The year as a whole was characterized by improved profitability, robust cash flow and a good financial position for Peab. With our four complementary and cooperating business areas we are well-equipped to take on the market’s opportunities and challenges.

Improved profitability and a robust cash flow helped Peab achieve all its financial goals and pre-tax profit of over two billion Swedish krona. Orders increased in all the business areas and totaled SEK 41.4 billion (37.8) for the year while order backlog at the end of December was SEK 33.6 billion (27.0). The improved profit stems mainly from business areas Industry and Project Development but the contract operations in Construction and Civil Engineering showed stable results. In Project Development it was particularly positive to see that in Housing Development the operative operating margin continued to develop well and for the entire year of 2016 improved to 8.5 percent (6.5). In business area Industry sales volumes and profit increased in Concrete, Gravel and Rock, Asphalt as well as Rentals. Given Peab’s good financial position and a balanced need for investments the Board believes there is room to raise dividends to SEK 3.60 (2.60).

Employees and strategic decisions are behind the result

I am convinced that the key to our success lies in the interplay between a number of factors. First and foremost there are the people behind this year’s fine figures – all Peab’s employees. Their fantastic efforts and goal-oriented work have been a major contribution to the result this year. I also want to point out our strategic decision to create four complementary and cooperative business areas. In addition to comprising our value chain and to a certain extent making us self-sufficient, they provide a good balance between more capital intensive business areas and those with lower investment needs. Yet another crucial factor is our decentralized organization based on local entrepreneurship that operates close to customers and considers the local market.

Running a business responsibly is key to continued success and competitiveness

Developing a sustainable business is fundamental to Peab and our efforts intensified after signing UN Global Compact in 2012. We have identified crucial sustainable aspects of our business and gathered them into four areas: The Employees, The Business, Climate and Environment and Social Engagement.

One of the most prioritized issues at Peab is a safe and healthy working environment based on the premise that everything we do follows the law, regulations and collective bargaining agreements. We actively promote through clarity, leadership and cooperation attitudes and behavior built on the culture of safety we want in Peab. We combine this with systematic risk management, preventive measures and knowledge exchanges in our efforts to eliminate accidents at Peab’s workplaces.

We have a big responsibility to minimize the environmental impact of our operations throughout the value chain. Reducing carbon dioxide emissions, streamlining the use of resources and striving to phase out environmental and health hazardous substances in production are a major part of this work.

The Group’s four business areas are dependent on many different suppliers and subcontractors. To ensure Peab’s business is correct and reliable a company line for purchasing in our organization was adopted. We work continually to ensure that in our procurement process we take our responsibility for business ethical, financial, social and environmental aspects.

The foundation of our work with diversity and equality means that Peab welcomes everyone and excludes no one. In order to be the best company in the industry we need the most skilled and this requires the broadest recruitment base possible. Through the Peab School we provide high school construction and civil engineering education. In addition, during the year the Peab School has taught students and Peab personnel about equality and diversity. This better enables us to take important steps towards our long-term goal of a Peab that reflects society in general and our customers specifically.

Good circumstances challenged by capacity shortages

In many ways the circumstances for the construction and civil engineering industry are favorable: strong Swedish economy, population growth and low interest rates combined with an enormous need for new housing for several years ahead. According to the forecast by the Swedish Building and Planning Agency 700,000 new homes will be needed until 2025. Add to this all the infrastructure investments and public sector construction. However, despite this positive situation there are signs growth in construction will slow down in the coming years because of a capacity shortage, primarily in human form. This comes as no surprise since the current situation is largely the result of far too little investment in housing construction and infrastructure in the past two decades.

Healthy competition on equal terms

An efficient construction sector with long-term competence and capacity to meet the needs of society is crucial to growth in the country and to its well-being. With the resource shortage the Swedish construction market is currently facing we need access to both domestic and foreign labor but only if the game rules are unequivocal and apply to everyone active on the Swedish market. Only then will the right conditions exist for healthy competition on equal terms and safe workplaces. Furthermore we have to come together – politicians, labor market partners, authorities, the construction industry – and work harder to match the existing labor force better with what is needed.

If the construction industry is going to be part of putting more people to work in Sweden the possibility of creating a more flexible and competitive salary system needs to be looked into. And finally, there has to be a more far reaching perspective on construction in Sweden. Simply by smoothing out the curves between underproduction and overheating we can create long-term conditions for a healthy industry and a supply of the skilled workers so badly needed in the sector.

With the ambition to be the best company in the industry

Peab has a good financial position and we are working in a market with stable conditions. Our work on continuous improvement is producing results and we are clearly on the right road. Totally focused on running a responsible and sustainable business we continue to work on our ambition to be the best company in the industry. We intend to achieve this goal by having the most satisfied customers, the best workplace and most profitable company in the industry.

41.4

Orders received in 2016 increased to SEK 41.4 billion.

“Peab is a reliable and competent partner with strong local roots that delivers quality and makes our customer’s interests our own. We also regularly ask our customers how well our deliveries live up to their expectations. Our overall SCI value in 2016 displays a stable result but to reach our goal of having the most satisfied customers in the industry we need to work harder.”

According to the forecast by the Swedish Building and Planning Agency 700,000 new homes will be needed until 2025.

Förslöv in March 2017

Jesper Göransson
President and CEO