Collaboration for sustainable values

When we summarize 2021 Peab can check off one more successful year. For the financial year this entailed continued profitable growth, strong cash flow, a high level of orders received and strong financial position. Group net sales increased by five percent in 2021 and surpassed 60 billion Swedish kronor. Operating profit amounted to 3.1 billion Swedish kronor and the operating margin was 5.2 percent.

Our work on improving the operating margin continues to bear fruit in both the construction contract operations Construction and Civil Engineering and in Housing Development. Integration of YIT’s Nordic paving and mineral aggregates operations into business area Industry after their acquisition in 2020 is progressing well and when we, for the first time, present the outcome of our nine external targets we can conclude that they have been broadly met.

Rich plethora of commissions

The variation and geographic spread of the products and services Peab delivers continues to be good, even if housing did become an increasingly larger portion in 2021. More and more of net sales in business area Construction were housing projects and at the same time construction of public sector buildings like schools and sports facilities rose significantly. Public investment needs were apparent in business area Civil Engineering as well and during the year Peab landed several exciting infrastructure projects concerning ports, bridges and roads. In business area Industry over 60 percent of net sales are generated in paving and mineral aggregates operations. That gives us a position as market leaders in the Nordic region on a market less sensitive to fluctuations in the economy.

Our four business areas, the good geographic spread of our commissions in the Nordic region, the public sector that generates at least half of our net sales as well as the fact that almost 90 percent of our contracts are under 500 million Swedish kronor are four important aspects that spread our risks well and provide stability in Peab’s business.

Continued investments in housing and property deals

Our fourth business area Project Development also made significant progress during the year. Despite the corona pandemic the business continued to show stable development. Both production starts of our own housing developments and sales increased and were well spread geographically throughout Sweden, Norway and Finland. In addition, Housing Development signed several contracts for the sales of rental apartment projects which will be recognized in revenue when they are completed and turned over. A number of real estate transactions in Property Development during the year contributed to operating profit and we started up new real estate projects in, for instance, Malmö and Gothenburg. At the end of the year we also made a billion krona investment on Lilla Essingen in Stockholm which gave us access to extensive development rights. These are all examples of investments in line with our strategy. Today in Project Development we can, depending on the market situation, focus development on tenant-owner and rental apartments as well as commercial and public buildings.

First year with updated targets

Because Peab is today a Nordic community builder with considerable local presence and four collaborating business areas, executive management and the Board adopted nine external financial and non-​financial targets at the beginning of 2021. The targets are related to the industry and categorized under the strategic targets; most satisfied customers, best workplace and most profitable company as well as the new, fourth strategic target, leader in social responsibility which includes climate and equality aspects.

The fine profit we delivered for 2021 and how well we met our targets is naturally thanks to our some 15,000 engaged employees. They are the ones that in every local market throughout the Nordic region make our locally produced community possible.

For the first time we are presenting the status of all our nine external targets and we are pleased to say that they have been broadly met. For instance, we have surpassed our targets regarding Satisfied Customer Index, recommend Peab as an employer (eNPS) and equal opportunity in recruitment. Likewise we have a contracting trend in serious accidents and carbon dioxide intensity is developing in the right direction concerning our two climate-​related targets, although the reduction for input goods and purchased services is less than in our own production. Regarding our three financial targets, development of the operating margin is headed in the right direction. Our target is an operating margin that over time surpasses 6 percent and during the year we have gone from 4.5 (excluding the effect of the distribution of Annehem Fastigheter) to 5.2 percent. As a result of a strong cash flow the net debt/equity ratio at the end of year was 0.2, which is lower than the target interval 0.3-0.7. This despite the fact that we continue to invest in, above all, business areas Industry and Project Development. The Board has proposed a dividend of SEK 5.00 per share which means we will even achieve our third financial target of dividends of over 50 percent of profit for the year.

Leader in social responsibility

The non-financial targets are an expression of the responsibility we take and therefore define our prioritized sustainability aspects. As a lead­ing Nordic com­mu­ni­ty builder we have a big im­pact – and a big re­spon­si­bil­i­ty. This means al­ways striv­ing in our own op­er­a­tions to take the most sus­tain­able route and dri­ve sus­tain­able de­vel­op­ment in the in­dus­try, which our tar­gets linked to so­cial re­spon­si­bil­i­ty take par­tic­u­lar aim at. We intend to be cli­mate neu­tral in 2045 and along the way we have adopted two climate targets for 2030. We also in­tend to take ad­van­tage of all the com­pe­tence out there in so­ci­ety and make sure that these skilled employees can work in safe and de­vel­op­men­tal en­vi­ron­ments. This is why we have set targets for both equal opportunity and workplace accidents, ensuring our operations are focused on these important issues.

We strive to make our industry safe and sound. This concerns both healthy competition and control at every stage, particularly in the supply chain. We work actively for an open industry with a level playing field and humane working conditions. We are also explicit in our demands, especially those regarding the climate.

Our work is based on the UN Global Compact, which we continue to support, and its 17 global goals for sustainable development, along with Peab’s Code of Conduct, core values, business concept, mission and our strategic targets. Our business plan is important and a guiding light for our employees as they transition and integrate our sustainably aspects into their roles and daily operations. In addition, our education and training programs in ethics, the environment, purchasing, the work environment and equal opportunity have continued non-​stop.

Locally produced community building

The fine profit we delivered for 2021 and how well we met our targets is naturally thanks to our some 15,000 engaged employees. They are the ones that in every local market throughout the Nordic region make our locally produced community possible. They are the ones that separate us from the competition and make Peab’s future bright. In a troubled world our decentralized model is always an advantage. With all the employees in our four business areas working together we can utilize local resources in the form of our own input goods, employees and local subcontractors. This entails our ECO-​products, including the new ECO-​Prefab, ECO-​Stomme (ECO-Frame) and ECO-​Ballast (ECO-Mineral Aggregates), recycling and reuse in local projects as well as local social responsibility through Peab Life and the Peab School, and everything in between. This is how we create local and sustainable business in the Nordic region. This is how we improve everyday life for people where they live it.

I want to take this opportunity to express a heartfelt thanks to each and every one of my colleagues that day-​by-day do their best to deliver quality to our customers and build communities.

This is also how we take on the market and external challenges we face – like the pandemic or the rise in prices for materials and energy. We have managed the price hikes well and now we are working on adjusting and streamlining our operations to curb the effect of rising construction costs. Another uncertain factor is the persevering uncertainty about long-​term access to cement. We are following developments regarding Cementa’s permit process for Slite but, first and foremost, we are working on our own binder alternatives and securing the supply of cement by importing it ourselves. At the time of writing all eyes are turned to Ukraine after the Russian invasion. In addition to the terrible tragedy of the people the war touches, the situation risks hampering macroeconomic growth in the world. Naturally we carefully follow developments in order to continually assess any possible effects on Peab. Despite all these challenges, I want to make it clear that the long-​term external driving forces are very advantageous for Peab.

With our strong business model I’m confident about the future and Peab forging ahead with our locally produced community. I look forward to continued value creation for our customers, employees, owners and society in general and in particular furthering our work on contributing to the essential climate transition.