004,048 after the new share issue in February 2017.

52
FINANCIAL
STATEMENTS
Report of the Directors 54 Note 22 | Borrowing 93
Consolidated Income Statement 63 Note 23 | Trade receivables 94
Consolidated Balance Sheet 64 Note 24 | Overdraft facilities 94
Consolidated Changes in Equity 66 Note 25 | Accrued expenses and
Consolidated Cash Flow Statement 67 deferred income 94

Parent Company Income Statement 68 Note 26 | Pledged assets 94

Parent Company Balance Sheet 68 Note 27 | Contingent liabilities 95

Parent Company Changes in Equity 70 Note 28 | Operating leases 95

Parent Company Cash Flow Statement 70 Note 29 | Consolidated cash flow state-
ment 95
Alternative Performance Measures 71
Note 30 | Business combinations 96

Notes to Parent Company and Note 31 | Significant accounting esti-

consolidated financial statements 74 mates and assessments 96

Note 1 | General information 74 Note 32 | Proposed distribution of prof-

its 97
Note 2 | Risks and risk management 78
Note 33 | Significant events after the
Note 3 | Segment reporting 80 close of the financial year 97
Note 4 | Other operating income 82
Note 5 | Other
 operating expenses 82 Signatures 97
Note 6 | Salaries, other remuneration Audit Report 98
and social security contribu-
tions 83
Note 7 | Fees and cost reimbursement
paid to auditor 85
Note 8 | Depreciation, amortisation
and impairment 85
Note 9 | Operating expenses classified
by nature of expense 85
Note 10 | Appropriations 85
Note 11 | Tax on profit for the year 86
Note 12 | Intangible assets 86
Note 13 | P
 roperty, plant and equip-
ment 87
Note 14 | Interests in Group companies,
changes in book values 88
Note 15 | D
 eferred tax liabilities/assets 89
Note 16 | Inventories 90
Note 17 | Prepaid expenses and
accrued income 90
Note 18 | Equity 91
Note 19 | Untaxed reserves 91
Note 20 | Provisions for pensions and
similar obligations 91
Note 21 | Other provisions 93

53
VBG GROUP ANNUAL REPORT 2017 | REPORT OF THE DIRECTORS
Report of the Directors
VBG Group AB (publ) Corp. ID No. 556069–0751
(All amounts in SEK thousand unless otherwise stated.)
The Board of Directors and Managing Director of VBG Group AB
(publ) hereby submit their annual report and consolidated finan-
cial statements for the 2017 financial year, the company’s 59th
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 Europe, North America, Brazil, South Africa, Australia,
India and China. The Group’s operations are grouped into four
divisions – VBG Truck Equipment, Edscha Trailer Systems, Mobile
Climate Control and Ringfeder Power Transmission – with prod-
ucts that are marketed under strong, well-known brands. VBG
Group AB’s Series B share was introduced on the stock exchange
in 1987 and is listed today on the Nasdaq Stockholm Mid Cap
list.
Divisions
Operations are grouped into four divisions:
• VBG Truck Equipment is an internationally leading supplier of
equipment and systems to customers in the truck industry
and includes the brands VBG and Ringfeder for coupling
equipment and Onspot for automatic tyre chains. Customers
are mainly truck manufacturers, body builders, hauliers and
importers.
• Edscha Trailer Systems is the market’s biggest manufacturer
of sliding roofs for trailers. The main brand is Edscha Trailer
Systems, and the complementary brand is Sesam. The cus-
tomers primarily consist of the major European trailer manu-
facturers.
• Mobile Climate Control is an industry-leading supplier of
complete climate control systems (HVAC systems) for com-
mercial motor vehicles, primarily in North America and
Europe. The customers are mainly found in four market seg-
ments: buses, off-road vehicles, utility vehicles and defence
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, Henfel, Tschan and Gerwah brands. The customers
are machine manufacturers, companies in the mining industry
and other high-tech companies all over the world.
Consolidated sales and earnings
Consolidated full-year sales increased 94.4 per cent to SEK
3,002.0 M (1,543.9). Excluding the annual effect of the acquired
volumes amounting to SEK 1,309.2 M pertaining to Mobile Cli-
mate Control, the change in volume was 9.6 per cent. Adjusted
for currency effects, the actual organic growth was 8.4 per cent
(5.4).
54
The Group’s adjusted operating profit rose to SEK 358.6 M
(196.7), with an operating margin of 11.9 per cent (12.7). The
Group was impacted by an item affecting comparability of nega-
tive SEK 7.5 M (neg: 12.7) in connection with reorganisation
costs for Edscha Trailer Systems. Accordingly, the reported full-
year operating profit amounted to SEK 351.1 M (184.0), with a
margin of 11.7 per cent (11.9).
The acquired company Mobile Climate Control contributed
SEK 127.9 M (5.0) to operating profit.
The consolidated operating profit included Group-wide over-
heads of SEK 20.5 M (22.5) that were not allocated among the
various divisions.
Net interest expense for the full-year amounted to SEK 40.1
M (expense: 10.8) and the Swedish companies’ foreign-currency
denominated credits were impacted positively by a currency
effect of SEK 4.7 M (neg: 5.0). Taken together, this resulted in a
net financial expense of SEK 35.5 M (expense: 15.8), where
increased costs were the result of loans taken out in conjunction
with the acquisition of Mobile Climate Control.
Accordingly, profit after financial items amounted to SEK
315.6 M (168.2), with a margin of 10.5 per cent (10.9).
Profit after tax totalled SEK 220.5 M (120.8), corresponding to
earnings per average number of outstanding shares of SEK 9.62
(9.66).
Return on capital employed declined to 10.7 per cent (12.7),
while return on equity was 12.3 per cent (12.7). The Group’s
equity/assets ratio increased year-on-year to 54.7 per cent
(28.7).
Significant events during the financial year
The acquisition of Mobile Climate Control Group Holding AB –
a transaction that would substantially mark the Group’s 2017
operations – was completed on 23 November 2016.
The acquisition resulted in a significant change in the Group’s
financing and indebtedness. In conjunction with the acquisition,
VBG Group AB signed a new three-year financing agreement
with SEB for a total of SEK 2,200 M, divided into a term loan of
SEK 1,000 M, a revolving facility of SEK 400 M and a shorter
bridge loan of SEK 800 M.
At the beginning of the year, a 1:1 preferential share issue was
carried out, which meant that the number of outstanding shares
(Series A and Series B) doubled from 12,504,024 to 25,004,048
shares. Equity of SEK 779 M, net after issue expenses, was
thereby injected into the company at the end of February. The
proceeds from the new share issue were used to normalise the
Group’s net indebtedness by paying off the bridge loan of SEK
800 M.
At the end of the year, VBG Group established a new Group
Management with four people from the Parent Company and
the Division Managers for the Group’s two largest divisions,
VBG Truck Equipment and Mobile Climate Control, both of
which were given a more central role in the work on developing
VBG Group. The purpose was to create a business structure that
 REPORT OF THE DIRECTORS | VBG GROUP ANNUAL REPORT 2017

Group trend, SEK M 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Net sales 3,002.0 737.0 719.2 777.2 768.6 1,543.9 464.7 335.2 372.4 371.6
Adjusted operating profit (EBIT) 358.6 75.7 81.7 98.5 102.7 196.7 45.3 51.7 48.6 51.1
Adjusted operating margin, % 11.9 10.3 11.4 12.7 13.4 12.7 9.7 15.4 13.1 13.7
Items affecting comparability –7.51 –7.51 — — — –12.72 –12.72 — — —
Reported operating profit (EBIT) 351.1 68.2 81.7 98.5 102.7 184.0 32.6 51.7 48.6 51.1
Reported operating margin, % 11.7 9.2 11.4 12.7 13.4 11.9 7.0 15.4 13.1 13.7
Profit after financial items 315.6 52.7 75.1 93.6 94.2 168.2 21.7 50.5 47.1 48.9
Profit margin, % 10.5 7.1 10.4 12.0 12.3 10.9 4.7 15.1 12.6 13.2
Profit after tax 220.5 30.6 53.2 70.1 66.6 120.8 9.6 40.0 36.3 34.9
Earnings per share, SEK 9.62 1.34 2.13 2.80 3.80 9.66 0.76 3.20 2.91 2.79
ROCE (cumulative), % 10.7 10.7 11.0 11.0 13.7 12.7 12.7 18.0 18.3 19.0
ROE (cumulative), % 12.3 12.3 14.0 15.8 17.6 12.7 12.7 15.8 15.7 15.6
Equity/assets ratio, % 54.7 54.7 53.0 51.7 51.0 28.7 28.7 71.1 68.9 68.5
1
 egative SEK 7.5 M in reorganisation costs pertaining to Edscha Trailer Systems.
N
2
Negative SEK 7.9 M pertaining to acquisition-related costs attributable to the acquisition of Mobile Climate Control,
and negative SEK 4.8 M pertaining to an action programme to increase profitability in Ringfeder Power Transmission.

promotes both cross-organisational cooperation and utilisation
of competence in the Group. Part of the reorganisation entailed
giving Anders Erkén, Division Manager for VBG Truck Equip-
ment, overall responsibility for the Group’s other two divisions,
Ringfeder Power Transmission and Edscha Trailer Systems. The
reorganisation did not affect how the Group reports its earnings;
the reporting will continue to be grouped according to the four
separate divisions.
VBG Truck Equipment
During the first quarter of the year, VBG Truck Equipment
reported strong sales and a high operating margin. This was the
result of a healthy economic trend and a strong market situation
in the industry, combined with a highly efficient operating struc-
ture. The division followed this with a very strong second quar-
ter, where part of the success can be ascribed to the work on
developing the Onspot business through digital marketing. Digi-
talisation has also begun for the division’s other brands and VBG
Truck Equipment is considered to be relatively early with this in
its industry. The third quarter remained strong, but the slightly
weaker result was explained by the investment of resources into
establishing operations in Brazil and China, and that the division
continued its intensive work with product development and the
digitalisation of sales and marketing. The division then ended
the year with its strongest fourth quarter ever, making the year
as a whole the best in its history.
For full-year 2017, sales increased 10.5 per cent to SEK 836.7
M (757.3). Adjusted for currency effects during the year, the
actual organic growth was 9.8 per cent.
Full-year operating profit increased to SEK 169.8 M (147.2),
with a continued strong operating margin of 20.3 per cent (19.4).
During 2017, VBG Truck Equipment had an average of 271
employees (264), and 278 persons (267) were employed in the
division at 31 December 2017.

Sales/Earnings, SEK M
VBG Truck Equipment 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Net sales 836.7 223.1 185.5 202.3 225.8 757.3 197.5 172.3 194.1 193.4
EBITDA 184.6 50.4 37.4 39.8 57.0 163.3 43.3 39.8 39.0 41.1
EBITA 170.8 46.7 34.1 36.3 53.6 149.2 39.8 36.3 35.5 37.6
EBITA margin, % 20.4 21.0 18.4 18.0 23.7 19.7 20.2 21.1 18.3 19.4
Operating profit (EBIT) 169.8 46.5 33.9 36.1 53.3 147.2 39.3 35.8 35.0 37.1
Operating margin (EBIT), % 20.3 20.8 18.3 17.9 23.6 19.4 19.9 20.8 18.0 19.2

55
VBG GROUP ANNUAL REPORT 2017 | REPORT OF THE DIRECTORS

Sales, SEK M
Market 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Sweden 199.0 48.7 44.0 50.3 56.0 204.4 55.7 45.4 51.8 51.5
Other Nordic countries 135.9 32.6 28.0 34.3 41.0 125.1 31.7 27.4 34.1 31.9
Germany 118.8 29.8 28.6 27.2 33.2 106.4 24.8 23.8 30.4 27.4
Other European countries 196.5 47.0 44.7 50.3 54.5 178.0 41.8 40.4 50.0 45.8
North America 92.0 28.6 20.5 18.8 24.1 85.6 29.2 18.7 14.9 22.8
Australia/New Zealand 67.7 22.9 16.3 15.1 13.4 44.7 10.7 12.2 10.7 11.1
Rest of world 26.8 13.6 3.4 6.2 3.6 13.1 3.6 4.4 2.2 2.9
VBG Truck Equipment 836.7 223.1 185.5 202.3 225.8 757.3 197.5 172.3 194.1 193.4

Edscha Trailer Systems
Edscha Trailer Systems had a stable start to the year, with strong
sales in Germany that compensated for weaker performance in
the Turkish market. The division’s second quarter maintained a
similar level, with sales of almost SEK 70 M, which resulted in
operating margin for the first six months of the year standing at
slightly above 11 per cent. The profitability trend ended in the
third quarter, when sales declined to just below SEK 60 M.
Lower sales meant low capacity utilisation, which had a negative
impact on profitability. Moreover, two of the division’s main
suppliers also experienced delivery problems, which resulted in
extra costs. Measures implemented in the fourth quarter had a
slightly positive effect relatively quickly, and there is reason to
expect stronger business moving forward. In addition, a reor-
ganisation was carried out in which a new Division Manager and
executive management were appointed.
Full-year sales decreased by 4.0 per cent to SEK 259.7 M
(270.5). Adjusted for currency effects, the actual organic growth
was negative 5.8 per cent.
The adjusted operating profit declined to SEK 21.1 M (30.0),
with an operating margin of 8.1 per cent (11.1). Operating profit
amounted to SEK 13.6 M (30.0), with a margin of 5.3 per cent
(11.1).
In 2017, Edscha Trailer Systems had an average of 91 employ-
ees (79) and, at 31 December 2017, 88 persons (85) were
employed in the division.

Sales/Earnings, SEK M
Edscha Trailer Systems 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Net sales 259.7 63.4 57.5 69.3 69.5 270.5 66.0 61.2 74.8 68.5
Adjusted EBITDA 31.7 7.4 3.4 10.2 10.7 40.4 8.5 8.7 11.8 11.4
Adjusted EBITA 26.3 6.0 2.0 8.8 9.4 35.0 7.2 7.4 10.5 10.1
Adjusted EBITA margin, % 10.1 9.5 3.5 12.8 13.6 12.9 10.8 12.0 14.0 14.7
Adjusted operating profit (EBIT) 21.1 4.7 0.7 7.6 8.2 30.0 5.9 6.1 9.2 8.8
Adjusted operating margin (EBIT), % 8.1 7.4 1.2 10.9 11.8 11.1 8.9 10.0 12.3 12.8
Item affecting comparability –7.51 –7.51 — — — — — — — —
Reported operating profit/loss (EBIT) 13.6 –2.8 0.7 7.6 8.2 30.0 5.9 6.1 9.2 8.8
Reported operating margin (EBIT), % 5.3 –4.5 1.2 10.9 11.8 11.1 8.9 10.0 12.3 12.8
1
Negative SEK 7.5 M in restructuring costs.

Sales, SEK M
Market 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Sweden 0.2 0.0 0.1 0.0 0.1 0.3 0.1 0.0 0.1 0.1
Other Nordic countries 1.3 0.2 0.5 0.4 0.3 0.9 0.1 0.2 0.3 0.3
Germany 147.0 36.5 31.9 37.1 41.4 159.8 28.2 40.8 47.4 43.4
Other European countries 110.3 26.5 25.0 31.1 27.6 108.4 37.5 20.1 26.5 24.3
Rest of world 0.9 0.1 0.0 0.7 0.1 1.1 0.1 0.1 0.5 0.4
Edscha Trailer Systems 259.7 63.4 57.5 69.3 69.5 270.5 66.0 61.2 74.8 68.5

56
 REPORT OF THE DIRECTORS | VBG GROUP ANNUAL REPORT 2017

Mobile Climate Control
Mobile Climate Control noted favourable demand in almost all
markets in the first quarter, which together with the fourth
quarter, is normally the weakest quarter in terms of sales during
the financial year. The acquisition balance drawn up by the VBG
Group following the acquisition of the division identified consoli-
dated intangible assets that are amortised, and thereby impact
the division’s operating profit by SEK 20 M per year for 20 years.
The second quarter was stronger than the first quarter both in
terms of sales and earnings. This positive growth meant the divi-
sion needed to employ new staff in both sales and product
development, which entailed increased costs. This fact, com-
bined with certain seasonal fluctuations that normally occur in
the fourth quarter being felt already in the third quarter, had a
slightly negative impact on sales and earnings for the third quar-
ter. Mobile Climate Control also had costs for closing Mobile Cli-
mate Control Holding AB in Stockholm and transferring the reg-
istered office to Vänersborg in the third quarter. In general, the
first three quarters also noted rising prices for key input materi-
als, such as copper and aluminium, which had a certain impact
on earnings. Overall for the year, operations grew significantly,
though profitability has failed to keep pace. Market and product
development initiatives are expected to result in profitability
improvements by a number of percentage points compared with
the outcome for 2017.
Mobile Climate Control’s first year as part of the VBG Group
has entailed sales of SEK 1,426.7 M for the full-year. Operating
profit for the full-year was SEK 127.9 M, with an operating mar-
gin of 9.0 per cent.
Mobile Climate Control had 785 employees (688) at 31
December 2017. An average of 767 people (69) were employed
in 2017. The low average number of employees in 2016 was due
to the calculation being based on the 37 days during 2016 that
Mobile Climate Control was part of VBG Group.

Sales/Earnings, SEK M
Mobile Climate Control 2017 4/17 3/17 2/17 1/17 20161 4/161 3/16 2/16 1/16

Net sales 1,426.7 338.6 357.4 383.2 347.5 101.4 101.4

EBITDA 160.8 28.6 42.8 52.4 37.0 6.5 6.5
EBITA 149.0 25.6 39.9 49.5 34.1 5.1 5.1
EBITA margin, % 10.4 7.6 11.2 12.9 9.8 5.0 5.0
Operating profit (EBIT) 127.9 20.3 34.6 44.2 28.8 5.0 5.0
Operating margin (EBIT), % 9.0 6.0 9.7 11.5 8.3 4.9 4.9

Sales, SEK M
Market 2017 4/17 3/17 2/17 1/17 20161 4/161 3/16 2/16 1/16

Sweden 37.3 8.0 8.2 9.1 11.9 2.9 2.9

Other Nordic countries 28.6 7.9 8.3 6.8 5.6 1.7 1.7
Germany 24.1 6.3 7.0 5.7 5.2 3.5 3.5
Other European countries 152.8 37.3 38.2 39.0 38.4 10.9 10.9
North America 1,155.7 273.6 288.2 314.5 279.5 78.5 78.5
Rest of world 28.2 5.7 7.4 8.1 7.0 4.0 4.0
Mobile Climate Control 1,426.7 338.6 357.4 383.2 347.5 101.4 101.4

1
Relates to the period from 23 November to 31 December 2016.

57
VBG GROUP ANNUAL REPORT 2017 | REPORT OF THE DIRECTORS

Ringfeder Power Transmission
At the end of 2016, Ringfeder Power Transmission was working
intensively with an action programme with the aim of imple-
menting structural improvements internally. Most of the work
was conducted during the first quarter, but also continued for
the remainder of 2017. The start of the year was better than
expected, both in terms of sales and earnings, in part due to the
cost savings achieved through the action programme. There was
also clearly rising demand in the European market during the
first quarter. In the second quarter, the division doubled its oper-
ating profit year-on-year, as a result of cost-saving measures
implemented and a favourable shift in the product mix, with
higher sales of more profitable products. The positive trend con-
tinued in the third quarter, both for sales and earnings, with very
positive developments in the two key markets of Germany and
the USA. The strong finish to the year meant the division neared
SEK 500 M in sales and also that operating profit for the year
exceeded SEK 60 M. Profitability improved dramatically to just
over 12 per cent.
For the full-year, Ringfeder Power Transmission increased
sales by 15.5 per cent to SEK 479.1 M (414.7). If the changes in
exchange rates between the years are taken into account, the
actual organic growth was 13.1 per cent. Adjusted operating
profit increased to SEK 60.3 M (29.0), with an adjusted margin
of 12.6 per cent (7.0). The division’s reported operating profit
increased to SEK 60.3 M (24.2). The reported operating margin
was 12.6 per cent (5.8).
During 2017, Ringfeder Power Transmission had an average of
309 employees (343) and, at 31 December 2017, 342 persons
(355) were employed in the division.

Sales/Earnings, SEK M
Ringfeder Power Transmission 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Net sales 479.1 112.0 118.8 122.4 125.8 414.7 99.9 101.7 103.5 109.6
Adjusted EBITDA 76.7 15.6 19.5 20.6 21.0 46.7 6.1 16.3 11.6 12.6
Adjusted EBITA 64.4 12.5 16.5 17.6 17.8 33.9 2.9 13.1 8.4 9.4
Adjusted EBITA margin, % 13.4 11.1 13.9 14.4 14.1 8.2 2.9 12.9 8.1 8.6
Adjusted operating profit (EBIT) 60.3 11.5 15.5 16.6 16.7 29.0 1.7 11.9 7.2 8.2
Adjusted operating margin (EBIT), % 12.6 10.3 13.0 13.5 13.3 7.0 1.7 11.7 7.0 7.5
Item affecting comparability — — — — — –4.81 –4.81 — — —
Reported operating profit/loss (EBIT) 60.3 11.5 15.5 16.6 16.7 24.2 –3.1 11.9 7.2 8.2
Reported operating margin (EBIT), % 12.6 10.3 13.0 13.5 13.3 5.8 –3.1 11.7 7.0 7.5
1
Negative SEK 4.8 M pertaining to an action programme to increase profitability.

Sales, SEK M
Market 2017 4/17 3/17 2/17 1/17 2016 4/16 3/16 2/16 1/16

Sweden 4.6 1.3 1.1 0.7 1.5 4.2 0.9 1.3 0.8 1.2
Other Nordic countries 4.0 0.9 1.1 0.9 1.0 5.1 1.3 1.1 1.4 1.3
Germany 170.3 37.7 43.1 43.5 46.0 153.8 36.7 38.9 37.3 40.9
Other European countries 62.2 14.6 15.3 15.7 16.6 52.1 13.2 12.2 14.9 11.8
North America 101.1 24.3 24.2 26.0 26.6 87.1 22.8 19.7 22.2 22.4
Brazil 66.7 16.0 16.2 18.9 15.6 56.7 14.5 12.7 18.9 10.6
Australia/New Zealand 11.5 1.9 2.5 2.5 4.6 8.8 1.2 3.1 2.7 1.8
Rest of world 58.7 15.3 15.3 14.2 13.9 46.9 9.3 12.7 5.3 19.6
Ringfeder Power Transmission 479.1 112.0 118.8 122.4 125.8 414.7 99.9 101.7 103.5 109.6

58
 REPORT OF THE DIRECTORS | VBG GROUP ANNUAL REPORT 2017

Five-year summary of the Group’s financial performance

and position
(definitions, see Note 1), SEK M 2017 2016 2015 2014 2013

Sales and earnings

Net sales 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4
Gross profit 1,067.9 625.9 537.4 468.8 479.6
EBITDA 428.3 231.6 178.0 171.6 195.1
EBITA 382.8 196.2 145.9 130.4 170.9
Operating profit (EBIT) 351.1 184.0 134.7 120.9 162.8
Profit after financial items 315.6 168.2 134.5 112.7 151.7
Profit after tax 220.5 120.8 95.5 78.9 112.5
Financial position
Balance sheet total 3,663.6 3,576.9 1,258.8 1,208.7 1,072.2
Equity 2,004.9 1,025.3 871.5 817.6 737.5
Equity/assets ratio, % 54.7 28.7 69.2 67.6 68.8
Interest-bearing net debt (incl. pension liability) 742.3 1,692.4 47.1 16.3 42.0
Interest-bearing net debt/EBITDA 1.7 7.3 0.3 0.1 0.2
Goodwill/Equity 0.6 1.1 0.4 0.3 0.4
Profitability
Gross margin, % 35.6 40.5 40.9 39.5 40.9
EBITDA margin, % 14.3 15.0 13.5 14.5 16.7
EBITA margin, % 12.8 12.7 11.1 11.0 14.6
Operating margin (EBIT), % 11.7 11.9 10.2 10.2 13.9
Profit margin before tax, % 10.5 10.9 10.2 9.5 13.0
Return on capital employed (ROCE), % 10.7 12.7 13.0 12.5 18.5
Return on equity (ROE), % 12.3 12.7 11.3 10.1 16.5
Earnings per share, SEK 9.62 9.66 7.64 6.31 9.00
Other
Amortisation of intangible assets 31.7 12.2 11.2 9.5 8.1
Depreciation of tangible assets 45.5 35.4 32.1 28.0 24.2
Goodwill impairment, Edscha Trailer Systems — — — –60.0 —
Negative goodwill, acquisition of Tschan GmbH — — — 46.8 —
Number of employees at year-end 1,502 1,401 748 612 523
Average number of employees 1,446 764 636 559 518
Personnel costs 717.1 415.9 357.7 302.8 274.5
Salaries and social security contributions per employee,
SEK ‘000 495.9 544.4 562.4 541.7 529.9

59
VBG GROUP ANNUAL REPORT 2017 | REPORT OF THE DIRECTORS
Tax expense
The tax expense for the year was SEK 95.1 M (47.4), of which
current tax accounted for SEK 77.4 M (50.9) and deferred tax
for a positive SEK 17.7 M (neg: 3.5). The tax expense for the
year corresponds to a tax rate for the Group of 30.1 per cent
(28.2). Part of the cost for deferred tax is the result of the reduc-
tion in corporate taxation in the US in 2018, meaning the value
of the Group’s deferred tax assets in the US were impaired by
SEK 3.8 M.
Capital expenditures
The Group’s investments for the year amounted to SEK 54.5 M
(SEK 45.9 M excluding acquired subsidiaries), of which intangible
assets totalled SEK 2.4 M and tangible assets totalled SEK 52.0 M.
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 declined to SEK 243.7 M
(251.0). Paid capital expenditures during the year amounted to
SEK 60.3 M (SEK 1,295.2 M, of which SEK 1,263.9 M pertained
to the acquisition of Mobile Climate Control Group Holding AB
in 2016). During the year, the Group’s total borrowings and cur-
rent financial liability declined SEK 873.9 M (increase of SEK
1,203.3 M), net, with a dividend payment to the shareholders of
SEK 43.8 M (40.6). The new share issue carried out contributed
SEK 778.6 M net in new capital, which overall resulted in a neg-
ative cash flow from financing activities of negative SEK 139.0 M
(pos: 1,162.6). Consequently, net cash flow for the year was SEK
44.4 M (118.4).
Profit after tax for the full year amounted to SEK 220.5 M
(120.8) and other comprehensive income totalled SEK 24.2 M
(73.7), which consisted of exchange rate changes and the impact
of the translation of defined-benefit pension plans. Comprehen-
sive income therefore totalled SEK 244.7 M (194.5). The new
share issue carried out generated SEK 778.6 M, net. After the
payment of dividends totalling SEK 43.8 M (40.6) to the share-
holders, consolidated equity increased to SEK 2,004.9 M
(1,025.3).
The equity/assets ratio increased during the year to 54.7 per
cent (28.7).
Cash and cash equivalents increased by SEK 45.1 M (132.5)
during the year to SEK 321.4 M (276.4) at year end. In addition,
there were unutilised overdraft facilities of SEK 100.0 M (0.0),
giving the Group an available liquidity of SEK 421.4 M (276.4) at
year-end.
The Group’s interest-bearing net debt (including pension lia-
bility) declined by SEK 950.2 M during the year to SEK 742.3 M
(1,692.4) at year-end. The reduction is due to the new share
issue that contributed SEK 778.6 M net in new capital to the
Group, which was used to pay off the bridge loan of SEK 800 M
raised in connection with the acquisition of Mobile Climate Con-
trol in November 2016.
60
The ratio of interest-bearing net debt to equity was 0.37 at 31
December 2017 (1.65 at 31 December 2016) and the ratio of net
debt to consolidated operating profit before depreciation/amor-
tisation and impairment (EBITDA) was 1.73 (7.31).
The acquisition of Mobile Climate Control in 2016 resulted in
preliminary goodwill of SEK 1,446.7 M. The preliminary acquisi-
tion balance was updated in the first quarter of 2017, which is
described in the interim report for January–March 2017. The
acquisition balance was preliminary pending the completion of
the process to identify and determine the fair value of intangible
assets separate from goodwill. During the fourth quarter, the
final acquisition balance was confirmed, meaning the Mobile Cli-
mate Control brand with indefinite useful life was set at SEK
400.0 M and customer relationships with an expected useful life
of 20 years were as valued at SEK 396.9 M. Taken together, the
final acquisition balance means the goodwill value attributable
to Mobile Climate Control decreased to SEK 764.9 M on the
acquisition date. The final acquisition plan is recognised retroac-
tively on the acquisition date, meaning the consolidated balance
sheet and key figures at 31 December 2016 and subsequent
periods have been updated. The final acquisition balance has not
affected the value of amortisation on acquisition-related intangi-
ble assets recognised for earlier periods in 2016 and 2017.
The Group’s remaining goodwill declined SEK 3.4 M due to
exchange rate changes. The net effect of this was that the
Group’s goodwill at 31 December 2017 amounted to SEK
1,118.9 M (1,122.3), which in relation to equity amounted to a
ratio of 0.56 (1.09).
Personnel
At 31 December 2017, there were 1,502 employees in the VBG
Group (1,401), of which 785 (688) in Mobile Climate Control.
Of the total number of employees, 211 were in Sweden (201).
The Group employed an average of 1,446 persons (764) in
2017, representing an increase of 89.0 per cent. Of these, 207
(205) were active in Sweden. The cost of salaries and social
security contributions in 2017 increased 72.6 per cent, of which
the acquired company Mobile Climate Control accounted for
70.2 per cent, to SEK 717.1 M.
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.
During the year, the company sold the industrial property in
Vänersborg to the subsidiary VBG Group Truck Equipment AB.
The objective is to gather the Group’s intangible assets, in the
form of brands and other rights, into the Parent Company. VBG
Group AB focuses on maintaining and developing all the Group’s
brands and rights.
The Parent Company’s net sales pertain primarily to intra-
Group services, licence revenues and rentals and amounted to
SEK 29.2 M during the year (26.9). The operating loss for the
year was SEK 16.7 M (loss: 12.9). After dividends from Group
companies totalling SEK 64.9 M (52.2), negative exchange rate
differences of SEK 12.4 M (pos: 1.6), net interest expenses total-
ling SEK 21.65 M (expense: 4.5), and impairment losses on
 REPORT OF THE DIRECTORS | VBG GROUP ANNUAL REPORT 2017
shares in subsidiaries of SEK 50.0 M, the loss after financial items
amounted to SEK 35.8 M (profit: 36.3).
In 2017, an impairment loss of SEK 50 M was incurred for
shares in a subsidiary, which was prompted by the changes to
the business direction of the company in question toward
becoming a dedicated distribution company.
Sustainability reporting
Sustainability issues continued to hold a central position in VBG
Group in 2017. We have chosen to report on our sustainability
activities in a section on sustainability, pages 23–27, and with
reference to this (page 61) in the Report of the Directors for
more detailed information on the stakeholder and materiality
analysis conducted in the Group during the year. Sustainability
risks, and how they are managed, are presented together with
other risks in Note 2 Risks and risk management, on page 80.
Stakeholders and material issues
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 custom-
ers, 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 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:
Environmental responsibility
Waste products, consumption and emissions
The Group strives to be as efficient as possible in using both
finite and renewable resources. The reuse of excess heat to
warm up company premises and the installation of units to chill
water in the production process – which minimised the con-
sumption of fresh water – can be named as examples. The
Group also strives to utilize raw materials as efficiently as possi-
ble. 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 mental impact.
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 alternately 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 procedures 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, from 2017 all employees in senior posi-
tions and 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 cus-
tomers, 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 type
of remuneration from third parties that could affect their objec-
tivity in taking business decisions.
Environmental impact
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 pro-
tect 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 pollution from truck
transport, for example. VBG Truck Equipment’s strategic part-
nerships with customers and suppliers enable the Group to keep
abreast of market trends while creating opportunities for the
Group to get in on the development work early and influence
the direction it takes. The products manufactured and sold by
VBG Truck Equipment not only comply with regulatory require-
ments, but also meet the explicit and implicit needs of the cus-
tomers when it comes to reliability, ergonomics, design and
environmental impact.
The VBG Group’s environmental 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 noise is reduced.
• all employees are aware of their own and the Group’s environ-
• 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.
61
VBG GROUP ANNUAL REPORT 2017 | REPORT OF THE DIRECTORS
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.
VBG Truck Equipment’s production unit in Vänersborg is envi-
ronmentally certified under ISO 14001 and conducts activities
requiring a permit under the Environmental Code. The permit is
needed for the handling of large volumes of cutting fluid. Mobile
Climate Control’s facility in Norrtälje is also environmentally cer-
tified under ISO 14001.
Outlook for 2018
The Group makes no forecast regarding figures, but its assess-
ment is that the potential exists for the Group to increase sales
and earnings in 2018.
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 dep-
uties. In addition, the trade unions, Unionen/Swedish Associa-
tion of Graduate Engineers/Ledarna and IF Metall, each appoint
one member and one deputy member. Company officers take
part in Board meetings by submitting reports or serving in the
post of secretary.
During 2017 financial year, the Board of Directors held 12 (15)
meetings. 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 Managing Director.
The 2017 AGM appointed a Nominating Committee, and on
behalf of the AGM, the Board appointed an Audit Committee
and a Compensation Committee. 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 officers
The 2017 AGM passed a resolution adopting the following
guidelines for remuneration to senior officers. The guidelines
pertain to remuneration and other terms of employment for the
VBG Group’s executive management and other senior officers.
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
officers, the variable portion can amount to a maximum of 50
per cent of their fixed annual salary. In addition to the above
remunerations, other benefits may also be provided such as
company car and healthcare. The management generally enjoys
pension benefits as provided by law and collective agreement
(the ITP plan). It is, however, possible for the individual to opt
for other pension arrangements at the same cost to the com-
pany. Persons residing outside Sweden receive the pension ben-
efits that are customary in each particular country. For officers
residing in Sweden, the period of notice of termination 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 sever-
ance pay that are customary in each particular country are
applied. The Compensation Committee decides on salaries and
other terms of employment.
62
The Board proposes an addition to the guidelines for remuner-
ation to senior officers to the 2018 AGM. After the sentence
“For senior officers, the variable portion can amount to a maxi-
mum of 50 per cent of their fixed annual salary”, the following
addition is proposed: “In addition, long-term variable remunera-
tion in the form of shares and/or share-based instruments in
VBG Group AB can be paid out through participation in long-
term incentive programmes decided by the General Meeting.”
The VBG Group share and shareholders
In the first quarter, an oversubscribed new share issue was com-
pleted, 1:1 of outstanding Series A shares (1,220,000 shares)
and Series B shares (11,282,024 shares) with preferential rights
for existing shareholders, whereby VBG Group received SEK
778.6 M net after issue expenses. The total number of outstand-
ing shares (Series A and Series B) increased accordingly from
12,502,024 shares to 25,004,048 shares. The issue price was set
at SEK 64 per share for both Series A and Series B shares.
For the full year, the average number of outstanding shares is
estimated at 22,920,377 shares (12,502,024 for the year-earlier
period) and the number of outstanding shares at the end of the
year was 25,004,048 shares (12,502,024). This has consequently
impacted the key figures for the year.
Earnings per share for the year (average number) amounted to
SEK 9.62 (9.66). At 31 December 2017, equity per share (total
outstanding) was SEK 80.18, compared with SEK 82.01 year-on-
year.
At the end of the year, the share price was SEK 132.00, which
corresponds to a market capitalisation of SEK 3,301 M, com-
pared to a share price of SEK 160.50 and market capitalisation
of SEK 2,006 M year-on-year. The adjusted share price year-on-
year was SEK 111.19.
The number of shareholders increased by 75 during the year,
amounting at year-end to 4,670 (4,595).
Significant events after the close of the financial year
No significant events occurred after the balance sheet date.
Proposed distribution of profits
In proposing the dividend, the Board of Directors has taken into
account the Group’s long-term development potential, financial
position and investment needs. Bearing these factors in mind,
the Board of Directors of VBG Group AB (publ) proposes that
the 2018 Annual General Meeting resolve to approve a dividend
of SEK 3.25 per share (1.75) for the 2017 financial year. The pro-
posed dividend entails a total distribution of funds from the Par-
ent Company of SEK 81.3 M (43.8), equivalent to 4.1 per cent of
the Group’s equity at year end. The Group reported profit after
tax of SEK 220.5 M (120.8), which means that the proposed div-
idend represents 36.9 per cent of net profit for the year (36.3).
The following funds in the Parent Company are available for
distribution by the AGM:
Retained earnings SEK 1,148,936,989
Net profit for the year SEK 15,150,555
SEK 1,164,087,544
The Board of Directors and the Managing Director propose that
these funds be distributed as follows:
Dividend to shareholders SEK 81,264,156
Carried forward to new account SEK 1,082,823,388
SEK 1,164,087,544
 CONSOLIDATED INCOME STATEMENT | VBG GROUP ANNUAL REPORT 2017

Consolidated Income Statement

SEK ’000 Note 2017 2016

Net sales 3 3,002,045 1,543,894

Cost of goods sold –1,934,143 –917,984
Gross profit 1,067,902 625,910
Selling expenses –332,082 –233,753
Administrative expenses –253,467 –164,096
Research and development costs –106,394 –46,803
Other operating income 4 3,433 6,224
Other operating expenses 5 –28,296 –3,509
–716,806 –441,937

Operating profit 6,7,8,9 351,096 183,973

Profit/loss from financial items

Exchange rate effects, net 4,629 –5,016
Interest income 2,540 1,814
Interest expenses –31,885 –9,900
Other financial expenses –10,773 –2,670
Total loss from financial items –35,489 –15,772

Profit after financial items 315,607 168,201

Tax on profit for the year 11 –95,115 –47,447

Net profit for the year 220,492 120,754

Net profit for the year attributable to Parent Company shareholders 220,492 120,754

Other comprehensive income

Profit for the period 220,492 120,754
Items that will not be reversed in the Income Statement
Effect of translation of defined-benefit pension plans,
net after tax –5,789 –2,096

Items that may later be reversed in the Income Statement

Translation differences relating to foreign operations 28,758 70,700
Translation differences pertaining to hedge accounting
for net investments in foreign operations 1,227 5,105

Other comprehensive income, net after tax 24,196 73,709

Comprehensive income for the period 244,688 194,463
Comprehensive income for the period attributable to Parent Company
shareholders 244,688 194,463

Earnings per share, basic and diluted, SEK 9.62 9.66

Number of shares at year-end 25,004,048 12,502,024
Average number of shares during the year 22,920,377 12,502,024

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

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

63
VBG GROUP ANNUAL REPORT 2017 | CONSOLIDATED BALANCE SHEET

Consolidated Balance Sheet

SEK ’000 Note 31 Dec 2017 31 Dec 2016

Assets
Non-current assets
Intangible assets 12
Brands, customer relationships and other intangible assets 827,872 858,025
Goodwill 1,118,861 1,122,302
1,946,733 1,980,327
Property, plant and equipment 13
Land and buildings 179,287 171,126
Plant and machinery 101,794 101,745
Equipment, tools, fixtures and fittings 54,008 51,487
Construction in progress 11,444 1,842
346,533 326,200

Deferred tax asset 15 48,116 67,901

Total non-current assets 2,341,382 2,374,428

Current assets
Inventories 16
Raw materials and consumables 256,879 242,581
Work in progress 75,398 79,917
Finished products and merchandise 163,745 157,201
496,022 479,699
Current receivables
Trade receivables 23 418,244 345,229
Current tax assets 25,991 38,730
Other receivables 42,654 43,238
Prepaid expenses and accrued income 17 17,852 19,196
504,741 446,393
Cash and cash equivalents
Cash on hand and demand deposits 321,423 276,360
321,423 276,360

Total current assets 1,322,186 1,202,452

Total assets 3,663,568 3,576,880

64
 CONSOLIDATED BALANCE SHEET | VBG GROUP ANNUAL REPORT 2017

CONSOLIDATED BALANCE SHEET CONT’D.

SEK ’000 Note 31 Dec 2017 31 Dec 2016

Equity and liabilities

Equity 18
Share capital 65,490 34,235
Other contributed capital 779,443 32,111
Reserves 84,126 52,045
Retained earnings, incl. net profit for the year 1,075,801 906,951
Total equity 2,004,860 1,025,342

Non-current liabilities
Provisions for pensions and similar obligations 20 185,687 175,734
Deferred tax liability 15 207,878 233,985
Other provisions 21 23,716 24,613
Liabilities to credit institutions 22 801,888 912,588
Total non-current liabilities 1,219,169 1,346,920

Current liabilities
Liabilities to credit institutions 22 76,140 880,482
Trade payables 176,203 154,029
Current tax liabilities 18,919 20,951
Other liabilities 22,518 25,220
Accrued expenses and deferred income 25 145,759 123,936
Total current liabilities 439,539 1,204,618

Total equity and liabilities 3,663,568 3,576,880

65
VBG GROUP ANNUAL REPORT 2017 | CONSOLIDATED CHANGES IN EQUITY

Consolidated Changes in Equity

Share Contributed Retained Total
SEK ’000 capital capital Reserves earnings equity

Opening balance at 1 Jan 2016 34,235 32,111 –21,664 826,829 871,511

Effect of translation of defined-benefit pension
plans, net after tax* –2,096 –2,096
Translation differences 70,700 70,700
Hedging of net investments 5,105 5,105
Other comprehensive income 75,805 –2,096 73,709
Net profit for the year 120,754 120,754
Total comprehensive income 194,463
Dividend –40,632 –40,632
Total transactions with shareholders –40,632
Equity at 31 Dec 2016 34,235 32,111 54,141 904,855 1,025,342

Opening balance at 1 Jan 2017 34,235 32,111 54,141 904,855 1,025,342

Effect of translation of defined-benefit pension
plans, net after tax1 –5,789 –5,789
Translation differences 28,758 28,758
Hedging of net investments 1,227 1,227
Other comprehensive income 29,985 –5,789 24,196
Net profit for the year 220,492 220,492
Total comprehensive income 244,688
New share issue 31 255 747,332 778,587
Dividend –43,757 –43,757
Total transactions with shareholders –43,757
Equity at 31 Dec 2017 65,490 779,443 84,126 1,075,801 2,004,860
1
The deferred tax effect amounted to a negative SEK 1,607 M (neg: 740) upon translation of the defined-benefit pension.

66
 CONSOLIDATED CASH FLOW STATEMENT | VBG GROUP ANNUAL REPORT 2017

Consolidated Cash Flow Statement

SEK ’000 Note 2017 2016

Operating activities
Operating profit before financial items 351,096 183,973
Depreciation/amortisation 77,193 47,606
Other items not affecting liquidity 29 –15,623 16,593
Interest received etc. 2,540 1,814
Interest paid, etc. –42,658 –10,117
Tax paid –98,288 –18,899
Cash flow before change in working capital 274,260 220,970

Decrease/increase (–) in inventories –11,787 –8,087

Decrease/increase (–) in trade receivables –71,466 16,069
Decrease/increase (–) in other current receivables 750 1,285
Increase/decrease (–) in trade payables 19,881 18,405
Increase/decrease (–) in other current liabilities 32,098 2,321
Cash flow from operating activities 243,736 250,963

Investing activities
Investments in intangible assets 29.30 –1,803 –3,617
Investments in property, plant and equipment 29 –58,469 –27,653
Investments in subsidiaries, after deduction for acquired cash and cash
equivalents 30 — –1,263,936
Cash flow from investing activities –60,272 –1,295,206

Financing activities
Repayment of loans –950,005 —
Borrowings 76,140 1,203,276
New share issue 778,587 —
Dividend paid –43,757 –40,632
Cash flow from financing activities –139,035 1,162,644

Cash flow for the year 44,428 118,401

Cash and cash equivalents at start of year 276,360 143,947

Translation difference, cash and cash equivalents 635 14,012
Cash and cash equivalents at year-end 321,423 276,360
Unutilised overdraft facilities 100,000 —
Total cash and cash equivalents available 421,423 276,360

Composition of net debt

Provisions for pensions 185,687 175,734
Liabilities to credit institutions 878,028 1,793,070
Cash on hand and demand deposits –321,423 –276,360
Net debt 742,292 1,692,444
Change in interest-bearing net debt –950,152 1,645,353

67
VBG GROUP ANNUAL REPORT 2017 | PARENT COMPANY INCOME STATEMENT

Parent Company Income Statement

SEK ’000 Note 2017 2016

Net sales 29,188 26,919

Gross profit 29,188 26,919

Administrative expenses –43,599 –37,732

Other operating income 3,404 —
Other operating expenses –5,689 –2,150
–45,884 –39,882

Operating loss 6,7,8 –16,696 –12,963

Profit/loss from financial items

Dividends from interests in subsidiaries 64,890 52,181
Impairment of interests in subsidiaries –50,000 —
Exchange rate effects, net –12,409 1,566
Interest income 16,076 2,022
Interest expenses –37,635 –6,495
Total loss from financial items –19,078 49,274

Profit after financial items –35,774 36,311

Appropriations 10 51,754 30,250
Tax on profit for the year 11 –829 –3,472

Net profit and comprehensive income for the year 15,151 63,089

Parent Company Balance Sheet

SEK ’000 Note 31 Dec 2017 31 Dec 2016

Assets
Non-current assets
Intangible assets 12
Trademarks and other intellectual property 3,023 4,975
3,023 4,975
Property, plant and equipment 13
Land and buildings — 4,665
Equipment, tools, fixtures and fittings 1,133 1,178
1,133 5,843
Long-term investments
Interests in Group companies 14 1,992,558 2,042,558
1,992,558 2,042,558

Total non-current assets 1,996,714 2,053,376

Current assets
Current receivables
Receivables from Group companies 463,801 551,641

68
 PARENT COMPANY BALANCE SHEET | VBG GROUP ANNUAL REPORT 2017

PARENT COMPANY BALANCE SHEET CONT’D.

SEK ’000 Note 31 Dec 2017 31 Dec 2016

Current tax asset 3,710 1,053
Other receivables 355 900
Prepaid expenses and accrued income 17 3,267 5,618
471,133 559,212
Cash and cash equivalents
Cash on hand and demand deposits 119,387 91,647
119,387 91,647

Total current assets 590,520 650,859

Total assets 2,587,234 2,704,235

Equity and liabilities

Equity 18
Restricted equity
Share capital 65,490 34,235
Reserves 53,249 53,249
118,739 87,484
Non-restricted equity
Retained earnings, incl. net profit for the year 1,148,937 382,273
Net profit for the year 15,151 63,089
1,164,088 445,362
Total equity 1,282,827 532,846
Untaxed reserves 19 4,750 7,831
Provisions
Provisions for pensions, PRI 20 12,685 12,751
Total provisions 12,685 12,751

Non-current liabilities
Liabilities to credit institutions 22 795,710 903,987
Total non-current liabilities 795,710 903,987

Current liabilities
Trade payables 1,622 7,307
Liabilities to subsidiaries 404,565 350,424
Liabilities to credit institutions 22 74,617 874,766
Other current liabilities 1,617 717
Accrued expenses and deferred income 25 8,841 13,606
Total current liabilities 491,262 1,246,820

Total equity and liabilities 2,587,234 2,704,235

69
VBG GROUP ANNUAL REPORT 2017 | PARENT COMPANY CHANGES IN EQUITY

Parent Company Changes in Equity

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

Equity at 1 Jan 2016 34,235 53,249 422,905 510,389

Net profit for the year 63,089 63,089
Dividend –40,632 –40,632
Equity at 31 Dec 2016 34,235 53,249 445,362 532,846
New share issue 31,255 747,332 778,587
Net profit for the year 15,151 15,151
Dividend –43,757 –43,757
Equity at 31 Dec 2017 65,490 53,249 1,164,088 1,282,827

Parent Company Cash Flow Statement

SEK ’000 Note 2017 2016

Operating activities
Operating loss before financial items –16,696 –12,963
Depreciation/amortisation 4,346 4,176
Other items not affecting liquidity 46,132 25,511
Interest received 16,142 2,022
Dividend received 64,890 52,181
Interest paid –37,635 –6,951
Tax paid –3,486 –1,219
Cash flow before change in working capital 73,693 62,757

Decrease/increase (–) in other current receivables 89,741 –509,933

Increase/decrease (–) in trade payables –5,685 6,112
Increase/decrease (–) in other current liabilities 50,276 106,314
Cash flow from operating activities 208,025 –334,750

Investing activities
Investments in subsidiaries — –1,380,766
Investments in intangible assets 29 –368 –744
Investments in property, plant and equipment 29 –3,912 –107
Divestment of property, plant and equipment 10,000 —
Cash flow from investing activities 5,720 –1,381,617

Financing activities
Dividend paid –43,757 –40,632
Payment of new share issue 778,587 —
Borrowings/repayment of loans –920,835 1,763,615
Cash flow from financing activities –186,005 1,722,983

Cash flow for the year 27,740 6,616

Cash and cash equivalents at start of year 91,647 85,031
Cash and cash equivalents at year-end 119,387 91,647
Unutilised overdraft facilities 100,000 —
Total cash and cash equivalents available 219,387 91,647

70
 ALTERNATIVE PERFORMANCE MEASURES | VBG GROUP ANNUAL REPORT 2017

Alternative Performance Measures

Reconciliation between IFRS and performance measures used
Certain information in this report that is used by company man-
agement and analysts to assess the Group’s performance has
not been prepared in accordance with IFRS. Company manage-
ment believes that this information makes it easier for investors
to analyse the Group’s earnings performance and financial struc-
ture. Investors should view this information as a supplement
rather than a replacement of financial reporting in accordance
with IFRS.

Operating profit and operating margin before items affecting comparability

Items affecting comparability refer to material income or expense items that are
recognised separately due to the significance of their character or amount.

SEK M 2017 2016 2015 2014 2013

VBG Group
Net sales 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4
Reported operating profit 351.1 184.0 134.7 120.9 162.8
Reported operating margin, % 11.7 11.9 10.2 10.2 13.9
Items affecting comparability –7.5 –12.7 –15.2 –7.2 —
Operating profit before items affecting comparability 358.6 196.7 149.9 128.1 162.8
Operating margin before items affecting comparability, % 11.9 12.7 11.4 10.8 13.9

VBG Truck Equipment

Net sales 836.7 757.3 697.7 636.6 650.2
Reported operating profit 169.8 147.2 115.7 103.7 116.2
Reported operating margin, % 20.3 19.4 16.6 16.3 17.9
Items affecting comparability — — –1.7 6.0 —
Operating profit before items affecting comparability 169.8 147.2 117.4 97.7 116.2
Operating margin before items affecting comparability, % 20.3 19.4 16.8 15.3 17.9

Edscha Trailer Systems

Net sales 259.7 270.5 221.7 219.8 254.6
Reported operating profit 13.6 30.0 13.0 –52.7 22.9
Reported operating margin, % 5.3 11.1 5.9 –24.0 9.0
Items affecting comparability –7.5 — –0.9 –60.0 —
Operating profit before items affecting comparability 21.1 30.0 13.9 7.3 22.9
Operating margin before items affecting comparability, % 8.1 11.1 6.3 3.3 9.0

Mobile Climate Control

Net sales 1,426.7 101.4
Reported operating profit 127.9 5.0
Reported operating margin, % 9.0 4.9
Items affecting comparability — —
Operating profit before items affecting comparability 127.9 5.0
Operating margin before items affecting comparability, % 9.0 4.9

Ringfeder Power Transmission

Net sales 479.1 414.7 395.9 330.4 266.6
Reported operating profit 60.3 24.2 21.7 83.0 35.3
Reported operating margin, % 12.6 5.8 5.5 25.1 13.2
Items affecting comparability — –4.8 –12.6 46.8 —
Operating profit before items affecting comparability 60.3 29.0 34.3 36.2 35.3
Operating margin before items affecting comparability, % 12.6 7.0 8.7 11.0 13.2

71
VBG GROUP ANNUAL REPORT 2017 | ALTERNATIVE PERFORMANCE MEASURES

Actual organic growth

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

SEK M 2017 2016 2015 2014 2013

Group
Net sales 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4
Acquired volume (incl. full-year effect from
­preceding year) –1,309.2 –150.2 –52.0 –46.4 –52.7
Currency effect –20.0 –6.9 –84.5 –45.1 12.3
Net sales excluding acquisitions and currencies 1,672.8 1,386.8 1,178.8 1,095.3 1,131.0
Actual organic growth 129.0 71.5 –8.0 –76.1 26.2
Organic growth, % 8.4 5.4 –0.7 –6.5 2.4

VBG Truck Equipment

Net sales 836.7 757.3 697.7 636.6 650.2
Acquired volume (incl. full-year effect from
­preceding year) — — — — –52.7
Currency effect –5.2 0.7 –26.7 –15.0 6.1
Net sales excluding acquisitions and currencies 831.5 758.0 671.0 621.6 603.6
Actual organic growth 74.2 60.3 34.4 –28.6 38.4
Organic growth, % 9.8 8.6 5.4 –4.4 6.8

Edscha Trailer Systems

Net sales 259.7 270.5 221.7 219.8 254.6
Acquired volume (incl. full-year effect from
­preceding year) — — — — —
Currency effect –4.8 –3.3 –6.3 –10.0 2.8
Net sales excluding acquisitions and currencies 254.9 267.2 215.4 209.8 257.4
Actual organic growth –15.6 45.5 –4.4 –44.8 5.3
Organic growth, % –5.8 20.5 –2.0 –17.6 2.1

Mobile Climate Control

Net sales 1,426.7 101.4
Acquired volume (incl. full-year effect from
­preceding year) –1,309.2 —
Currency effect — —
Net sales excluding acquisitions and currencies 117.5 101.4
Actual organic growth 16.1 n/a
Organic growth, % 15.9 n/a

Ringfeder Power Transmission

Net sales 479.1 414.7 395.9 330.4 266.6
Acquired volume (incl. full-year effect from
­preceding year) — –48.8 –52.0 –46.4 —
Currency effect –10.0 –4.8 –51.5 –20.1 3.4
Net sales excluding acquisitions and currencies 469.1 361.1 292.4 263.9 270.0
Actual organic growth 54.4 –34.8 –38.0 –2.7 –17.5
Organic growth, % 13.1 –8.8 –11.5 –1.0 –6.1

72
 ALTERNATIVE PERFORMANCE MEASURES | VBG GROUP ANNUAL REPORT 2017

Interest-bearing net debt

Interest-bearing loan liabilities and provisions less cash and cash equivalents.
SEK M 2017 2016 2015 2014 2013

Group
Provisions for pensions 185.7 175.7 165.6 172.7 126.6
Overdraft facilities — — — — —
Loans 878.0 1,793.1 25.5 39.2 46.8
Bank balances –321.4 –276.4 –144.0 –195.6 –131.5
Interest-bearing net debt 742.3 1,692.4 47.1 16.3 41.9

EBITDA
Operating profit before amortisation and impairment of intangible assets and property, plant and equipment.

SEK M 2017 2016 2015 2014 2013

Group
Operating profit 351.1 184.0 134.7 120.9 162.8
+ Depreciation/amortisation 77.2 47.6 43.3 37.5 32.3
+ Goodwill impairment — — — 60.0 —
– Negative goodwill on acquisition — — — –46.8 —
EBITDA 428.3 231.6 178.0 171.6 195.1

EBITA
Operating profit before amortisation and impairment of intangible assets.
SEK M 2017 2016 2015 2014 2013

Group
Operating profit 351.1 184.0 134.7 120.9 162.8
+ Amortisation of intangible assets 31.7 12.2 11.2 9.5 8.1
EBITA 382.8 196.2 145.9 130.4 170.9

Interest-bearing net debt/EBITDA

Interest-bearing net debt in proportion to operating profit before depreciation/amortisation and impairment.

SEK M 2017 2016 2015 2014 2013

Group
Interest-bearing net debt 742.3 1,692.4 47.1 16.3 41.9
EBITDA 428.3 231.6 178.0 171.6 195.1
Interest-bearing net debt/EBITDA 1.73 7.31 0.26 0.09 0.21

Profit margin
Profit after financial items as a percentage of net sales.
SEK M 2017 2016 2015 2014 2013

Group
Net sales 3,002.0 1,543.9 1,315.3 1,186.8 1,171.4
Profit after financial items 315.6 168.2 134.5 112.7 151.7
Profit margin, % 10.5 10.9 10.2 9.5 13.0

73
VBG GROUP ANNUAL REPORT 2017 | NOTES

Notes to Parent Company and

consolidated financial statements
NOTE 1 | GENERAL INFORMATION report. IFRS 9 Financial Instruments was published in three
phases: Classification and Measurement, Impairment and Hedge
Accounting, and will replace the current IAS 39 Financial Instru-
VBG Group AB (publ) in Vänersborg is the Parent Company of
ments: Recognition and Measurement. The standard establishes
an international industrial Group with wholly owned companies
three measurement categories for financial assets: amortised
in Europe, North America, Brazil, South Africa, Australia, India
cost, fair value through other comprehensive income and fair
and China. The Group’s operations are divided into four divi-
value through profit or loss.
sions: VBG Truck Equipment, Edscha Trailer Systems, Mobile Cli-
IFRS 9 also introduces a new model for calculating credit loss
mate Control and Ringfeder Power Transmission.
reserves based on expected credit losses and lessens the require-
The Parent Company is a limited company registered and
ments for application of hedge accounting. The standard will be
domiciled in Vänersborg, Sweden. The address of the head office
applied for the financial year commencing 1 January 2018. Early
is Kungsgatan 57, SE-461 34 Trollhättan, Sweden.
application is permitted.
The Parent Company’s Series B share is listed on the Nasdaq
IFRS 15 Revenue from Contracts with Customers regulates
Stockholm Mid Cap List.
how revenue is to be recognized. The principles of IFRS 15 are
intended to provide users of financial statements with more
Accounting and valuation policies
usable information about the entity’s revenue. The expanded
The consolidated financial statements have been prepared in
disclosure requirements stipulate that information must be pro-
accordance with the International Financial Reporting Standards
vided regarding the type of revenue, date of settlement, uncer-
(IFRSs) as adopted by the EU. In addition, the Swedish Annual
tainties associated with revenue recognition and cash flow
Accounts Act and the Swedish Financial Reporting Board’s rec-
attributable to the entity’s customer contracts. In accordance
ommendation RFR 1 are applied. The financial statements have
with IFRS 15, revenue is to be recognized when the customer
been prepared in accordance with the cost method, except with
gains control of the presold goods or services and is able to use
regard to available-for-sale financial assets and financial assets
or benefit from the goods or services. IFRS 15 will take effect on
and liabilities (including derivative instruments) measured at fair
1 January 2018. Early application is permitted. An analysis by
value through profit or loss.
the Group indicates that the implementation of IFRS 9 and IFRS
15 will not have a material impact on the consolidated financial
Parent Company accounting policies
statements. Consequently, no transitional effects will arise as a
The Parent Company has prepared its annual report in accor-
consequence of the introduction of these reporting standards.
dance with the Swedish Annual Accounts Act (1995:1554) and
IFRS 16 Leases. In January 2016, the IASB published a new
the Swedish Financial Reporting Board’s recommendation RFR 2
leasing standard that will replace IAS 17 Leases and the associ-
Accounting for Legal Entities. Under RFR 2, the Parent Company
ated interpretations IFRIC 4, SIC-15 and SIC–27. The standard
shall, in preparing the annual report for the legal entity, apply all
requires that assets and liabilities associated with leases, with a
IFRSs and statements approved by the EU as far as possible
few exceptions, be recognized in the balance sheet. This method
while complying with the Swedish Annual Accounts Act and tak-
of recognition is based on the approach that the lessee has a
ing into account the relationship between accounting and taxa-
right to use an asset for a specific period of time, while also hav-
tion. The recommendation stipulates what exceptions and addi-
ing an obligation to pay for this right. Recognition for the lessor
tions should be made with respect to the IFRSs. The same
will essentially be unchanged. The standard is applicable for
accounting policies and calculation methods were applied as in
financial years commencing 1 January 2019 or later. Early appli-
recent years. If differences exist between the consolidated and
cation is permitted provided that IFRS 15 Revenue from Con-
the Parent Company accounting policies, they are described in
tracts with Customers is also applied. The Group has com-
the relevant sections below.
menced, but not yet completed, an evaluation of the impact of
This Annual Report has been prepared in accordance with the
the implementation of this standard.
IFRS and IFRIC statements that had entered into effect at the
None of the other IFRSs or IFRIC interpretations that have not
time of its preparation and that have been approved by the
yet become effective are expected to have any material impact
European Commission.
on the Group.
New and amended standards applied by the Group
Consolidated financial statements
No new accounting policies applicable as of 1 January 2017 have
Subsidiaries are all companies (including structured companies)
materially impacted the consolidated financial statements.
over which the Group holds a controlling influence. The Group
controls a company when it is exposed to or has the right to a
New standards and interpretations yet to be applied by the Group
variable return from its holding in the company and has the pos-
A number of new standards and interpretations are coming into
sibility to influence this return through its influence in the com-
force for financial years commencing after 1 January 2017 and
pany. Subsidiaries are included in the consolidated financial
have not been applied for the preparation of this financial

74

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. Iden-
tifiable 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 interest. The excess that consists of the differ-
ence between the cost of the acquisition and the fair value of
the Group’s share of identifiable acquired net assets is rec-
ognised as goodwill.
Intra-Group transactions and line items, as well as unrealised
gains on transactions between Group companies, are eliminated.
Unrealised losses are also eliminated, unless the transaction con-
stitutes evidence of the existence of an impairment loss for the
transferred asset. The accounting policies for subsidiaries have
been changed where applicable in order to guarantee a consis-
tent application of the Group’s policies.
Tax
The tax expense for the period consists of current and deferred
tax. Tax is recognised in profit or loss, except when the tax per-
tains to items recognised in other comprehensive income or
directly in equity. In such cases, the tax is also recognised in
other comprehensive income or equity, respectively.
Current tax is calculated on the taxable profit for the period in
each individual legal entity.
Deferred tax is recognised in its entirety, in accordance with
the balance sheet method, on all temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. If, however,
the deferred tax arises as a result of a transaction that consti-
tutes the initial recognition of an asset or liability that is not a
business combination and that affects neither the carrying
amount nor the tax base on the transaction date, it is not rec-
ognised. Deferred tax is calculated with the application of tax
rates and tax laws that have been enacted or announced as of
the balance sheet date and that are expected to apply when the
concerned deferred tax asset is realised or the deferred tax liabil-
ity is settled.
Deferred tax assets and tax liabilities offset each other when
there is a legal right of offset for current tax assets and tax liabil-
ities in question, and when the deferred tax assets and tax liabil-
ities are attributable to tax charged by the same tax authority
and pertain to either the same tax subject or different tax sub-
jects, when the intention is to settle the balances through net
payments.
Deferred tax assets are recognised to the extent it is likely that
future taxable surpluses will be available against which the tem-
porary differences can be utilised.
NOTES | VBG GROUP ANNUAL REPORT 2017
Receivables
Loans receivable and trade receivables are financial assets with
fixed payments or payments that can be determined. The assets
in this category are measured at amortised cost less allowance
for impairment loss. Trade receivables are recognised at the
amount that is expected to be paid, based on an individual
assessment of doubtful trade receivables.
Effects of changes in exchange rates
Functional currency and reporting currency
Items included in the financial statements for the different enti-
ties in the Group are stated in the currency that is used in the
primary economic environment where the enterprise is active
(functional currency). For all entities, the functional currency is
the currency in the country where the entity operates. The
Swedish krona, which is the Parent Company’s functional and
reporting currency, is used in the consolidated financial state-
ments.
Transactions and line items
Transactions in foreign currencies are translated to the functional
currency at the exchange rate prevailing on the transaction date.
Exchange gains and exchange losses arising in connection with
the payment of such transactions and the translation of mone-
tary assets and liabilities in foreign currencies at the closing rate
are recognised in profit or loss. An exception is when the trans-
actions constitute hedges that meet the conditions for hedge
accounting, in which case gains/losses are recognised in other
comprehensive income. Exchange gains and exchange losses on
operating receivables and liabilities are offset against each other
and recognised among other operating income or other operat-
ing expenses.
Exchange gains and exchange losses of a financing nature are
recognised in profit or loss under financial items.
Group companies
The earnings and financial position of all Group companies
with another functional currency than the presentation currency
are translated to the Group’s reporting currency as follows:
(i) assets and liabilities are translated at the closing rate
(ii) revenue and expenses are translated at the average
exchange rate
(iii) all exchange rate differences that arise are recognised
as reserves within equity
On consolidation, exchange rate differences that arise as a con-
sequence of translation of net investments in foreign entities and
of borrowing and other currency instruments that have been
identified as hedges of such investments are posted to equity.
Goodwill and adjustments of fair value that arise in connec-
tion with the acquisition of a foreign entity are treated as assets
and liabilities in this entity and translated at the closing rate.
75
VBG GROUP ANNUAL REPORT 2017 | NOTES
Inventories
Inventories are measured, with application of the first-in first-out
principle, at the lower of cost and net realisable value on the bal-
ance 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.
Pension obligations
There are both defined-contribution and defined-benefit pen-
sion 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 employ-
ees in connection with the employees’ services during the pres-
ent or previous periods. A defined-benefit pension plan is a pen-
sion plan that is not subject to defined-contributions.
Defined-benefit plans typically state the amount of pension ben-
efits 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 recognised in the balance sheet
regarding defined-benefit pension 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 project-
ed-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 matu-
rity periods comparable to those of the relevant pension obliga-
tion. Actuarial gains and losses as a result of experience-based
adjustments and changed to actuarial assumptions are rec-
ognised under “Other comprehensive income” within the period
in which they arise. Expenses pertaining to employment during
earlier periods are recognised 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 accor-
dance 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 recognised
as a provision in the balance sheet. The interest portion of the
year’s pension expense is recognised 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.
Intangible assets
Goodwill consists of the amount by which the cost of the acqui-
sition 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 recognised directly in profit or loss. Goodwill on
acquisitions of subsidiaries is recognised as an intangible asset.
76
Goodwill is subjected to impairment testing annually and is rec-
ognised at cost less accumulated impairment losses.
Other intangible assets with a definable useful life are rec-
ognised at cost less amortisation according to plan during the
useful life of the asset.
Expenditures for strategic computer software are capitalised.
Expenditures for product development projects are capitalised
provided that the Group will enjoy future economic benefits
from the development work and that it is possible to determine
the cost reliably. Depreciation takes place on a straight-line basis
according to plan over the calculated useful life of the assets, as
follows:
Trademarks 15 years
Other intangible assets 3–5 years
The amortisation period of trademarks, 15 years, is warranted
by the fact that the Group’s acquired brands are well reputed
and have large and stable market shares on important markets.
Trademarks with indefinite useful lives are subjected to
impairment testing annually and recognised at cost less accumu-
lated impairment losses.
Research and development
Expenditure for research is expensed immediately. Expenditure
for material development projects (attributable to development
and testing of new or improved products) is capitalised as intan-
gible 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 proj-
ects has been capitalised as intangible assets during the year.
Property, plant and equipment
Property, plant and equipment are recognised at cost less
planned depreciation during the useful life of the assets. Depre-
ciation 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 val-
ues and useful lives of the assets are tested every balance sheet
date and adjusted if necessary.
Interest is capitalised as a part of the cost of investments in
assets that take a substantial period of time to get ready for
their intended use.
Impairment losses
Assets that have an indefinite useful life are not depreciated but
are subjected to annual impairment testing. Assets that are
depreciated 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 rec-
ognised 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 are classified in the consolidated financial statements as
either finance or operating leases. Leases where the economic
risks and rewards incidental to ownership are transferred sub-
stantially to the lessee are recognized 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 recognised as an
expense on a straight-line basis over the lease period.
Revenue recognition
The Group’s invoiced sales relate to sales of goods. Invoicing and
revenue recognition take place when the goods have been deliv-
ered to the customer. Sales are recognised net after deduction of
VAT, discounts and exchange rate differences for sales in foreign
currencies. Intra-Group sales are eliminated in the consolidated
financial statements.
Other revenue consists primarily of royalty income that is
accrued in accordance with the financial implications of the
agreement and rental income that is recognised in the period to
which the rental applies.
Financial instruments
Financial instruments recognised in the balance sheet include
securities, receivables, operating liabilities and borrowing.
According to IAS 39, financial assets are measured either at
fair value or amortised cost, depending on how the assets are
classified.
Of the Group’s financial assets, trade receivables are included
in the category “trade receivables and loans receivable.” Trade
receivables and loans receivable are initially measured at fair
value and thereafter at amortised cost.
Receivables are recognised less any allowance for impairment
loss. Allowance is made for impairment loss after individual test-
ing.
Short-term investments consist of interest-bearing securities
measured at amortised cost.
Purchases and sales of financial assets are recognised on the
trade date, which is the date when the Group committed itself
to purchase or sell the asset. Financial assets measured at fair
value through profit or loss are initially measured at fair value,
while related transaction costs are recognised in profit or loss.
Financial assets are derecognised from the balance sheet when
the contractual rights to receive the cash flows from the instru-
ment have expired or have been transferred and the Group has
transferred all risks and rewards incidental to ownership.
Gains and losses due to changes in the fair value of the cate-
gory’s financial assets measured at fair value through profit or
loss are recognised via the income statement in the period when
they arise under financial items.
Assets in this category are classified as current assets if they
are expected to be settled within 12 months. Otherwise they are
classified as non-current assets.
NOTES | VBG GROUP ANNUAL REPORT 2017
Hedges of net investments in foreign operations are rec-
ognised in a similar manner to cash flow hedges. The share of the
gain or loss on a hedging instrument deemed to be an effective
hedge is recognised in other comprehensive income. The gain or
loss attributable to the ineffective portion is recognised in profit
or loss. Accumulated gains and losses in equity are recognised in
profit or loss when the foreign operation is fully or partly
divested.
In both the balance sheet and cash flow statement, cash and
cash equivalents include cash on hand, demand deposits and
other short-term liquid investments with a remaining maturity of
less than three months from the acquisition date.
In the Parent Company, all financial instruments are recognised
at the lower of cost and fair value.
Borrowing
Borrowing is initially measured at fair value, net after transaction
costs. Borrowing is thereafter recognised at amortised cost, and
any difference between the amount received (net after transac-
tion costs) and the repayment amount is recognised in profit or
loss allocated over the term of the loan with application of the
effective-interest method.
Equity
Equity is recognised 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 recognised 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
recognised 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 recognised 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. No provisions are made 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.
77
VBG GROUP ANNUAL REPORT 2017 | NOTES
Segment reporting
Segment information is presented from a management perspec-
tive, which means it is presented in the same manner as in inter-
nal 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 recognised cash flow only includes transac-
tions that entail cash receipts and cash payments. Cash and cash
equivalents include, besides cash on hand and demand deposits,
short-term, highly liquid investments that are subject to an insig-
nificant risk of changes in value, and – are traded on the open
market at known amounts, or – have a shorter remaining matu-
rity than three months from the acquisition date.
Items affecting comparability
Items affecting comparability are recognised 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 recognised separately due to
the significance of their character or amount.
Definitions of performance measures
Risk-bearing capital
Equity plus/less deferred tax liabilities/assets.
Equity/assets ratio
Equity as a percentage of the balance sheet total.
Risk-bearing capital ratio
Risk-bearing capital 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
EBITDA a percentage of average operating capital expressed as
property, plant and equipment and working capital.
Profit margin
Profit after financial items as a percentage of sales.
Net debt
Interest-bearing loan liabilities and provisions less cash and cash
equivalents.
78
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 per cent
of sales in 2017. 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 produc-
tion series has to be recalled for rectification of defects. This
occurs from time to time in the motor vehicle industry. 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 minimise the risks of
claims, product liability losses and recalls by means of compre-
hensive and long-term testing in the development process and
quality management and control in production.
Commodity prices
The Group’s production is dependent on a number of raw mate-
rials and intermediate goods. The most important raw materials
are steel, cast iron and aluminium. Price increases or raw mate-
rial shortages can have a negative impact on consolidated profit.
A price increase of 10 per cent would increase the Group’s costs
by about SEK 50 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 honour these agreements. The VBG
Group strives to establish long-term relationships with its suppli-
ers in order to ensure continued deliveries during times of short-
age.
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 foresee-
able 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
3.5 per cent of sales in 2017.
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 minimise these risks, the patent situation is monitored closely
and continuously. 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.
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’s 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 Nor-
rtälje 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 “medi-
um-high” for an industrial enterprise. Continuous efforts are
made to improve loss prevention. The Group carries full insur-
ance cover against both business interruption and property
losses.
Cyclical risks
The motor vehicle industry is characterised by large fluctuations
in demand. This is particularly true of the truck market, although
aftermarket sales account for a large portion of Group sales in
this segment, which helps dampen the fluctuations. Establishing
on new geographic markets also contributes towards minimising
these fluctuations. To cope with the variations in demand, the
Group tries to increase flexibility in its production. Order back-
logs 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
intrusion risks are minimised by the fact that information is han-
dled in networks that are well protected by firewalls and rigor-
ous authorisation procedures. The hardware is distributed over a
large number of different units, limiting the negative conse-
quences 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 to
currency risk. Exchange rate changes affect the consolidated
income statement and balance sheet in the form of transaction
risks and translation risks.
NOTES | VBG GROUP ANNUAL REPORT 2017
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 cur-
rencies amounted to a value of about SEK 746 M.
The currency flows with the greatest impact on earnings are
inflows in USD and EUR to SEK. An exchange rate difference of
10 per cent between EUR and SEK affects the Group’s earnings
by approximately SEK 48 M, while the effect of an equivalent
change between USD and SEK is approximately SEK 77 M. Net
flows are not hedged.
Translation risks
Total non-restricted equity in foreign companies amounted to
approximately SEK 564 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 corre-
sponding currency. The currencies that are affected the most by
changes in exchange rates are the EUR and SEK, with a 10 per
cent change between the two yielding a currency impact of
approximately SEK 24 M. A 10 per cent change in exchange
rates between the CZK and SEK yields a currency effect of
approximately SEK 15 M, while a corresponding change
between the USD and SEK would entail a currency impact of
approximately SEK 34 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.
Borrowing with a fixed interest rate exposes the Group to an
interest rate risk with respect to fair value.
The Group’s loan structure changed in connection with the
refinancing that took place with the acquisition of Mobile Cli-
mate Control. The Parent Company signed a new three-year
financing agreement extending until 2019 for a total SEK
1,400,000 M, comprising a term loan of SEK 1,000 M and a
revolving facility of SEK 400 M. All loans currently bear a three-
month interest rate. The maturity dates of the loans are shown
in Note 22.
Credit risk
Credit risk refers to the risk that one party in a transaction will
be unable to fulfil its obligations, causing the other party a loss.
The risk that customers will default on payment for delivered
products is minimised by thorough checks of new customers and
follow-up of the payment behaviour of existing customers.
The Group’s trade receivables amounted to SEK 418 M at
year-end and are recognised 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 per cent of
sales. The finance policy regulates how credit risk is minimised
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 unutilised credit facilities
79
VBG GROUP ANNUAL REPORT 2017 | NOTES

that can be utilised without reservation. At the end of 2017, the
unutilised credits amounted to SEK 300 M. The maturity dates
of the loans are shown in Note 22.
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 per cent. The equity/assets ratio at 31 Decem-
ber 2017 was 54.7 per cent.
Sustainability risks
An analysis of various sustainability risks was carried out based
on the materiality analysis performed in 2017. The risk analysis is
based on traditional methodology whereby each risk is graded
on three aspects: probability of risk, extent of risk and the possi-
bility of discovering when risk arises. We have identified four
particularly important risk factors:
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 whistle blower service has been established
for employees to anonymously or openly report any offences.
Extensive work began in spring 2018 on Group-wide core val-
ues. These activities include studying needs for new policies and
guidelines.
Corruption in the purchasing organisation
The risk of corruption is deemed to be highest in connection with
purchasing that includes an element of business entertainment.
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 Board members, managers and employees. 275 people
completed the course in 2017.
NOTE 3 | SEGMENT REPORTING (SEK M)
Divisions (business segments)
The Group is organised in four divisions.
• VBG Truck 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 snow chains. Customers are mainly
truck manufacturers, body builders, hauliers and importers.
• Edscha Trailer Systems is the market’s biggest manufacturer
of sliding roofs for trailers. The main brand is Edscha Trailer
Systems, and a complementary brand is Sesam. The customers
mainly consist of European trailer manufacturers.
• 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 defence 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, Gerwah, Tschan 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 con-
sist primarily of property, plant and equipment, intangible
assets, inventories and receivables, but exclude cash and secu-
rities. Liabilities consist of operating liabilities but not tax.
Investments consist of purchases of property, plant and equip-
ment and intangible assets.

Child/slave labour among suppliers/sub-suppliers

The risk of child or slave labour is highest in high-risk countries
in Asia, South America and Africa and is often difficult to detect.
Management: The VBG Group Code of Conduct regulates the
requirements that the Group imposes on its suppliers. We do not
accept slave labour or child workers who have not finished com-
pulsory school. We have procedures in place for continuous
monitoring and control to ensure supplier compliance.

Discrimination
The risk of discrimination varies between different countries, as
do the underlying reasons for discrimination. This is why this can
also be difficult to detect in many cases.
Management: Alongside the Code of Conduct, work is being
conducted to establish Group-wide processes for recruitment
and salary levels to minimise the risk of discrimination.

80
 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 3 CONT’D.

VBG Truck Edscha Trailer Mobile Climate Ringfeder Power

Equipment Systems Control Transmission Group-wide Group

2017 financial year

External sales 836.7 259.7 1,426.7 479.1 — 3,002.0
Operating profit/loss 169.8 13.6 127.9 60.3 –20.5 351.1
Financial expenses — — — — –42.7 –42.7
Financial income — — — — 7.2 7.2
Tax expense for the year — — — — –95.1 –95.1
Net profit/loss for the year 169.8 13.6 127.9 60.3 –151.1 220.5
Other disclosures
Non-current assets 203.0 193.4 1,671.4 271.1 2.6 2,341.5
Current assets 265.6 90.5 437.4 199.3 7.8 1,000.6
Cash and cash equivalents — — — — 321.4 321.4
Assets 468.6 283.9 2,108.8 470.4 331.8 3,663.6
Non-current liabilities 179.6 10.6 178.6 35.4 815.1 1,219.3
Current liabilities 120.1 34.9 151.0 44.4 89.0 439.4
Liabilities 299.7 45.4 329.6 79.8 904.1 1,658.7
Capital expenditures 24.6 2.6 8.8 18.4 — 54.5
Depreciation/amortisation –17.0 –8.2 –32.9 –16.4 –2.7 –77.2

2016 financial year

External sales 757.2 270.5 101.4 414.7 — 1,543.9
Operating profit/loss 147.2 30.0 5.0 24.2 –22.4 184.0
Financial expenses — — — — –17.6 –17.6
Financial income — — — — 1.8 1.8
Tax expense for the year — — — — –47.4 –47.4
Net profit/loss for the year 147.2 30.0 5.0 24.2 –85.6 120.8
Other disclosures
Non-current assets 188.0 174.8 1,552.3 270.5 73.7 2,259.3
Current assets 205.6 83.5 382.4 197.7 58.4 927.6
Cash and cash equivalents — — — — 276.4 276.4
Assets 393.6 258.3 1,934.7 468.2 408.5 3,463.3
Non-current liabilities 141.6 7.2 23.9 9.6 1,051.1 1,233.4
Current liabilities 88.4 19.2 136.0 30.9 930.1 1,204.6
Liabilities 230.0 26.4 159.9 40.5 1,981.2 2,438.0
Capital expenditures 20.5 10.9 — 3.0 0.9 35.3
Depreciation/amortisation –18.0 –9.9 –1.5 –17.6 –0.6 –47.6

81
VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 3 CONT’D.

2017
Ringfeder
VBG Truck Edscha Trailer Mobile Climate Power
Sales per geographical area 2017 Equipment Systems Control Transmission Group

Sweden 199.0 0.2 37.3 4.6 241.1

Other Nordic countries 135.9 1.3 28.6 4.0 169.8
Germany 118.8 147.0 24.1 170.3 466.8
Other European countries 196.5 110.3 152.8 62.2 521.7
North America 92.0 — 1,155.7 101.1 1,348.8
Brazil — — 2.5 66.7 69.2
Australia/New Zealand 67.7 0.1 0.7 11.5 80.0
Rest of world 26.8 0.8 24.9 58.7 104.6
Total 836.7 259.7 1,426.7 479.1 3,002.0

2016
Ringfeder
VBG Truck Edscha Trailer Mobile Climate Power
Sales per geographical area 2016 Equipment Systems Control Transmission Group

Sweden 204.4 0.3 2.9 4.2 211.8

Other Nordic countries 125.1 0.9 1.7 5.1 132.8
Germany 106.4 159.8 3.5 153.8 423.5
Other European countries 178.0 108.4 10.9 52.1 349.4
North America 85.6 — 78.4 87.1 251.1
Brazil — — — 56.7 56.7
Australia/New Zealand 44.7 — — 8.8 53.5
Rest of world 13.1 1.1 4.5 46.9 65.1
Total 757.3 270.5 101.8 414.7 1,543.9

NOTE 4 | OTHER OPERATING INCOME

Group
2017 2016

Royalty income 482 890

Capital gain on property, plant and equipment — 373
Bad debts recovered 636 179
Exchange rate differences — 1,043
Other 2,315 3,739
Total 3,433 6,224

NOTE 5 | OTHER OPERATING EXPENSES

Group
2017 2016

Exchange rate differences 4,431 34

Scrapping of non-current assets — 1,008
Warranty costs 21,183 —
Other 2,682 2,467
Total 28,296 3,509

82
 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 6 | SALARIES, OTHER REMUNERATION AND SOCIAL SECURITY CONTRIBUTIONS

2017 2016
Salaries and other Social security Salaries and other Social security
remuneration contributions remuneration contributions

Parent Company 13,407 8,090 13,574 8,064

of which pension expenses (3,765) (3,004)
Subsidiaries 549,547 146,018 307,794 86,495
of which pension expenses (26,036) (13,459)
Group 562,954 154,108 321,368 94,559
of which pension expenses (29,801) (16,463)

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

2017 2016
Board Other Board Other
and MD employees and MD employees

Parent Company 5,464 7,943 6,104 7,470

of which bonuses, etc. (1,667) (1,636)
Subsidiaries 21,222 528,325 18,537 289,257
of which bonuses, etc. (3,167) (4,317)
Group total 26,686 536,268 24,641 296,727
of which bonuses, etc. (4,834) (5,953)

2017 2016
Average number of employees Number of employees Of whom men Number of employees Of whom men

Parent Company
Sweden 8 6 7 5
Total in Parent Company 8 6 7 5
Subsidiaries
Sweden 201 172 178 151
Norway 7 7 7 7
Denmark 5 4 5 5
France 3 3 3 3
Belgium 15 10 15 10
UK 8 5 8 5
Germany 142 112 176 137
Czech Republic 131 82 115 75
Poland 167 108 16 11
USA 192 144 64 52
Canada 391 349 34 31
China 44 16 12 5
India 15 12 14 12
Brazil 106 95 109 99
South Africa 11 9 1 1
Total in subsidiaries 1,438 1,128 757 604
Group total 1,446 1,134 764 609

At year-end, the Group had 1,502 employees (1,401).

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 6 CONT’D.

Board of Directors and senior officers “other senior officers” is meant the five persons who, together
with the Managing Director, make up the Group Management.
2017 2016 The proportions of basic salary and variable remuneration
Number Number should be commensurate with the individual’s powers and
on closing Of whom on closing Of whom responsibilities. The Managing Director and Executive Vice Presi-
date men date men
dent’s variable remuneration may not exceed 50 per cent of
Group (incl. subsidiaries) basic salary. The variable remuneration of other senior officers
Board members 27 23 27 24 may not exceed 33 per cent of their basic salary. The variable
Managing Directors and remuneration is based on actual outcome in relation to set goals.
other senior officers 33 31 45 42 Pension benefits and other benefits for the Managing Director
and other senior officers are payable as a part of the total remu-
All Board members in the Group’s subsidiaries are employees. neration. The retirement age for the Managing Director and
“Senior officers” refers to Group Management and division other senior officers is 65 years.
management members, and persons in senior positions in the The Managing Director has an employment contract that
subsidiaries. expires with a notice of termination of six months, during which
2017 2016 time his salary is guaranteed. The Managing Director can set
Number Number aside 35 per cent of his fixed salary in pension provisions. Vari-
on closing Of whom on closing Of whom
date men date men able remuneration is not pensionable. In the event his employ-
ment is terminated by the Company, the Managing Director is
Parent Company
entitled to receive six months of employment benefits and sever-
Board members 8 5 8 5 ance pay equivalent to 12 months’ salary. The equivalent period
Managing Directors and for other senior officers is six to 18 months. Compensation to
other senior officers 4 3 4 3
the Managing Director for the 2017 financial year has been
determined by the Compensation Committee. Compensation to
other senior officers has been determined by the Managing
Remuneration to Board members and senior officers Director in consultation with the Compensation Committee.
In accordance with a resolution by the 2017 AGM, the Chairman
and members of the Board receive a total of SEK 1,505,000 in
fixed annual fees. Of the total fee, SEK 100,000 is paid to the
Audit and Compensation Committees, to be distributed by the
Board of Directors. Employees of VBG Group AB (publ) do not
receive a Board fee. Remuneration to the Managing Director
and other senior officers consists of basic salary, variable remu-
neration, other benefits, pension and other remuneration. By

2017 Fees/basic salary Variable Other benefits Other benefits Total

Chairman Peter Hansson 500 — — — 500

Board Deputy Chairman Johnny Alvarsson 375 — — — 375
Director Louise Nicolin 210 — — — 210
Director Peter Augustsson 210 — — — 210
Director Jessica Malmsten 210 — — — 210
MD Anders Birgersson 3,617 1,667 83 1,183 6,550
Other senior officers (7 persons)1 16,048 3,721 719 4,372 24,860 2
Total (12 persons) 21,170 5,388 802 5,555 32,915
1
 ther senior officers are the persons who, besides the Managing Director, comprise Group Management. A new Group Management team was established in
O
December 2017, with the number of members reduced by two. However, the table above includes remuneration for these two members for the entire year.
2
The increase of SEK 7.9 M between 2017 and 2016 was due to, in addition to normal salary increases, the full-year effect for the Division Manager of Mobile
Climate Control and severance pay for the former Division Manager of Edscha Trailer Systems.

2016 Fees/basic salary Variable Other benefits Other benefits Total

Chairman Peter Hansson 380 — — — 380

Board Deputy Chairman Johnny Alvarsson 300 — — — 300
Director Louise Nicolin 175 — — — 175
Director Peter Augustsson 175 — — — 175
Director Jessica Malmsten1 0 — — — 0
Director Helene Richmond2 175 — — — 175
MD Anders Birgersson 3,263 1,636 84 1,099 6,082
Other senior officers (7 persons) 10,860 2,791 474 2,789 16,914
Total (13 persons) 15,328 4,427 558 3,888 24,201
1
Elected as a new Board member at the 2016 AGM and does not receive a Board fee until 2017.
2
Stepped down from the Board at the 2016 AGM and received a full fee for 2016.

84
 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 7 | FEES AND COST REIMBURSEMENT PAID NOTE 8 | DEPRECIATION, AMORTISATION AND IMPAIRMENT
TO AUDITOR
Depreciation and amortisation are recognised in profit or loss
Group Parent Company under the following headings:
2017 2016 2017 2016 Group Parent Company
PwC 2017 2016 2017 2016
Auditing assignments 4,685 2,631 1,471 350 Cost of goods sold 34,549 24,133 — —
(of which Parent Company’s Selling expenses 32,799 12,246 — 204
auditor) (1,823) (625) (1,471) (350)
Administrative expenses 8,073 9,379 3,517 3,462
Auditing activities other than
auditing assignments 23 228 — 218 Research and
development costs 1,772 1,848 — —
(of which Parent Company’s
auditor) — (218) — (218) Other operating expenses — — 829 510
Tax advice 1,521 1,744 76 — Total depreciation/­
amortisation 77,193 47,606 4,346 4,176
(of which Parent Company’s
auditor) (76) — (76) —
Other services 497 1,875 154 1,550 Depreciation and amortisation are allocated
(of which Parent Company’s to the following assets in the balance sheet:
auditor) (154) (1,550) (154) (1,550)
Group Parent Company
Total PwC 6,726 6,478 1,701 2,118 2017 2016 2017 2016
Other auditors:
Computer software, etc. 3,233 4,486 435 422
Auditing assignments 975 220 — —
Trademarks 28,500 7,680 1,885 1,884
Auditing activities other than
auditing assignments — 130 — — Land and buildings 7,748 6,319 829 510
Tax advice 596 397 — — Plant and machinery
21,105 15,966 — —
Total other auditors 1,571 747 — —
Equipment, tools,
8,297 7,225 1,701 2,118 fixtures and fittings 16,607 13,155 1,197 1,360
Other services primarily comprise due diligence activities in con- Total depreciation/­
amortisation 77,193 47,606 4,346 4,176
nection with acquisitions.
The Parent Company’s depreciation for buildings is included in
the market-related rent that is invoiced to the subsidiary in
Vänersborg. This building depreciation is recognised as other
operating expenses in the Parent Company’s accounts.

NOTE 9 | OPERATING EXPENSES CLASSIFIED BY

NATURE OF EXPENSE

Group
2017 2016

Direct material incl. change in inventories 1,492,648 664,895

Employee benefits 717,062 415,927
Depreciation/amortisation 77,193 47,606
Other expenses 339,183 234,208
Total operating expenses 2,626,086 1,362,636

Includes cost of goods sold, selling expenses, administrative

expenses and costs for research and development.

NOTE 10 | APPROPRIATIONS

Parent Company
2017 2016

Difference between book depreciation

and depreciation according to plan 3,581 950
Change in tax-allocation reserve –500 4,300
Group contributions received 48,673 25,000
Total 51,754 30,250

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 11 | TAX ON PROFIT FOR THE YEAR

Group Parent Company Group

2017 2016 2017 2016 2017 2016

Current tax Reported profit before tax 315,607 120,754

Swedish companies –8,211 –17,125 –829 –3,472 Tax calculated according to Swedish tax rate –69,434 –26,566
Foreign companies –69,156 –33,787 — — Difference between tax rate in Sweden and
Deferred tax –17,748 3,465 — — weighted tax rate of foreign subsidiaries –29,342 –21,372
Total –95,115 –47,447 –829 –3,472 Non-deductible expenses –908 –496
Imputed income, tax allocation reserve –55 –166
Tax attributable to prior income years –3,498 —
Reconciliation with tax recognised in profit or loss:
Other 8,122 1,153
The acquisition of Mobile Climate Control means that the
weighted tax rate increased since corporate tax in the US and Total tax –95,115 –47,447
Canada is relatively high. Part of the deferred tax is the result
of the reduction in corporate taxation in the US in 2018, which
entailed additional deferred tax of SEK 3.8 M. The difference
between the tax expense according to the Swedish tax rate and
the actual tax rate comprises the following sub-items:

NOTE 12 | INTANGIBLE ASSETS

Group Parent Company

Goodwill is allocated to the Group’s divisions as follows
2017 2016 2017 2016
Group
Trademarks, customer
2017 2016
­relationships and other
intangible assets VBG Truck Equipment 101,304 106,764
Opening Edscha Trailer Systems 129,865 119,439
cost 962,811 150,062 34,319 33,575
Mobile Climate Control 764,903 764,903
Business combinations — 799,377 — —
Ringfeder Power Transmission 122,789 131,196
Purchases for the year 2,650 3,617 368 744
Carrying amount 1,118,861 1,122,302
Retirement of assets –2,524 –53 — —
Translation differences –450 9,808 — — The Group has allocated goodwill to four cash-generating units
Closing accumulated costs 962,487 962,811 34,687 34,319 that correspond to the lowest level at which goodwill is moni-
Opening amortisation –104,786 –88,831 –29,344 –27,038 tored as part of the internal control in the Group, which coin-
Amortisation for the year –31,733 –12,166 –2,320 –2,306 cides with the Group’s four segments (divisions).
Retirement of assets 1,677 53 — —
Goodwill and trademarks are subjected to impairment testing
annually and when there are indications of impairment losses.
Translation differences 227 –3,842 — —
The recoverable amount for cash-generating units is determined
Closing accumulated
­amortisation –134,615 –104,786 –31,664 –29,344
by the company management and is based on discounted cash
flows for the 2018 budget and forecasts up to 2020.
Closing balance 827,872 858,025 3,023 4,975
For the period after the forecast interval, sustained growth of
Of which trademarks 820,4961 848,862 2,255 4,141
1.5 per cent (1.5) is estimated, which is deemed to correspond to
long-term inflation assumptions. With the above assumptions
Group and using a discount rate of 8.3 per cent (9.3) before tax, the
Goodwill 2017 2016 value in use exceeds the carrying amount for these four
Opening cost 1,122,302 324,067 cash-generating divisions. The discount rate was determined
Business combinations — 764,903 based on expected cost of capital, weighted between borrowed
Translation differences –3,441 33,332 capital and equity. An increase in the discount rate of 1 percent-
Closing balance 1,118,861 1,122,302
age point and a decrease in operating profit of 20 per cent
would, individually, not give rise to any additional impairment of
1
Includes the Mobile Climate Control trademark with an indefinite use- goodwill in any of the divisions.
ful life of SEK 400 M (400).

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 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 13 CONT’D.

NOTE 13 | PROPERTY, PLANT AND EQUIPMENT

Group Parent Company

Land and buildings 2017 2016 2017 2016

Opening costs 249,426 181,070 33,669 33,669

Business combinations — 52,869 — —
Purchases for the year 19,454 715 2,760 —
Sale and retirement of assets –36,429 — –36,429 —
Reclassification 637 — — —
Translation differences 3,983 14,772 — —
Closing accumulated costs 237,071 249,426 0 33,669
Opening depreciation –78,300 –66,407 –29,004 –28,494
Depreciation for the year –7,748 –6,319 –829 –510
Sale and retirement of assets 29,227 — 29,833 —
Translation differences –963 –5,574 — —
Closing accumulated depreciation –57,784 –78,300 0 –29,004
Closing balance 179,287 171,126 0 4,665

Group Parent Company

Plant and machinery 2017 2016 2017 2016

Opening cost 265,587 210,612 7,914 7,914

Business combinations — 38,249 — —
Purchases for the year 18,494 20,955 — —
Reclassification 3,959 73 — —
Sale and retirement of assets –14,999 –13,504 –7,914 —
Translation differences –1,272 9,202 — —
Closing accumulated costs 271,769 265,587 0 7,914
Opening depreciation –163,842 –150,425 –7,914 –7,914
Depreciation for the year –21,105 –15,966 — —
Sale and retirement of assets 14,305 9,501 7,914 —
Translation differences 667 –6,952 — —
Closing accumulated depreciation –169,975 –163,842 0 –7,914
Closing balance 101,794 101,745 0 0

Group Parent Company

Equipment, tools, fixtures and fittings 2017 2016 2017 2016

Opening cost 134,662 110,357 8,413 8,306

Business combinations — 13,366 — —
Purchases for the year 19,611 9,840 1,152 107
Reclassification –123 833 — —
Sale and retirement of assets –10,628 –4,834 –4,229 —
Translation differences –1,061 5,100 — —
Closing accumulated costs 142,461 134,662 5,336 8,413
Opening depreciation –83,175 –70,825 –7,235 –5,875
Depreciation for the year –16,607 –13,155 –1,197 –1,360
Sale and retirement of assets 9,968 4,620 4,229 —
Translation differences 1,361 –3,815 — —
Closing accumulated depreciation –88,453 –83,175 –4,203 –7,235
Closing balance 54,008 51,487 1,133 1,178
Construction in progress
Opening balance 1,842 1,412 — —
Business combinations — 369 — —
Purchases for the year 13,372 532 — —
Reclassification –4,198 –906 — —
Translation difference 428 435 — —
Closing balance 11,444 1,842 — —

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 14 | INTERESTS IN GROUP COMPANIES, CHANGES IN CARRYING AMOUNTS

Parent Company
Interests in Group companies 2017 2016

Opening cost 2,042,558 661,792

Impairment loss on shares in subsidiaries –50,000 —
Business combinations — 1,380,766
Closing balance 1,992,558 2,042,558

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

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
Trailer Systems Sweden AB, Sweden 100 100
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 Thermal Systems India PVT. LTD., India 100 100
MCC do Brazil LTDA., Brazil 100 100
Mobile Climate Control Australia (PTY) Ltd, Australia 100 100
Total 1,992,558

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 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 14 CONT’D.

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
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
European Trailer Systems GmbH Moers, Germany
European Trailer Systems s.r.o. Kamenice nad Lipou, 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 556723-5642 Vänersborg, Sweden
Mobile Climate Control Sverige AB 556535-3074 Norrtälje, Sweden
Mobile Climate Control China Holding AB 556819-6629 Vänersborg, Sweden
Mobile Climate Control Manufacturing Co Ltd Ningbo, China
Mobile Climate Control Trading Co Ltd Ningbo, China
Mobile Climate Control Corp. Goshen IN, USA
Mobile Climate Control Inc. Toronto, Canada
Mobile Climate Control Sp. Zo.o. Olawa, Poland
Mobile Climate Control Africa (PTY) Ltd Durban, South Africa
Mobile Climate Control Thermal Systems India PVT. LTD. Karnataka, India
MCC do Brazil LTDA. Louveira, Brazil
Mobile Climate Control Australia (PTY) Ltd Melbourne, Australia

NOTE 15 | DEFERRED TAX LIABILITIES/ASSETS

Group Parent Company

Deferred tax assets 2017 2016 2017 2016

Deferred tax asset pertaining to pension liability 8,933 15,378 — —

Other temporary differences 41,221 39,981 — —
Deferred tax asset on tax-loss carryforward 5,251 19,865 — —
Total tax assets, gross 55,405 75,224 — —
Offset against deferred tax liabilities –7,289 –7,323 — —
Recognised deferred tax assets 48,116 67,901 — —

Deferred tax liabilities

Deferred tax liabilities relating to tax allocation reserves 22,682 23,056 –660 –550
Deferred tax liabilities relating to difference between carrying
amounts of assets and residual values for tax purposes 67,451 102,040 –385 –1,173
Deferred tax liabilities on intangible assets
identified in connection with acquisitions 125,034 139,268 — —
Total tax liabilities, gross 215,167 241,308 –1,045 –1,723
Offset against deferred tax assets –7,289 –7,323 — —
Recognised deferred tax liabilities 207,878 233,985 –1,045 –1,723

The Parent Company’s deferred tax liability is included in the line item “untaxed reserves.”

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 16 | INVENTORIES

Group
Inventories 2017 2016

VBG Truck Equipment

Raw materials and consumables 26,662 26,788
Semi-finished products and work in progress 22,517 24,602
Finished products and merchandise 54,685 47,855
Total inventories VBG Truck Equipment 103,864 99,245
Edscha Trailer Systems
Raw materials and consumables 42,260 43,655
Semi-finished products and work in progress 6,499 6,730
Finished products and merchandise 1,682 1,606
Total inventories Edscha Trailer Systems 50,441 51,991
Mobile Climate Control
Raw materials and consumables 154,073 135,012
Semi-finished products and work in progress 13,334 13,488
Finished products and merchandise 60,811 50,136
Total inventories Mobile Climate Control 228,218 198,636
Ringfeder Power Transmission
Raw materials and consumables 33,886 37,128
Semi-finished products and work in progress 33,047 35,096
Finished products and merchandise 46,566 57,603
Total inventories Ringfeder Power Transmission 113,499 129,827
Total 496,022 479,699

The obsolescence reserve for outgoing inventories amounts to SEK 68,029 thousand (61,870), divided between VBG Truck Equipment
SEK 9,504 thousand (11,442), Edscha Trailer Systems SEK 7,841 thousand (7,270), Ringfeder Power Transmission SEK 26,468 thou-
sand (43,158) and Mobile Climate Control 24,216 thousand.

NOTE 17 | PREPAID EXPENSES AND ACCRUED INCOME

Group Parent Company

2017 2016 2017 2016

Prepaid lease payments 483 778 191 35

Prepaid insurance premiums 2,251 3,591 — 1,652
Prepaid service charges 3,503 3,263 527 692
Prepaid marketing activities 785 511 — —
Prepaid issue expenses — 2,321 — 2,321
Accrued income 585 154 — —
Other items 10,245 8,578 2,549 918
Total 17,852 19,196 3,267 5,618

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 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 18 | EQUITY

In 2017, a fully subscribed new share issue was completed, 1:1 of
outstanding Series A shares (1,220,000 shares) and Series B shares
(11,282,024 shares) with preferential rights for existing sharehold-
ers. This means that share capital consists of 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, of Series B,
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 is equivalent to 96
per cent of the number that could be repurchased. At the same
AGM, the Board was authorised to use repurchased shares to
pay for acquisitions during the period up until the next AGM in
2003. This authorisation has been extended repeatedly, most
recently at the 2017 AGM to apply until the next AGM (2018).
This authorisation had not been utilised 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, 2,440,000 of
which are Series A shares and 22,564,048 Series B shares.
For the full-year 2017, the average number of outstanding
shares was calculated at 22,920,377 (12,502,024). This has con-
sequently impacted the key figures for the year.

NOTE 19 | UNTAXED RESERVES

Parent Company
2017 2016

Accumulated difference between recognised depreciation/amortisation

and depreciation/amortisation in excess of plan 1,750 5,331
Tax allocation reserves 3,000 2,500
Total 4,750 7,831

NOTE 20 | PROVISIONS FOR PENSIONS AND SIMILAR OBLIGATIONS

Parent Company
2017 2016

Provisions in accordance with Swedish Pension Obligations Vesting Act

FPG/PRI pensions 12,685 12,751
Group
Provisions in accordance with IAS 19
Defined-benefit pension plans 185,687 175,734

Defined-benefit pension plans

The Group has several defined-benefit pension plans where the employees are entitled to compensation after terminated employ-
ment 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 recognised in the consolidated balance sheet for defined-benefit pension plans have been calculated as follows:
Sweden Germany Other countries 31 Dec 2017 Total 31 Dec 2016 Total

Present value of funded obligations 27,223 27,223 28,904

Fair value of plan assets –26,729 –26,729 –28,531
494 494 373
Present value of unfunded obligations 93,602 90,142 1,449 185,193 175,361
Total obligation 185,687 175,734

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

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 20 CONT’D.

Amounts recognised in the consolidated income statement for pensions Group

2017 2016

Current service costs 4,419 5,068

Interest expense 3,541 4,683
Expected return on plan assets — —
Costs for defined-benefit plans 7,960 9,751

Costs for defined-contribution plans 25,382 11,395

Total costs recognised in profit or loss 33,342 21,146
Of which
Amount charged to operating profit 29,801 16,463
Amount charged to financial expenses 3,541 4,683
Total costs recognised in profit or loss 33,342 21,146

Interest expense for pension plans is classified as financial Other comprehensive income was negatively impacted by SEK
expense. Other items are allocated in the operating profit as cost 2,096 thousand (pos: 3,602), net after tax, as a result of the
of goods sold, selling or administrative expenses, depending on remeasurement of defined-benefit pension plans.
the employee’s function.

Specification of changes in net debt recognised in the consolidated balance

sheet relating to defined-benefit pension plans Group
2017 2016

Net debt at beginning of year 175,734 165,570

Net cost recognised in profit or loss 7,960 9,751
Benefits paid –5,974 –5,552
Contributions to funded plans –1,196 —
Gains (–) losses (+) resulting from changed financial assumptions 7,566 2,836
Gains (–) losses (+) resulting from changed demographic assumptions — —
Experience-based gains (–) losses (+) –1,058 —
Exchange rate differences on foreign plans 2,655 3,129
Net debt at year-end 185,687 175,734

Actuarial assumptions regarding significant defined-benefit pension plans

2017 2016
Percentage Sweden Germany Sweden Germany

Discount rate 2.5 1.9 2.7 1.7

Future annual salary increases 2.7 2.8 2.5 2.8
Inflation rate 1.9 1.5 1.7 1.5

The discount rate in Sweden for 2017 and 2016 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 corre-
sponding value increase of plan assets.
Inflation risk
Pension plans in both Sweden and Germany are linked to infla-
tion. 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 cor-
responding 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.

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 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 20 CONT’D.

Sensitivity of the defined-benefit obligation to changes in the weighted essential assumptions are:
Impact on the defined-benefit obligation
2017 Change in assumptions Increase in assumptions Decline in assumptions

Discount rate 0.5% Decrease of 8.0% Increase of 9.1%

Salary increases 0.5% Increase of 3.6% Decrease of 3.1%
Inflation rate 0.5% Increase of 6.5% Decrease of 5.9%

Impact on the defined-benefit obligation

2016 Change in assumptions Increase in assumptions Decline in assumptions

Discount rate 0.5% Decrease of 8.3% Increase of 9.4%

Salary increases 0.5% Increase of 3.6% Decrease of 3.0%
Inflation rate 0.5% Increase of 6.6% Decrease of 5.3%

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 recognised in the statement of financial position.

NOTE 21 | OTHER PROVISIONS

Group
2017 2016

Warranty obligations 23,716 24,613

Total 23,716 24,613

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

NOTE 22 | BORROWING

In 2016, VBG Group AB signed a new three-year financing
agreement for SEK 1,400 M, comprising a term loan of SEK
1,000 M and a revolving facility of SEK 400 M. The financing
agreement is conditional on financial covenants primarily linked
to cash flow and net indebtedness/EBITDA. Shares in subsidiar-
ies have been given as security for the loans.
The term loan of SEK 1,000 M is to be repaid in a total amount
of SEK 40 M every six months with the first repayment on 30
June 2017.
Of the revolving facility of SEK 400 M, SEK 100 M is an over-
draft facility that was unutilised at year-end, and the remaining
SEK 300 M had not been utilised as at 31 December 2017.
The financing agreement also allows the VBG Group to utilise
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, the equivalent of SEK 5 M was utilised in this
type of loan.

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

Total contracted cash
2017-12-31 Carrying amount Within 1 year Within 2–3 years Within 4–5 years After 5 years flow

Liabilities to credit institutions 878,028 100,378 832,304 932,682

Trade payables 176,203 176,203 176,203
Total 1,054,231 276,581 832,304 1,108,885

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

Total contracted cash
31 Dec 2016 Carrying amount Within 1 year Within 2–3 years Within 4–5 years After 5 years flow

Liabilities to credit institutions 1,793,070 906,467 959,257 1,865,724

Trade payables 154,029 154,029 154,029
Total 1,947,099 1,060,496 959,257 2,019,753

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 23 | TRADE RECEIVABLES

Group
Age distribution of trade receivables and reserve for doubtful debts 2017 2016

Trade receivables not due 317,791 267,250

Trade receivables due in 1–30 days 67,930 55,760
Trade receivables due in 31–90 days 20,246 12,405
Trade receivables due in more than 90 days 18,252 18,667
Reserve for doubtful debts -5,975 -8,853
Total 418,244 345,229

Reserve for doubtful debts

Reserve for trade receivables 1–30 days — -4,804
Reserve for trade receivables 31–90 days — —
Reserve for trade receivables older than 90 days -4,655 -4,049
Reserve for trade receivables not due -1,320 —
Total -5,975 -8,853

Change for the year in reserve for doubtful debts

Opening reserve -8,853 -7,044
Changes written off as bad debt losses 255 887
Reversed unutilised reserves 3,234 644
New provisions for doubtful trade receivables -611 -3,340
Closing reserve -5,975 -8,853

For a description of the risks associated with the company’s trade receivables, see Note 2.

NOTE 24 | OVERDRAFT FACILITIES

At year-end, the Group has an overdraft facility of SEK 100 M as part of the revolving facility of SEK 400 M.
The overdraft facility was unutilised at year-end.

NOTE 25 | ACCRUED EXPENSES AND DEFERRED INCOME

Group Parent Company

2017 2016 2017 2016

Special employer’s contribution 10,916 3,017 899 867

Accrued personnel costs 86,056 79,855 6,635 6,202
Audit fees 4,858 — 600 —
Other accrued expenses 3,031 — — —
Commissions and sales support 6,431 6,304 — —
Accrued interest 474 3,822 474 3,822
Other items 33,993 30,902 233 2,715
Total 145,759 123,936 8,841 13,606

NOTE 26 | PLEDGED ASSETS

Group Parent Company

2017 2016 2017 2016

Shares in subsidiaries 2,779,720 2,740,116 1,992,558 2,042,558

Leased machines — 11,478 — —
Total pledged assets 2,779,720 2,751,594 1,992,558 2,042,558

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 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 27 | CONTINGENT LIABILITIES

Group Parent Company

2017 2016 2017 2016

Guarantees for the benefit of subsidiaries — — 39,598 41,454

Tax — 14,829 — —
Other 1,046 1,001 254 255
Total contingent liabilities 1,046 15,830 39,852 41,709

Tax issues in Germany
The German tax authority has investigated the subsidiary VBG
Group Truck Equipment GmbH. As a result of the investigation,
the German tax authority considered not approving the subsidi-
ary’s deductions for costs of EUR 3.9 M attributable to restruc-
turing of the operations in 2009, which would have entailed an
additional tax expense of EUR 1.55 M, including interest. This
exposure was recognised as a contingent liability of SEK 14,829
thousand on 31 December 2016. Negotiations with the tax
authority in 2017 resulted in a preliminary agreement entailing
additional tax of SEK 3.6 M. This was included in the annual
accounts for 2017.

NOTE 28 | OPERATING LEASES

Group
2017 Within 1 year Within 2-5 years After 5 years 2016

Operating property leases

Property leases, current lease payments 36,813 17,983 16,264 318 26,353
Group total 36,813 17,983 16,264 318 26,353

Property leases mainly pertain to factory and office properties in foreign subsidiaries.

NOTE 29 | CASH FLOW STATEMENT

Group Parent Company

Other items not affecting liquidity in operating activities 2017 2016 2017 2016

Impairment/retirement of non-current assets — 4,217 -2,409 —

Change in provisions 2,876 22,693 — —
Group contributions received — — 48,673 25,000
Other items -18,499 -10,317 -132 511
Total -15,623 16,593 46,132 25,511
Acquisition of non-current assets
Capital expenditures in intangible assets for the year (Notes 12 and 13) -1,803 -3,617 -368 -744
Capital expenditures in property, plant and equipment for the year (Notes 12
and 13) -58,469 -27,653 -3,912 -107
Effect of capital expenditures on cash and cash equivalents for the year -60,272 -31,270 -4,280 -851

Reconciliation between opening and closing balances for liabilities whose cash flow is recognised in financing activities

Items not affecting liquidity

Currency New Change in fair December
Group trend, SEK M January 2017 Cash flow Acquisitions Interest effects leases value 2017

Current liabilities, bank 880,482 -804,342 76,140

Non-current liabilities, bank 912,588 -75,288 -35,412 801,888
Total financial liabilities 1,793,070 -879,630 0.0 0.0 -35,412 0.0 0.0 878,028

Cash and cash equivalents -276,360 45,063 -321,423

Total cash and cash equivalents -276,360 45,063 0.0 0.0 0.0 0.0 0.0 -321,423

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VBG GROUP ANNUAL REPORT 2017 | NOTES

NOTE 30 | BUSINESS COMBINATIONS

Updated acquisition balance of Mobile Climate Preliminary Final

Control Group Holding AB Group 2016 2017
The acquisition of Mobile Climate Control resulted in preliminary Purchase consideration 1,372.8 1,372.8
goodwill of SEK 1,446.7 M in 2016. The acquisition balance was
Acquired net assets:
preliminary pending the completion of the process to identify
and determine the fair value of intangible assets separate from Cash and cash equivalents 108.9 108.9
goodwill. During the fourth quarter, the final acquisition balance Property, plant and equipment 104.9 104.9
was confirmed, meaning the Mobile Climate Control brand with Trademarks — 400.0
indefinite useful life was set at SEK 400 M and customer rela- Customer relationships — 396.9
tionships with an expected useful life of 20 years were valued at Other intangible assets 5.0 5.0
SEK 396.9 M. Taken together, the final acquisition balance Long-term investments 16.3 16.8
means the goodwill value attributable to Mobile Climate Control Inventories 208.5 207.0
has been reduced by SEK 681.8 M to SEK 764.9 M on the acqui- Receivables 251.7 251.7
sition date. The final acquisition plan is recognised retroactively
Deferred tax liability, trademarks — -88.0
on the acquisition date, meaning the Group’s balance sheet and
Deferred tax liabilities, customer rela-
key figures at 31 December 2016 and subsequent periods have tionships — -87.3
been updated. However, the final acquisition balance has not
Other liabilities -769.2 -708.0
affected the comparative year, equity or earnings per share.
Goodwill 1,446.7 764.9
The preliminary acquisition balance has been changed and
adopted as follows:

NOTE 31 | SIGNIFICANT ACCOUNTING ESTIMATES AND ASSESSMENTS

Accounting estimates and assessments are evaluated continu-
ously and are based on historical experience and other factors,
including expectations of future events that are considered rea-
sonable under prevailing circumstances. The Group makes esti-
mates and assumptions about the future with regard to pensions
(Note 20), provisions and restructuring costs (Note 21). 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 trade-
marks with indeterminable lifetimes. Recoverable amounts for
cash-generating units have been established by calculation of
value in use. Certain estimates must be made for these calcula-
tions (Note 12). The Group recognised a total inventory value of
SEK 496,022 thousand (481,199) after obsolescence reserves of
SEK 68,387 thousand (61,870). An obsolescence reserve is rec-
ognised if the estimated net realisable value is lower than the
cost, and in conjunction with this, the Group makes estimates
and assessments regarding, for example, future market condi-
tions and the estimated net realisable 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
obsolescence reserve.

96
 NOTES | VBG GROUP ANNUAL REPORT 2017

NOTE 32 | PROPOSED DISTRIBUTION OF PROFITS

In proposing the dividend, the Board of Directors has taken into The following funds in the Parent Company are available for dis-
account the Group’s long-term development potential, financial tribution by the AGM:
position and investment needs. For this reason, the Board of
Retained earnings SEK 1,148,936,989
Directors of VBG Group AB (publ) proposes that the 2018
Annual General Meeting resolve to approve a dividend of Net profit for the year SEK 15,150,555
SEK 3.251 per share (1.75) for the 2017 financial year. The pro- SEK 1,164,087,544
posed dividend entails a total distribution of funds from the Par-
ent Company of SEK 81.3 M (43.8), equivalent to 4.1 per cent of The Board of Directors and the Managing Director propose
that these funds be distributed as follows:
the Group’s equity at year end. The Group reported profit after
tax of SEK 220.5 M (120.8), which means that the proposed div- Dividend to shareholders SEK 81,264,156
idend represents 36.9 per cent of net profit for the year (36.3). To be carried forward SEK 1,082,823,388
1
Proposed dividend
SEK 1,164,087,544

NOTE 33 | SIGNIFICANT EVENTS AFTER THE CLOSE OF THE FINANCIAL YEAR

No significant events occurred after the close of the period.

The income statements and balance sheets will be submitted to the Annual General Meeting on 25 April 2018 for adoption.

The undersigned ensure that the consolidated accounts and annual accounts have been prepared in accordance
with the International Financial Reporting Standards (IFRSs) 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, 21 March 2018

Peter Hansson Johnny Alvarsson Anders Birgersson

Chairman of the Board Board Deputy Chairman Managing Director and CEO

Peter Augustsson Louise Nicolin Jessica Malmsten

Board member Board member Board member

Jouni Isoaho Cecilia Pettersson

Employee representative Employee representative

Our Audit Report was submitted on 27 March 2018

Öhrlings PricewaterhouseCoopers AB

Fredrik Göransson
Authorised Public Accountant

97
VBG GROUP ANNUAL REPORT 2017 | AUDIT REPORT
Auditor’s Report
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 2017. The annual accounts
of the company are included on pages 54–97 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 as of
31 December 2017 and its financial performance and cash flow
for the year then ended in accordance with the Annual Accounts
Act. The consolidated accounts have been prepared in accordance
with the Annual Accounts Act and present fairly, in all material
respects, the financial position of the group as of 31 December
2017 and their financial performance and cash flow for the year
then ended in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, and the Annual Accounts
Act. The statutory administration report is consistent with the
other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of 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 con-
solidated accounts are consistent with the content of the addi-
tional 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 Stan-
dards on Auditing (ISA) and generally accepted auditing stan-
dards in Sweden. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities section. We
are independent of the parent company and the group in accor-
dance 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 knowledge 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 com-
pany or its controlled companies within the EU.
We believe that the audit evidence we have obtained is suffi-
cient 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 signifi-
cant 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 con-
98
sideration of whether there was evidence of bias that repre-
sented a risk of material misstatement due to fraud. We tailored
the scope of our audit in order to perform sufficient work to
enable us to provide an opinion on the consolidated financial
statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry
in which the group operates.
When we designed our group audit strategy and group audit
plan, we 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 geo-
graphical spread, the size of the respective units, and the specific
risk profile represented by the respective units. Against this back-
ground, we determined that a complete audit would be executed
as regards, in addition to the parent company’s financial state-
ments in Sweden, eleven subsidiaries’ (with registered offices in a
total of eight different countries) 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 (two companies). For other units deemed to be indi-
vidually insignificant to the group audit, the group team exe-
cuted 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 mate-
riality. An audit is designed to obtain reasonable assurance
whether the financial statements are free from material misstate-
ment. Misstatements may arise due to fraud or error. They are
considered material if individually or in aggregate, they could rea-
sonably 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 mis-
statements, 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 pro-
fessional judgment, were of most significance in our audit of the
annual accounts and consolidated accounts of the current
Key audit matter
Valuation of goodwill
As at 31 December 2017, the group reports a goodwill totaling
MSEK 1 119 which is divided between the group’s four divi-
sions. 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 calcu-
lated and compared with the reporting value of the operations.
The recoverable value was determined by company manage-
ment 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 test-
ing implies that company management must make significant
estimations 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 2017.
The most significant assumptions applied in this impairment
testing are described in Note 12.
Key audit matter
Valuation of inventories
As at 31 December 2017, the group reports inventories in an
amount of MSEK 496.
Company management determine the value of inventories
based on the calculation of the acquisition costs, with deduc-
tion 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 inven-
tory 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 con-
siders the historical scrappage rate, the staying time of individ-
ual 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 31 in the annual report.
AUDIT REPORT | VBG GROUP ANNUAL REPORT 2017
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 sepa-
rate opinion on these matters.
How our audit addressed the key audit matter
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 2018 and against the pre-
pared business plans for 2019–2020.
• Valuation and assessment to determine whether the compa-
ny’s valuation model complies with generally accepted valua-
tion 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 impair-
ment 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.
How our audit addressed the key audit matter
Our audit activities included an evaluation of the group’s prin-
ciples for calculating obsolescence in the inventories.
With the aim of assessing the reasonableness of the compa-
ny’s obsolescence provision, we have instructed our component
auditors to examine and report to the group team on any pos-
sible deviations from the statistically calculated obsolescence in
accordance 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 sat-
isfactory manner, described its principles for the valuation of inven-
tories in the annual report, including the estimations and judge-
ments made in evaluating the inventory as at 31 December 2017.
99
VBG GROUP ANNUAL REPORT 2017 | 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
1–53, 102 and 113 in this document. The Board of Directors and
the Managing Director are responsible for this other informa-
tion. 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 infor-
mation identified above and consider whether the information is
materially inconsistent with the annual accounts and consoli-
dated 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 noth-
ing to report in this regard.
Responsibilities of the Board of Directors and the
Managing Director
The Board of Directors and the Managing Director are responsi-
ble 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 responsi-
ble for such internal control as they determine is necessary to
enable the preparation of annual accounts and consolidated
accounts that are free from material misstatement, whether due
to fraud or error.
In preparing the annual accounts and consolidated accounts,
The Board of Directors and the Managing Director are responsi-
ble 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. Misstate-
ments can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the
annual accounts and consolidated accounts is available on Revi-
sorsinspektionen’s website: www.revisorsinspektionen.se/revi-
sornsansvar. This description is part of the auditor´s report.
100
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board
of Directors and the Managing Director of VBG Group AB (publ)
for the year 2017 and the proposed appropriations of the com-
pany’s profit or loss.
We recommend to the general meeting of shareholders that
the profit be appropriated in accordance with the proposal in the
statutory administration report and that the members of the
Board of Directors and the Managing Director be discharged
from liability for the financial year.
Basis for opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the
group in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements.
We believe that the audit evidence we have obtained is suffi-
cient and appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and
the Managing Director
The Board of Directors is responsible for the proposal for appro-
priations of the company’s profit or loss. At the proposal of a
dividend, this includes an assessment of whether the dividend is
justifiable considering the requirements which the company’s
and the group’s type of operations, size and risks place on the
size of the parent company’s and the group’ equity, consolida-
tion requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s orga-
nization and the administration of the company’s affairs. This
includes among other things continuous assessment of the com-
pany’s and the group’s financial situation and ensuring that the
company´s organization is designed so that the accounting, man-
agement of assets and the company’s financial affairs otherwise
are controlled in a reassuring manner. [The Managing Director
shall manage the ongoing administration according to the Board
of Directors’ guidelines and instructions and among other mat-
ters take measures that are necessary to fulfill the company’s
accounting in accordance with law and handle the management
of assets in a reassuring manner.]
Auditor’s responsibility
Our objective concerning the audit of the administration, and
thereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing
Director in any material respect:
• has undertaken any action or been guilty of any omission
which can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
 AUDIT REPORT | VBG GROUP ANNUAL REPORT 2017

Our objective concerning the audit of the proposed appropria- Öhrlings PricewaterhouseCoopers AB, was appointed auditor
tions of the company’s profit or loss, and thereby our opinion of VBG Group AB (publ) by the general meeting of the share-
about this, is to assess with reasonable degree of assurance holders on the April 27, 2017 and has been the company’s audi-
whether the proposal is in accordance with the Companies Act. tor for more than twenty years.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with generally Gothenburg, 27 March 2018
accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or that Öhrlings PricewaterhouseCoopers AB
the proposed appropriations of the company’s profit or loss are
not in accordance with the Companies Act. Fredrik Göransson
A further description of our responsibility for the audit of the Authorised Public Accountant
administration is available on Revisorsinspektionen’s website:
www.revisorsinspektionen.se/revisornsansvar. This description is
part of the auditor’s report.

Auditor’s statement 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 Opinion

It is the Board of Directors who is responsible for the statutory A statutory sustainability report has been prepared.
sustainability report for the year and that it has been prepared in
accordance with the Annual Accounts Act. Gothenburg, 27 March 2018

The scope of the audit Öhrlings PricewaterhouseCoopers AB

Our examination has been conducted in accordance with FAR’s
auditing standard RevR 12 The auditor’s opinion regarding the Fredrik Göransson
statutory sustainability report. This means that our examination Authorised Public Accountant
of the statutory sustainability report is substantially different
and less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinion.

101
VBG GROUP ANNUAL REPORT 2017 | FROM THE CHAIRMAN OF THE BOARD

Interview with Peter Hansson

What is your view of the VBG

Group’s performance in 2017?
2017 was an incredible year for the
VBG Group in many ways. Thanks
After a year of to last year’s acquisition of Mobile
Climate Control – and the highly
organic growth and the inte-
favourable underlying economic
gration of Mobile Climate performance we experienced during
Control, the VBG Group is the year, particularly in the motor
ready for further acquisitions. vehicle industry – the Group
generated sales of more than SEK
3 billion. VBG Truck Equipment
reported a record-breaking year
in both sales and profitability.
Alongside this, the Group
strengthened its positions in both existing and new markets and also made
several important investments in digitalisation, which will create new
business opportunities going forward.

What issues did the Board focus on?

Our focus in 2017 was on monitoring the work of the operations, paying
particular attention to the integration of Mobile Climate Control into the
Group. It is important to remember for this type of major acquisition that
– with Mobile Climate Control – the VBG Group has not only gained a new
company but also another corporate culture. I am pleased to state that the
process of merging two strong companies has gone smoothly and both
parties seem happy thus far, which is positive.

You established a new Group Management team for the VBG Group during
the year – what is your view of this?
I have every confidence in the new Group Management and now that the
team is in place the VBG Group has a group of highly qualified individuals
who can concentrate, in a more focused manner on strategically important
matters to evolve the Group.

What is the Board’s view of the years ahead for the VBG Group?
With the business in order and effective Group Management in place, the
VBG Group has positive conditions for continuing to grow, provided that the
healthy economic climate continues. After a year of organic growth and the
integration of Mobile Climate Control, the VBG Group is ready for further
acquisitions. The Board is looking forward to pursuing its work together with
management to ensure that the Group achieves its established targets in the
years ahead.

Peter Hansson,
Chairman of
VBG Group

102
 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2017
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 com-
panies 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 Meet-
ing, the Board of Directors, its elected committees and the Man-
aging Director 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 documents.
Shareholders
The share capital in VBG Group AB amounted to SEK 65,490,060
on 31 December 2017, 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 bought back by VBG
Group AB in 2002. This amounts to a total of 25,004,048 out-
standing shares with a total of 46,964,048 votes.
At the end of 2017, VBG Group AB had a total of 4,670 share-
holders. At year-end, the ten largest shareholders controlled
79.9 per cent of the outstanding share capital, 76.3 per cent of
the total number of issued shares and 89.3 per cent of the votes.
The stake held by the largest shareholder, the Herman Krefting
Foundation for Allergy and Asthma Research, amounted to 22.6
per cent of the outstanding share capital and 28.3 per cent of
the votes. Other shareholders with more than 10 per cent of the
votes were the SLK Employees’ Foundation and the VBG-SLK
Foundation, whose holdings of Series A shares represented 24.2
per cent and 10.4 per cent of the votes, respectively.
More detailed information on the share, the ownership struc-
ture, etc. is provided on pages 50–51.
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 finan-
cial 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 votes 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
itemised agenda with the matters to be discussed, and informa-
tion 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 Meet-
ings shall be given not earlier than six weeks and not later than
two 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 Group’s
website, vbggroup.com.
Annual General Meeting 2017
VBG Group AB’s Annual General Meeting was held on 27 April
2017 and all the presentations were made in Swedish. Notice of
the meeting, the agenda, and the minutes with the Managing
Director’s illustrations from his address are available on the web-
site. The entire Board of Directors, the chairman of the Nominat-
ing Committee, the Group Management in the person of the
Managing Director and the CFO, and the company’s auditor
were present at the meeting. Shareholders were given an oppor-
tunity 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 2018 AGM.
The AGM decided to adopt the Board’s proposal for a raised
dividend of SEK 1.75 per share for 2017 (3.25, or recalculated
1.63 based on the double number of outstanding shares in
2017), with a record date of 2 May 2017. The AGM decided to
re-elect Board members Peter Hansson, Anders Birgersson,
Johnny Alvarsson, Peter Augustsson, Louise Nicolin and Jessica
Malmsten. Norges Bank with its holding of 222,913 shares (0.6
per cent of the votes at the meeting) made a reservation against
the resolution. Norges Bank’s representative Johan Örneblad did
not provide any explanation.
Peter Hansson was re-elected Chairman and Johnny Alvarsson
was re-elected Deputy Chairman.
The fee paid to the Board of Directors was raised to SEK
1,505,000 (formerly SEK 1,270,000), of which SEK 475,000
(400,000) to the Chairman of the Board, SEK 300,000
(250,000) to the Deputy Chairman and SEK 210,000 (180,000)
each to the other Board members.
103
VBG GROUP ANNUAL REPORT 2017 | CORPORATE GOVERNANCE REPORT

Of the total fee, SEK 100,000 was paid to the Audit and Com-
pensation Committees, to be distributed by the Board of Directors.
No fee was paid to the Managing Director.
Furthermore, Öhrlings PricewaterhouseCoopers was re-elected
as auditor, with Fredrik Göransson as auditor in charge, for a
period of one year.
The AGM also authorised the Board to resolve on one or more
occasions up until the 2018 AGM that repurchased shares can
be transferred, notwithstanding the shareholders’ pre-emption
rights, and that non-cash payment can be made for such trans-
ferred shares. This authorisation enables the Board to use the
Company’s own shares as payment for acquired companies.
Furthermore, the AGM resolved to appoint a Nominating Com-
mittee consisting of Reidar Öster (private), Peter Hansson (Chair-
man of VBG Group), Peter Trygg (SEB Asset Management SA) and
Johan Lannebo (Lannebo Fonder), with Reidar Öster as Chairman.
On 27 April 2017, it was announced that the 2018 AGM
would take place in Vänersborg on 25 April 2018 at 5:00 p.m.
Nominating Committee
The Nominating Committee is appointed by the AGM and, for
the 2018 AGM, consists of the following members:
• Reidar Öster, private, Chairman of the Nominating Committee
• Peter Hansson, 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 Chair-
man 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 state-
ment 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 in good enough time 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 bal-
ance and diversity in terms of breadth of qualifications, experi-
ence and background among Board members, which is also
reflected in the current composition. The Nominating Commit-
tee applies rule 4.1 of the Swedish Corporate Governance Code
as its policy for diversity on the Board.
The majority of the members of the Nominating Committee
are independent in relation to the company, the executive man-
agement and the shareholder with the most votes, the Herman
Krefting Foundation for Allergy and Asthma Research.
Ahead of the 2018 AGM, the Nominating Committee proposes
that the number of Board members be increased by one to seven
members with no deputies. The Nominating Committee proposes
that Peter Hansson be re-elected to the Board as Chairman,
Johnny Alvarsson as Deputy Chairman and Peter Augustsson,
­Louise Nicolin, Jessica Malmsten and Anders Birgersson (MD) as
ordinary members, and that Mats R Karlsson be elected as a new
Board member. Mats R Karlsson has an MSc Industrial Engineering
and Management from Linköping University of Technology and is
currently Senior Advisor in his own company. Mats has previously
worked as the CEO of Axel Johnson International AB and prior to
that served as CEO of AxFlow, a subsidiary of the Axel Johnson
Group. He has previously worked as the President of Humicool
Europe for Munters and Business Area Manager at Primus Sievert.
It is proposed that the fee paid to the Board of Directors and
committees be raised to SEK 1,795,000 (currently SEK 1,505,000),
of which SEK 500,000 (475,000) to the Chairman of the Board,
SEK 315,000 (300,000) to the Deputy Chairman and SEK
220,000 (210,000) each to the other Board members.

Board members as of the 2017 AGM

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

Compensation Committee/
Peter Hansson Chairman 2001 Audit Committee Yes No
Compensation Committee/
Johnny Alvarsson Deputy Chairman 2004 Audit Committee Yes Yes
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
Board member, CEO
Anders Birgersson and Managing Director 2001 Audit Committee No No
Total 5/6 4/6

Employee representatives Function Elected

Jouni Isoaho, IF Metall Board member 2016

Cecilia Pettersson, Unionen/Swedish Association of Graduate Engineers/Ledarna Board member 2011
Michael Freiholtz, IF Metall Deputy 2009
Karin Pantzar, Unionen/Swedish Association of Graduate Engineers/Ledarna Deputy 2010

Information on the members of the Board is provided on pages 108–109.

104
 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2017

Of the total fee, SEK 100,000 shall be paid to the Audit and
Compensation Committees, to be distributed by the Board of
Directors.
No fee is paid to the Managing Director.
Furthermore, the Nominating Committee proposes to the
2018 AGM the re-election of Öhrlings PricewaterhouseCoopers
as auditor, with Fredrik Göransson as auditor in charge, for a
period of one year.
Fees to auditors are proposed to be paid as billed, upon
approval, for work performed.
Shareholders representing more than 75 per cent of the total
number of votes in VBG Group AB propose that the 2018 AGM
appoint the following persons to the Nominating Committee:
• Reidar Öster, private, Chairman of the Nominating Committee
• Peter Hansson, Chairman of VBG Group AB
• Per Trygg, SEB Asset Management SA
• Johan Lannebo, Lannebo Fonder
to experience. The Managing Director 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 Managing Director.
According to the adopted rules of procedure, the Board of Directors
holds six ordinary meetings per year, including the statutory meet-
ing following the AGM, plus Extraordinary Meetings whenever the
situation warrants. Company officers take part in Board meetings
as rapporteurs, and the company’s CFO 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.

Composition of the Board of Directors Role of the Chairman

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 2017 AGM elected Board members Peter Hansson,
Johnny Alvarsson, Anders Birgersson (MD), Peter Augustsson,
Louise Nicolin and Jessica Malmsten. Peter Hansson was elected
Chairman of the Board and Johnny Alvarsson was elected Dep-
uty Chairman. There is a presentation of the Board members
and their assignments on pages 108–109.
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 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 are also judged to be independent of the company’s major
shareholders and all six members meet the requirements relating
The Chairman organises and leads the work of the Board of
Directors so that it complies with the Swedish Companies Act,
other laws and ordinances, rules governing stock market compa-
nies (including the Code) and the Board’s internal governance
documents.
The Chairman monitors the company’s operations via contin-
uous contacts with the Managing Director and is responsible for
ensuring that other Board members receive relevant information
and documents. The Chairman also ensures that an annual eval-
uation is conducted of the work of the Board and the Managing
Director, and that the results of this evaluation are communi-
cated 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 2018 AGM.

Compensation Committee
At the statutory Board meeting in April 2017, the Board of Direc-
Attendance at Board meetings in 2017 tors appointed a Compensation Committee consisting of Peter
Hansson, Chairman, and Johnny Alvarsson. The Committee had
Board of Audit Compensation two meetings during 2017 where it discussed remuneration and
Board members Directors ­Committee Committee
other terms of employment for the Managing Director and
Peter Hansson 12 (12) 2 (2) 2 (2) senior officers in the Group. The Managing Director was
Johnny Alvarsson 12 (12) 2 (2) 2 (2) co-opted, but did not participate in the discussion when remu-
Peter Augustsson 12 (12) 2 (2) neration to the Managing Director was addressed.
The principle applied within the Group is that the manager’s
Louise Nicolin 12 (12) 2 (2)
manager should approve decisions in compensation matters. A
Jessica Malmsten 12 (12) 2 (2) presentation was made at the AGM of the Board’s proposal for
Anders Birgersson 12 (12) 2 (2) guidelines for remuneration to the Managing Director and other
senior officers. The AGM adopted the guidelines in accordance
Employee representatives with the Board’s proposal. Information on the Board’s proposal
Jouni Isoaho, IF Metall 12 (12) 2 (2) to the 2018 AGM for guidelines for remuneration to the Manag-
Cecilia Pettersson, ing Director and senior officers is provided in the Report of the
Unionen/Swedish Directors on page 62.
­A ssociation of Graduate Information on remuneration in 2017 is provided in Notes 6
Engineers/Ledarna 11 (12) 2 (2) and 7 on pages 83–85.

105
VBG GROUP ANNUAL REPORT 2017 | CORPORATE GOVERNANCE REPORT
Audit Committee
At the statutory Board meeting in April 2017, the Board of Direc-
tors appointed an Audit Committee consisting of the entire
Board with Johnny Alvarsson as Chairman. In 2017, the Audit
Committee held two meetings of record, one before and one
after the statutory Board meeting.
The Audit Committee has a supervisory role with regard to
the company’s system for internal control and risk management
of the financial reporting. The Committee’s Chairman maintains
ongoing contact with the company’s auditors in order to ensure
that the company’s internal and external accounting meets the
requirements made on a listed company and to discuss the scope
and content of the audit work.
The committee had consultations with and received reports
from the company’s external auditors on two occasions during
2017. The auditors’ reports have not occasioned any special
measure on the part of the Audit Committee.
The work of the Board during 2017
Prior to each Board meeting, an agenda is sent out to the Board
members along with in-depth information on the business at
hand. Twelve meetings were held during the 2017 financial year
(fifteen in the preceding year), of which four (February, April,
August and October) were held in connection with the publica-
tion of the company’s quarterly reports. One meeting in March
was held to adopt the 2016 Annual Report and the statutory
Board meeting was held immediately after the AGM. The busi-
ness plan for 2018 was adopted at the December meeting. Four
of the five remaining meetings in January and February were
related to the preferential share issue and one meeting in Octo-
ber addressed strategic issues for the Group.
Operational activities
The Managing Director is responsible for the VBG Group AB’s
day-to-day administration, and rules established by the Board of
Directors govern the Managing Director’s power of decision
regarding investments and financing matters.
Managing Director and CEO
Managing Director 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 VBG Group AB’s Managing Director, Anders Birgersson is
also a member of the boards of the Herman Krefting Foundation
for Allergy and Asthma Research, the SLK Employees’ Founda-
tion and the VBG-SLK Foundation, in keeping with the by-laws
of the owner foundations.
The Managing Director holds 1,017 shares.
Group and Division Management
Group Management comprises four individuals from the Parent
Company: Managing Director and CEO Anders Birgersson, the
Group’s CFO Claes Wedin, Senior Vice President of Business
Development Bo Hedberg and Senior Vice President of HR and
Corporate Responsibility Christina Holgerson, as well as the divi-
sion managers for the Group’s two largest divisions: Clas Gunne-
berg, Mobile Climate Control and Anders Erkén, VBG Truck
Equipment Anders Erkén has also been given overall responsibil-
ity for the Group’s two other divisions, Ringfeder Power Trans-
mission and Edscha Trailer Systems.
106
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 fac-
tors that affect the business. Furthermore, Group and division-­
related major projects are discussed and decided on.
Information on the Parent Company management and the
division managers is provided on pages 110–111.
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 decentralised to
the four 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.
The Group works with annual, rolling, multi-year activity plans
that can also be measured and evaluated. These activity plans
are important for the long-term strategic management of the
Group. The Group also uses annual objectives, forecasts and
action plans for the day-to-day management of the business.
Different business processes such as marketing, sales, pur-
chasing 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
supplementary follow-up reports.
Auditors
The auditing firm of Öhrlings PricewaterhouseCoopers AB
(PwC) was elected by the 2017 AGM as auditor for a period of
one year, with authorised public accountant Fredrik Göransson
as auditor in charge.
The annual audit includes a statutory audit of VBG Group
AB’s annual accounts, a statutory audit of the Parent Company
and all significant subsidiaries (where required), an audit of inter-
nal report packages, an audit of the year-end closing and a gen-
eral review of one interim report.
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 organisation, 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 is per-
formed of the third quarter accounts in October-November, fol-
lowed by an early warning meeting with the executive manage-
ment and the Audit Committee where important questions for
the annual closing are raised. Review and audit of the annual
closing and annual accounts is performed in January–February.
During 2017, in addition to the audit assignment, the VBG
Group consulted PwC on taxes, transfer price matters, account-
ing matters and due diligence in conjunction with acquisitions.
The amount of remuneration paid to PwC in 2017 is shown in
Note 7 on page 85.
PwC is obliged to assess its independence prior to providing
independent advice to the VBG Group in addition to its auditing
assignments.
 CORPORATE GOVERNANCE REPORT | VBG GROUP ANNUAL REPORT 2017
Report on internal control
This section contains the Board’s annual report on how internal
control is organised 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 instruc-
tion to the Managing Director. The VBG Group’s financial
reporting complies with the laws and rules that apply to compa-
nies 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 divi-
sion of roles and responsibilities aimed at good internal control
in the financial reporting.
Control environment
The control environment is the foundation for internal control.
VBG Group AB’s control environment consists of organisational
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 labour between the
Board and its committees. In its role as Audit Committee, the
Board of Directors has the principal task of ensuring that estab-
lished 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 Managing Director and agreed on the eco-
nomic reporting to the Board of Directors of VBG Group AB.
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 pertain
to the financial reporting, kept continuously updated and com-
municated via relevant channels to the companies in the Group.
Systems and procedures have been created to provide the
management with the necessary reports concerning business
results in relation to established objectives. The necessary infor-
mation 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 signif-
icant risks identified in the Group’s internal control of the finan-
cial 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 reports are prepared monthly and quarterly in the
Group, its divisions and subsidiaries. In conjunction with this
reporting, analyses are conducted with comments and updated
forecasts aimed at ensuring that the financial reporting is accu-
rate. Accounting functions and business controllers with func-
tional 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 fulfils 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 report-
ing shall provide support for correct business decisions at all
levels in the Group.
Information and communications
Internal information and communications have to do with creat-
ing an awareness among the Group’s employees concerning
external and internal governance instruments, including powers
and responsibilities. Information and communications regarding
internal governance instruments for financial reporting are avail-
able for all concerned employees. Important tools for this are
the VBG Group’s manuals and courses.
Control activities
The Group’s companies are organised in four divisions. Each divi-
sion management has a CFO/business controller who has a cen-
tral 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 report-
ing. A new Group consolidation system was acquired and imple-
mented in connection with the closing of the 2016 accounts to
further strengthen security and controls.
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 Managing
Director. On a quarterly basis, in connection with the interim
report, the Board of Directors receives comprehensive informa-
tion regarding the Group’s and divisions’ performance, earnings,
financial position and cash flow via a report package comprising
outcomes, forecasts and comments.
MISCELLANEOUS
Internal audit
VBG Group AB has a relatively simple operational structure with
four divisions, each consisting of small or medium-sized legal
entities with varying platforms for internal control. Governance
and internal control systems established by the company are
monitored regularly with regard to compliance by the CFO/con-
trollers at the division and Parent Company level. Continuous
analyses of the companies’ reporting and economic outcomes
are also performed 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 and
interim reports as well as press releases. Financial information
covering the past few years is provided at vbggroup.com, along
with information on corporate governance. Some ten or so meet-
ings with investors and analysts were held in Sweden during 2017.
107
 VBG GROUP ANNUAL REPORT 2017 | BOARD OF DIRECTORS

Board of Directors

MEMBERS PETER HANSSON ANDERS BIRGERSSON JOHNNY ALVARSSON LOUISE NICOLIN

Position on Chairman Board member Deputy Chairman Board member

the Board

Current position Owner of PKH-konsult AB
since 2014 Professional
board member.
Education MSc. (Political Science) and
BSc., University of Gothen-
burg. Management training,
Centre d’Etudes Industrielles,
Geneva.
Elected 2001 (Board member)
2008 (Chairman of the Board)
Born 1947
Other Board Chairman of the boards of
assignments Borås Bil Förvaltning AB and
several of its subsidiaries.
Member of the boards of the
Herman Krefting
Foundation for Allergy and
Asthma Research, the World
Childhood Foundation and
Bra Bil Sverige AB.
Managing Director 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, Christian Berner
Tech Trade AB, Sparbanken
Lidköping AB, the Herman
Krefting Foundation for
Allergy and Asthma
Research, the VBG-SLK
Foundation and the SLK
Employees’ Foundation.
Chairman of Manava konsult
AB since 2017.
MSc. Eng., Industrial Eco-
nomics, Institute of Technol-
ogy at Linköping University.
2004
1950
Chairman of FM Mattsson
Mora Group AB, Manava
Konsult AB and Dacke
­Industri AB. Board member
of Beijer Alma AB, Instalco
Intressenter AB and
Sdiptech AB.
Managing Director and owner
of Nicolin Consulting AB since
2011.
MSc. Eng., Molecular Biotech-
nology, Uppsala University.
Executive MBA, Stockholm
School of Business. International
Directors Programme (IDP-C),
Insead, Fontainebleau.
2014
1973
Chairman of AB Better Business
World Wide, Sweden. Board
member of Volati AB, Dellner
Couplers AB, Enzymatica AB and
UppdragsHuset Sverige AB.

Work experience CEO of the Gothenburg Has worked in the engineer- Managing Director and Consulting assignments for such
Opera 2006–2014. President ing industry since 1984 in CEO of Indutrade AB 2004– companies as AstraZeneca,
of Volvo Cars Sweden 1995– logistics, production, prod- 2017. Managing Director of Maquet Critical Care, Octa-
2006. Previously held senior uct development and senior the listed companies Elek- pharma, Recipharm, GE Health-
management positions management. Production tronikgruppen BK AB 2000– care, Pfizer and Pharmadule
at Volvo Lastvagnar Norden Manager, Managing Director 2004 and Zeteco AB 1988– 1998–. Marketing Manager and
AB since 1972. and Business Area Manager 2000. Chief Engineer at Business Area Head at Plantvision
in the ESAB Group 1997– Ericsson Telecom 1975– 2007–2011. Engineering Consul-
2001. Production Manager 1987. tant at Semcon 1998–2000.
and Technical Manager in
the SKF Group 1989–1997.
Production and logistics in
the ABB Group 1979–1988.
Remuneration1, SEK 500,000 — 375,000 210,000
Attendance at
12 (12) 12 (12) 12 (12) 12 (12)
Board meetings
Own shareholding
and shareholding 200 1,017 1,000 —
of related parties
Independent of
Yes No Yes Yes
the company
Independent of
No No Yes Yes
major shareholders

1
Remuneration approved at the 2017 AGM.

108

PETER AUGUSTSSON
Board member
Chairman of Peter Augusts-
son Development AB since
2005.
MSc. Eng., Mechanical Engi-
neering, Chalmers University
of Technology.
2011
1955
Chairman of Smoltek Nano-
tech Holding AB, AXsensor
AB, Mechanum Sverige AB,
QLT Marine AB, Johanne-
berg Science Park AB, Fort-
aco Group Oy and Walki
Group Oy. Board member of
Walleniusrederierna Aktie­
bolag, Malte Månson Holding
AB, Ljunghäll Group AB and
Mechanum Stockholm 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.
210,000
12 (12)
1,100
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.
JESSICA MALMSTEN
Board member
Senior Manager Customer
Relationship Management
Volvo Bil AB since 2017.
MSc. Eng., Electronical Engi-
neering, Chalmers University
of Technology.
2016
1964
Board member of Bra Bil
Sweden AB until third quar-
ter of 2017.
Has held various senior posi-
tions in business and opera-
tions development.
Göteborgs­Operan AB,
2007–2017. Volvo Person­
bilar Sverige AB and Volvo
Personvagnar Norden AB,
2001–2007. Volvo Person-
vagnar AB 1987–2001.
210,000
12 (12)
100
Yes
Yes
Michael Freiholtz
Trollhättan, born 1975
Deputy Board member since 2009.
Employee representative blue-collar
employees. Employed since 2007.
BOARD OF DIRECTORS | VBG GROUP ANNUAL REPORT 2017
CECILIA PETTERSSON JOUNI ISOAHO
Board member and employee Board member and employee
representative white-collar representative blue-collar
employees employees
Employee in the purchasing and International Welding Specialist
logistics division of VBG Truck (IWS) at VBG Truck Equipment.
Equipment. Employed since 1998. Employed since 1996.
Three-year economics Upper secondary welding
­programme. education, Artur Lund-
qvistskolan.
2011 2016
1968 1959
— —
— —
— —
11 (12) 12 (12)
— —
— —
— —
AUDITOR
Öhrlings PricewaterhouseCoopers AB
Fredrik Göransson
Auditor in charge, Born 1973
Authorised Public Accountant
Auditor of the company since 2012.
109
VBG GROUP ANNUAL REPORT 2017 | MANAGEMENT

Management

MANAGEMENT ANDERS BIRGERSSON CLAES WEDIN BO HEDBERG

Current position Managing Director and CEO CFO Senior Vice President of Business
Development

Born 1958 1956 1957

Education MSc. Eng., Mechanical Engineering, MSc. Econ., School of Business, Eco- MSc. Eng., Mechanical Engineering,
Chalmers University of Technology. nomics and Law at Gothenburg Uni- Luleå University of Technology.
Business Administration, University versity.
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, Managing Director and
Business Area Manager in the ESAB
Group 1997–2001. Production Man-
ager and Technical Manager in the
SKF Group 1989–1997. Production
and logistics in the ABB Group
1979–1988.
Director of Finances at the Älvsborg Various positions within the VBG
County Council 1992–1997. CFO and Group, including Director of R&D
Deputy Managing Director at Mill- and Marketing. Marketing Director
er-Nohab 1986–1992. Controller and at Mark IV Automotive 1994–1996.
Business Analyst at Volvo Flygmotor Various positions within Saab Auto-
1982–1986. Economist at Union mobile 1981–1994, including Plat-
­Carbide 1979–1982. form 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, Christian Berner Tech
Trade 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

110

CHRISTINA HOLGERSON
Senior Vice President of HR and Cor-
porate Responsibility
1965
Engineering, specialising in mechani-
cal engineering, Nils Ericson
Upper-Secondary School. Qualified
Human Resources Specialist, FEI.
1986–1996 and from 2000
Various positions within the VBG
Group, including Design Engineer,
Quality Manager Purchasing and
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.
Board member of the Scandinavian
Automotive Supplier Association
(FKG) since 2012.
— —
ANDERS ERKÉN
Executive Vice President, VBG Group
and Division Manager, VBG Truck
Equipment, with overall responsibility
for Edscha Trailer Systems and Ring-
feder Power Transmission
1964
MSc. Eng., Mechanical Engineering,
Luleå University of Technology.
2007
Branch Manager, Imaje AB 2004–2007.
Production and logistics in ESAB AB
1990–2003.
— —
MANAGEMENT | VBG GROUP ANNUAL REPORT 2017
CLAS GUNNEBERG
Executive Vice President, VBG Group
and Division Manager, Mobile Cli-
mate Control
1964
MSc. Eng., Mechanical Engineering,
Chalmers University of Technology.
Executive MBA, School of Business,
Economics and Law at Gothenburg
University.
2016
President & CEO of
Mobile Climate Control, 2007–.
Management consultant, StratFit
Consulting, 2006–2007. President of
Finnveden Metal Structures AB,
2002–2006. Managing Director of
Dayco Automotive AB, 1999–2002.
Plant Manager, Dayco Automotive
AB, 1996–1999. Various positions at
AB SKF, 1989–1996.
—
111
VBG GROUP ANNUAL REPORT 2017 | ANNUAL GENERAL MEETING

Vänersborg, 21 March 2018

Peter Hansson Johnny Alvarsson Anders Birgersson

Chairman of the Board Board Deputy Chairman Managing Director and CEO

Peter Augustsson Louise Nicolin Jessica Malmsten

Board member Board member Board member

Jouni Isoaho Cecilia Pettersson

Employee representative 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 2017 on pages 103–112 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
of the corporate governance report is different and substantially
less in scope than an audit conducted in accordance with Inter-
national 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.

Gothenburg, 27 March 2018

Öhrlings PricewaterhouseCoopers AB
Fredrik Göransson
Authorised Public Accountant

WELCOME TO THE ANNUAL GENERAL MEETING 2018
The Annual General Meeting of VBG Group AB (publ) will be held
at 5:00 p.m. on Wednesday, 25 April 2018 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 19 April 2018.
• notify the company by not later than 4:00 p.m. on 19 April 2018.
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 anmalan2018@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
representing a legal entity must produce a power of attorney, a
copy of the registration certificate or equivalent documents show-
ing the person(s) authorised to sign on behalf of the legal entity.
Shareholders whose shares are registered to a nominee must
have the shares re-registered in their own name by the nominee
in good time before 19 April 2018 (voting rights registration).
Dividend
The Board of Directors and Managing Director propose that a
­dividend of SEK 3.25 per share (1.75) be approved, with a record
date of 27 April 2018. If the AGM approves this proposal, the divi-
dend is expected to be distributed by Euroclear Sweden AB starting
3 May 2018.
Report dates
25 April Interim report January–March
21 August Interim report January–June
22 October Interim report January–September
February 2019 Year-end report 2018
The VBG Group welcomes enquiries about the Group and its
development. Contact persons are: Anders Birgersson, Managing
Director 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.

112

VBG TRUCK 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
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 11 458 379
USA
ONSPOT OF NORTH AMERICA, INC.
P.O. Box 1077
North Vernon, IN 47265-5077
Tel +1 800 224 2467
Branch:
555 Lordship Blvd
Stratford, CT 06615-7124
Tel +1 800 766 7768
France
ONSPOT E.U.R.L
14 Route de Sarrebruck
FR-57645 Montoy-Flanville
Tel +33 387 763 080
EDSCHA TRAILER SYSTEMS
Germany
EUROPEAN TRAILER SYSTEMS GMBH
Im Moerser Feld 1f
DE-47441 Moers
Tel +49 2841 6070 700
Czech Republic
EUROPEAN TRAILER SYSTEMS S.R.O.
Ke Gabrielce 786
CZ-39470 Kamenice nad Lipou
Tel +420 565 422 402
ADDRESSES | VBG GROUP ANNUAL REPORT 2017
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 SYSTEMS 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 8 402 21 40 Tel +55 19 3878 2058
MOBILE CLIMATE CONTROL SVERIGE AB
Odinslundsgatan 15 RINGFEDER POWER TRANSMISSION
SE-412 66 Gothenburg
Tel +46 8 402 21 40 Germany
RINGFEDER POWER TRANSMISSION GMBH
Canada Werner-Heisenberg-Straße 18
MOBILE CLIMATE CONTROL INC. DE-64823 Groß-Umstadt
7540 Jane St. Tel +49 6078-9385-0
Vaughan, Ontario
L4K 0A6 RINGFEDER POWER TRANSMISSION
Tel +1 (905) 482–2750 TSCHAN GMBH
Postfach 2166
MOBILE CLIMATE CONTROL INC. DE-66521 Neunkirchen
6659 Ordan Drive Tel +49 6821 866 0
Mississauga, Ontario
L5T 1K6 Czech Republic
Tel +1 (905) 482–2750 RINGFEDER POWER TRANSMISSION S.R.O.
Oty Kovala 1172
USA CZ-33441 Dobrany
MOBILE CLIMATE CONTROL CORP. Tel +420 377 201 511
P.O. Box 803
Goshen, Indiana 46527 USA
Tel +1 (574) 534–1516 RINGFEDER POWER TRANSMISSION
USA CORPORATION
MOBILE CLIMATE CONTROL CORP. 165 Carver Avenue
3189 Farmtrail Road Westwood, NJ 07675
York, PA 17406 Tel +1 201 666 3320
Tel +1 (717) 767–6531
India
MOBILE CLIMATE CONTROL CORP. RINGFEDER POWER TRANSMISSION
27 Corporate Circle Suite 1 INDIA PRIVATE LTD.
East Syracuse, NY 13057 Plot No. 4, Door No. 220
Tel +1 (315) 434–1851 Mount Poonamallee High Road
Kattuppakkam
Poland
MOBILE CLIMATE CONTROL S.P.Z.OO Chennai-600056
Tel +91 44 2679 1411
Ul. Szwedzka 1
55-200 Oława China
Tel +48 71 3013 701 KUNSHAN RINGFEDER POWER
TRANSMISSION CO., LTD.
China
MOBILE CLIMATE CONTROL MANUFAC- No. 10, Dexin Road
Zhangpu 215321
TURING/TRADING CO., LTD
No.7 Jinxi Road Kunshan, Jiangsu Province
Zhenhai, Ningbo, 315221 Tel +86 512 5745 3960
Tel +86 (574)–863 085 77 Brazil
South Africa HENFEL INDÚSTRIA METALÚRGICA LTDA.
MCC AFRICA PTY (LTD) Major Hilario Tavares Pinheiro, 3447
Unit 7B, Rinaldo Industrial Park Cep 14871 - 300
50 Moreland Drive, Red Hill Jaboticabal, SP
4071 Durban Tel +55 16 3209 3422
Tel +27 31 569 3971
The VBG Group is an international industrial
group with more than 1,500 employees in 18
countries. The Parent Company VBG Group
AB is a long-term owner that provides active

Solberg • Photo: Peter Bartholdsson, Jesper Orrbeck and others • Printed by: Göteborgstryckeriet
management of the Group’s four wholly
owned divisions through considerable industrial
expertise, a strong corporate culture and
financial resilience.