Business area Construction
Stable development in a strong construction market
|Net sales, MSEK||26,726||24,121||23,845|
|Operating profit, MSEK||602||542||-225|
|Operating margin, %||2.3||2.2||-0.9|
|Orders received, MSEK||29,280||27,883||25,999|
|Order backlog on 31 December, MSEK||26,805||24,160||19,529|
|Number of employees on 31 December||6,685||6,600||6,320|
With local roots close to customers business area Construction performs contract work for both external and internal customers. Construction projects include everything from new production of housing, public and commercial premises to renovations and extensions as well as construction maintenance.
Operations in business area Construction are run via some 150 local offices around the Nordic area, organized in eleven regions in Sweden, three in Norway and two in Finland. There are three specialized housing production regions in Stockholm, Gothenburg and the Öresund region. Construction maintenance operations are run in a nationwide region primarily focused on the big city areas. Other regions are responsible for all types of construction projects in their geographic area.
THE BUSINESS 2017
The construction market in 2017 was strong and has continued to be on a high level in Sweden. It has been driven by a robust domestic demand and favorable conditions for Swedish exports. Housing production was intense throughout 2017 although it slowed in some areas towards the end of the year.
Housing production represented a considerable part of the business area’s production during 2017. One example among the great many housing projects Peab carried out in Sweden is Nya Munkebäck in Gothenburg. Comissioned by Tornet, Riksbyggen and Bonum Peab is building 346 apartments for rent, tenant-owned apartments, senior housing and various premises. Together these will create a completely new city district and the project in its entirety will be ready in 2021.
New housing generates the need to build different forms of community functions like schools and healthcare centers as well as commercial space. Demand for this type of project is therefore expected to be high in 2018. Construction of the renovation and extension of Södra Älvsborg Hospital for Västfastigheter, a contract worth around SEK 1 billion, began at the end of 2017.
Peab has a strong presence in Kiruna, which is undergoing a huge transformation. It began with the construction of Kiruna City Hall that has a strong sustainability profile. The project was commissioned by LKAB and will be ready in 2018. Peab is also building the completely new culture center in Kiruna for Kiruna municipality.
In Stockholm Peab continued production on the major renovation and extension project in city block Björnen. Peab is building around 1,000 workplaces in government offices in the largest construction project The National Property Board of Sweden has ever taken on.
In one of Karlstad’s most expansive areas and just a few minutes from the center of the city, the Inner Harbor, Peab is putting up the office project Skeppet for Klövern. The planning and construction of Skeppet has been aimed at gaining certification according to GreenBuilding.
The division between housing projects and other construction projects on the market in Norway is quite similar to the Swedish market and the market is expected to remain on a high level in 2018. In Norway one of the projects Peab is building is housing in Fløtningen Park, located idyllically next to Hjellevannet in central Skien. The project is divided into five stages and when completed will comprise 150 apartments. Stage 2 with 27 apartments was erected during 2017 and completed in January 2018.
Growth has continued to be good in Finland in 2017 and this is expected to continue in 2018. Up to this point there has been a big need for renovations but now growth is expected in all kinds of projects, housing and commercial premises alike. Peab is increasing its presence in the areas around Tammerfors and Helsinki. Construction of the project Hämeenlinnan Henrietta with 52 apartments, which is being built on a cultural site in the middle of the historic city Tavastehus, is an example of this.
Key functions in the community
In Växjö Peab completed Pär Lagerkvist School, the municipality’s largest elementary school, which with its 13,500 m2 has room for a thousand students. The school is certified according to Miljöbyggnad Gold and is made of sustainable material like a solid wood frame in parts of the building, solid wood floors and solar panels. Student housing is being produced in Linköping for Akademiska Hus and in Sollentuna Peab has taken on the considerable job of renovating the hospital there for the Stockholm County Council’s property company Locum.
In Tromsø, Norway Peab is building the Prostneset Harbor Terminal, a 12,000 m2 terminal with service functions for travelers comprising district and regional buses, fast boats and Hurtigruten. It also contains a goods terminal and offices. Peab is also building new medical research facilities for Norwegian Statsbygg at the University of Tromsø.
In Finland Hyvinge Hospital is being extended with several different wards for specialist care and Hyvinge City’s primary care center. The extension is 22,800 m2. The project began in 2016 and will be completed in the summer of 2018.
Nationwide construction resources
One of Peab’s most prominent strengths, in addition to having its own skilled workers, is its local roots and capacity to handle not only large projects but also offer construction services to all kinds of customers no matter where they are or their size.
Peab Construction Service covers most of Sweden. The extensive expertise in Peab Construction Service also makes it possible to take on projects that require special measures, like preserving historic, culturally valuable environments. One of these is the Österbergska Estate in Kristianstad originally from the beginning of the 1800’s, which was restored in 2017.
Development of purchasing function and digitalization
Peab continues to work on its purchasing strategy following the Group’s direction towards a more secure and efficient steering of purchasing. The intention is to increase digitalization in operations to create more channels for transferring knowledge, improve productivity and ensure the quality of production methods.
NET SALES AND PROFIT
Net sales for 2017 increased by eleven percent and amounted to SEK 26,726 million (24,121). The increase is spread over all regions. The portion represented by housing production continued to grow. Operating profit for the year amounted to SEK 602 million (542) and the operating margin was 2.3 percent (2.2).
ORDERS RECEIVED AND ORDER BACKLOG
Orders received increased during the year compared to last year and amounted to SEK 29,280 million (27,883). Orders received were well diversified in terms of products and geography although housing is still a large portion. Order backlog 31 December 2017 increased to SEK 26,805 million compared to SEK 24,160 million at the end of 2016.
Project allocation of order backlog, 31 Dec 2017
|Below 200 MSEK, 50% (52)||201 MSEK – 500 MSEK, 35% (35)||501 MSEK – 1,000 MSEK,10% (10)||> 1,000 MSEK, 5% (3)|
Operating profit and margin
|Housing, 45% (42)||45|
|Other building construction, private, 28% (28)||28|
|Other building construction, public, 27% (30)||27|
|New construction, 69% (65)||69|
|Renovation, 21% (24)||21|
|Construction maintenance, 10% (11)||10|
|Private, 50% (59)||50|
|Public, 33% (25)||33|
|Internal/other, 17% (16)||17|
|Sweden, 78% (80)||78|
|Norway, 12% (12)||12|
|Finland, 10% (8)||10|