Acquisitions reinforce our Nordic position

Industry offers everything from mineral aggregates, concrete, paving 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 excavated soil. The business area is run in six product areas: Mineral Aggregates, Paving, Concrete, Transportation and Machines, Rentals and Construction System.

Business area Industry contains strong brands that complement the Peab brand such as Lambertsson, Swerock, Peab Asfalt, Cliffton, Swecem, Skandinaviska Byggelement, Smidmek Glacell, Rådasand, Virtanen and Kranor.

The business 2020

On July 4, 2019 Peab signed a contract to acquire YIT’s paving and mineral aggregates operations in the Nordic region. At the end of March 2020 the transaction was approved by the competition authorities and the acquisition was finalized on April 1, 2020. Through the acquisition Peab expanded its presence in Sweden, Norway and Finland and became established in the paving business in Denmark. The acquisition entailed taking over some 2,000 employees, around 200 strategically located quarries and 63 production asphalt plants in the Nordic region. The operations have primarily been integrated into the companies Peab Asfalt and Swerock. This gives Peab a unique and market leading position in paving and mineral aggregates in the Nordic region. The acquisition also provides conditions for further expansion and development in other operations such as Recycling and Concrete. The transaction was a combination of an asset deal and share purchase and the total purchase price on a debt free basis amounted to SEK 3,184 million. For more information see note 6.

Peab has worked to develop our own ECO-products for several years now. Our ECO concepts consist of products that are better for the climate and environment and we have added ECO-Ballast, ECO-Prefab and ECO-Stomme to the already existing brands of ECO-Asfalt and ECO-Betong. Read more under the section Environment.

The acquisition entailed taking over some 2,000 employees, around 200 strategically located quarries and 63 production asphalt plants in the Nordic region.

Growing paving operations

During the year Peab Asphalt has had high volumes in Paving and the acquired operations have developed well. Its market position in the Nordic region continues to be strong with a growing number of contracts from municipalities while maintaining business with private and state customers on the same level. The amount of recycled asphalt continues to grow in the Nordic countries. Finland is in the lead, where 28 percent of all asphalt production contains recycled asphalt, followed closely by Denmark. The binder bitumen is a vital raw material in Paving. As a result of the uncertainty connected to deliveries from Nynas Peab has worked with replacements for bitumen as well as alternative suppliers.

Circular material

The work to ensure access to raw material has progressed in Mineral Aggregates. The synergies in establishing concrete and asphalt plants and recycling operations close to mineral aggregates are significant. With the C&D Recycling Wash Plants in Malmö and Sundsvall Swerock contributes to circular material flows by recycling up to 80 percent of surplus excavated soil.

Investment in ECO-Betong

Concrete production has been high in 2020, although it varied from region to region. We opened another climate smart concrete factory with state-of-the-art technology this year in Skara.

ECO-Betong combines good performance with up to 50 percent less carbon dioxide emissions. ECO-Betong, where part of the energy intense cement is replaced with slag, has been thoroughly tested internationally and has many technical advantages.

Construction System develops new products

During the year Construction System launched the new climate improved products ECO-Prefab and ECO-Stomme. The concept of climate smart railroad carriage was expanded to include more factories. During the year Construction System started a manufacturing unit in Ängelholm for balconies and road blocks.

Smidmek, which delivers comprehensive solutions for frames made of steel, concrete and sheet metal, started up a new unit in Solna to be closer to the market in the middle of Sweden. At the end of 2020 it received a major contract for the delivery of frames to a new building at Danderyd Hospital in Stockholm.

Environmentally friendly range in Rentals

Crane operations in Sweden (Lambertsson), Norway (Kranor) and Finland (Virtanen) developed well in 2020. In Sweden Lambertsson continued to invest in a more environmentally friendly offer with, for example, more electric machines.

Net sales and profit

Net sales for 2020 increased by 40 percent and amounted to SEK 18,720 million (13,339), of which the acquired operations contributed by SEK 5,944 million. Adjusted for the acquired operations, net sales contracted by four percent to SEK 12,776 million. Net sales increased in Mineral Aggregates and Concrete while they decreased in Transportation and Machines, Rentals and Construction System.

Operating profit for the year increased to SEK 1,105 million (937) with an operating margin amounting to 5.9 percent (7.0). Not including the acquired operations, operating profit was SEK 855 million and the operating margin was 6.7 percent. The lower operating margin is due to a lower profit in Rentals and Construction System.

The underlying operations in the acquired companies contributed to operating profit by SEK 494 million. Depreciation on surplus values for, among other things, customer contracts in the order backlog taken over and fixed assets amounted to SEK -189 million. Depreciation on surplus values for customer contracts in the order backlog taken over have been high throughout 2020 and will also affect part of 2021. In addition, acquisition costs and transfer tax in Finland have charged profits in total by SEK -55 million. All in all operating profit for the year was affected by SEK 250 million related to the acquired operations. Because the acquired operations have a very clear seasonal pattern the first quarter is characterized by considerable deficits since the season starts in the second quarter. If the acquisition had taken place on January 1, 2020 profit in the first quarter would have been affected by SEK -297 million and the underlying operations would have had an accumulated operating profit per December 31, 2020 of SEK 197 million.

Capital employed in Industry was at the end of the year SEK 8,822 million compared to SEK 6,799 million at the end of last year. The increase is due to the acquired operations.

Orders received and order backlog

Orders received during 2020 increased to SEK 9,893 million (6,174), of which orders received from the acquired operations amounted to SEK 4,357 million. Order backlog on December 31, 2020 amounted to SEK 3,921 million (2,548), of which order backlog related to acquired operations was SEK 1,531 million.