Continued growth and focus on sustainability

Business area Industry is a complete supplier of the products and services needed to carry out a sustainable and cost-efficient construction and civil engineering project on the Nordic market. Industry offers everything from gravel and rock material, concrete, asphalting and temporary electricity to prefabricated concrete elements. Business area Industry also assists with crane and machine rental, distribution of binder to the concrete industry, transportation as well as recycles production waste and rubble.

Through good organic growth supplemented by strategic acquisitions business area Industry has built up strong brands that complement the Peab brand. Among these are Lambertsson, Swerock, Cliffton, Swecem, Skandinaviska Byggelement, Glacell, Rådasand, Utform, ATS Kraftservice, Lättklinkerbetong, Smidmek, Virtanen and Kranor.

With local roots the companies take on jobs big and small. The business area is run in six product areas: Asphalt, Concrete, Gravel and Rock, Transportation and Machines, Rentals and Construction System.

THE BUSINESS 2019

The Nordic construction and civil engineering market has been highly active during the year. In the summer Peab announced its intention to acquire YIT’s Nordic paving and mineral aggregates business. Through the acquisition Peab will expand its presence in Sweden, Norway and Finland and become established in the paving business in Denmark. The business has around 1,700 employees, 200 strategically placed quarries and 63 asphalt plants in the Nordic region. This also creates opportunities for further expansion and development of Recycling and Concrete. The transaction was conditional on approval from competition authorities as well as the fulfillment of certain contractual conditions. At the end of March the acquisition was approved by the competition authorities and it was finalized on April 1, 2020.

Continued offensive development in Peab Asphalt

During the year Peab Asphalt has reached new record volumes. Its market position continues to be strong with a growing number of contracts from municipalities and business with the Swedish Transport Administration and Swedavia has remained the same. On April 1 the remaining shares in the milling operations that were previously run in Peab’s partially owned company Svenska Fräs och Asfaltsåtervinning AB (SFA) were acquired. Incorporating another niche area strengthens and broadens asphalt operations.

The concept ECO-Asfalt® which was launched in 2015 is well established. The product is being further developed by mixing in more recycled asphalt, which has a positive effect on environmental goals in both climate and material efficiency. Read more about ECO-Asfalt^® in the section Environment.

Swerock invests in climate-​improved ECO-​Betong™

Concrete production has been intense during the year. To a certain extent there has been a shift from housing to civil engineering projects in the big city regions. Investments were made in a concrete factory in Ylöjärvi, Finland and in one in Önnestad, Sweden as well as in Sweden’s largest concrete boom pump with a mast length of 63 meters. In 2019 Swerock launched ECO-​Betong™, a climate-​improved concrete where a part of the cement is replaced with slag, a byproduct in steel manufacturing. Peab collaborates with SSAB and has invested in our own manufacturing in a new factory in Oxelösund. The investment, which received funds from The Swedish Environmental Protection Agency, contributes to reducing carbon dioxide emissions from Swerock’s concrete production by 50,000 tons annually. This is equal to more than half a million trips between Gothenburg and Stockholm by car.

Gravel and Rock continue to ensure access to raw material. The added value of establishing concrete factories, asphalt plants and recycling operations with access to gravel and rock material is considerable. Recycling operations, which create new, sustainable material by making use of residue products from construction and civil engineering sites, have been expanded during the year with a new C&D Recycling Wash Plant in Sundsvall.

Focus on sustainability and development in Construction System

Construction System concentrated operations in 2019 to fewer production units. New products within prefabricated light outer walls have been developed in Hallstahammar.

Smidmek, which delivers comprehensive solutions within frame, wrought iron and sheet metal structures as well as complete concrete frame products, has developed positively since the acquisition of 60 percent of the shares in 2017 and contributed vital expertise in this area. The remaining 40 percent of shares were acquired in the autumn of 2019.

Higher external demands on Rentals

Crane operations in Sweden (Lambertsson), Norway (Kranor) and Finland (Virtanen) developed well in 2019. In Sweden Lambertsson expanded operations with new depots in Sundsvall, Umeå, Luleå and Sälen. Investments in fossil free machines, so-called green machines, continues. The growing green range of products makes it easier for more users to make a sustainable choice.

NET SALES AND PROFIT

Net sales for 2019 amounted to SEK 13,339 million (13,284). Even adjusted for acquisitions and divestitures net sales were unchanged compared to last year. Net sales increased in all product areas except Construction System where net sales fell.

Operating profit for the year amounted to SEK 938 million (977) and the operating margin was 7.0 percent (7.4). The lower operating margin was due to higher costs in Rentals stemming from some supplemental establishments made to raise local presence that have not yet begun to generate their full revenue capacity. In addition, the business area has been charged in the third quarter with acquisition costs of SEK 40 million concerning YIT’s paving and mineral aggregates operations and the acquisition of the remaining 40 percent of the shares in AB Smidmek Eslöv of SEK 47 million in the fourth quarter. The price of the remaining shares is based on the company’s development and earning capacity. Since the development of the company has been better than expected the remaining shares have fetched a higher price, which had an effect on profit.

Capital employed in Industry was at the end of the year SEK 6,897 million compared to SEK 6,432 million at the end of last year. The increase is primarily attributable to investments in machinery. The effect of additional IFRS 16, Leases was SEK 98 million per December 31, 2019.

Orders received and order backlog

Orders received during 2019 amounted to SEK 6,174 million (5,111). The increase is primarily related to Asphalt. Order backlog on December 31, 2019 amounted to SEK 2,548 million (2,246).