Other information and appropriation of profit

Operations with permit and notification obligations

Operations required to have permits or to notify the authorities according to the Environmental Code are found in the Swedish sub-groups Swerock, Byggelement, Peab Asfalt, Peab Anläggning and Peab Bostad.

Operations with permits in Sweden are land remediation, intermediate storage and recycling of excavated soil, work in/next to protected areas/objects, water operations/management, extraction of mineral aggregates and production of polymer modified bitumen (PMB). These operations primarily affect the environment through the extraction of finite resources, future land use, impact on ecosystems, emissions and noise.

Operations required to notify authorities are concrete manufacturing, production of prefabricated concrete elements, permanent and mobile asphalt plants, actions taken in contaminated areas, intermediate storage of excavated soil and waste, recycling of excavated soil, water operations/management and transportation of waste and hazardous waste.

Renewal and supplementation of permits as well as submitting notifications is ongoing.

Important events during the year

Peab has entered agreements for new credit facilities totaling SEK 7.4 billion

Peab has en­tered agree­ments for new cred­it fa­cil­i­ties di­vid­ed into two con­tracts. One is a three year cred­it fa­cil­i­ty for a total of SEK 7.0 bil­lion and the other is an 18 month cred­it fa­cil­i­ty of SEK 400 mil­lion. The cred­it fa­cil­i­ty for SEK 7.0 bil­lion runs until June 15, 2026 with the pos­si­bil­i­ty of an ex­ten­sion for one plus one year. Four banks par­tic­i­pate in the trans­ac­tion: Nordea, Swed­bank, SEB and Han­dels­banken. The trans­ac­tion is co­or­di­nat­ed by Nordea. Peab has also en­tered an agree­ment for a bi­lat­er­al cred­it fa­cil­i­ty with Nordea for SEK 400 mil­lion. The con­tract runs for 18 months and ma­tures on De­cem­ber 15, 2024 with the pos­si­bil­i­ty of an ex­ten­sion for an­oth­er year. The cred­it agree­ments re­fi­nance the com­pa­ny’s ex­ist­ing cred­it fa­cil­i­ty and are pre­pared for sus­tain­abil­i­ty link­ing. The loan con­tracts make up Peab’s long-​term fi­nanc­ing foun­da­tion and are com­ple­ment­ed by cap­i­tal mar­ket fi­nanc­ing, other types of short-​term fi­nanc­ing and project-​related cred­it.

Arbitration decision in the case of Mall of Scandinavia

A de­ci­sion in the case be­tween Peab and Uni­bail Ro­dam­co West­field re­gard­ing the con­tract for Mall of Scan­di­navia in Solna was hand­ed down in Peab´s favor on June 30, 2023. The judge­ment en­tailed a pos­i­tive ef­fect on Peab’s op­er­at­ing prof­it by SEK 400 mil­lion in the sec­ond quar­ter. The ef­fect on pre-​tax prof­it was SEK 790 mil­lion in the sec­ond quar­ter. Cash flow would have been pos­i­tive­ly af­fect­ed by ap­prox­i­mate­ly SEK 1,400 mil­lion in the third quar­ter, which did not occur.

In Au­gust Uni­bail Ro­dam­co West­field pe­ti­tioned the Swedish Court of Ap­peal to set aside the judg­ment in its en­tire­ty in a so-​called protest ac­tion. Dur­ing the process the judge­ment is sus­pend­ed and can­not be en­forced and there­fore the time of pay­ment has been de­ferred. Peab con­tin­ues to have an out­stand­ing re­ceiv­able of about SEK 1,500 mil­lion on Uni­bail Ro­dam­co West­field per December 31, 2023.

Peab’s as­sess­ment of the es­ti­mat­ed ef­fects on prof­it has not changed. After a thor­ough legal trial through ar­bi­tra­tion last­ing near­ly seven years Peab can­not see any grounds for a protest ac­tion. Peab will counter the protest ac­tion in the fur­ther process.

Peab re­ceived the con­tract for Mall of Scan­di­navia in De­cem­ber 2010 and the mall was com­plet­ed and ready for in­au­gu­ra­tion No­vem­ber 2015. Peab be­lieved it was en­ti­tled to com­pen­sa­tion for added ex­pens­es gen­er­at­ed by ex­ten­sive changes in the project made dur­ing the pro­duc­tion phase. The par­ties could not agree on out­stand­ing claims and trans­ac­tions and ar­bi­tra­tion com­menced in 2017.

Sustainability targets linked to existing credit facility

Peab re­newed its basic fi­nanc­ing in June 2023 when the ex­ist­ing cred­it fa­cil­i­ty reached ma­tu­ri­ty. The three year cred­it fa­cil­i­ty of SEK 7.0 bil­lion has thereafter been linked to Group cli­mate sus­tain­abil­i­ty tar­gets, which fur­ther in­ten­si­fies Peab’s focus on sus­tain­abil­i­ty work. The cred­it fa­cil­i­ty for SEK 7.0 bil­lion runs until June 2026 with the pos­si­bil­i­ty of an ex­ten­sion for one plus one year. Group tar­gets are to by 2030 re­duce green­house gas emis­sions from our own pro­duc­tion by 60 per­cent (Scope 1+2, ton CO₂e/MSEK) and from input goods and pur­chased ser­vices by 50 per­cent (Scope 3, ton CO₂e/MSEK). The in­ter­est mar­gin for the cred­it fa­cil­i­ty is linked to pre­de­ter­mined lev­els of an­nu­al re­duc­tions in emis­sions. The base year of the tar­gets is 2015.

Nomination Committee

According to the “Principles for the Nomination Committee’s appointment and instructions for the Nomination Committee”, adopted by the Annual General Meeting on May 4, 2023, the Nomination Committee is appointed by the three largest shareholders in terms of votes per the final banking day in August 2022, i.e. August 31, 2023, that want to appoint a member of the Nomination Committee as well as the Chairman of the Board. If one or more of the three largest shareholders decline to appoint a member of the Nomination Committee the Chairman of the Board will offer the next largest shareholder in terms of votes the opportunity to appoint a member of the Nomination Committee and so on until the Nomination Committee consists of three members as well as the Chairman of the Board.

The two largest shareholders in Peab per August 31, 2023, Ekhaga Utveckling AB and AB Axel Granlund, have agreed to appoint a member to Peab’s Nomination Committee. Mats Paulsson and Peab’s Profit-​Share Foundation, which were in terms of votes the third and fourth largest shareholders in Peab per August 31, 2023, have when asked replied that they do not wish to appoint a member to the Nomination Committee for the Annual General Meeting 2024. State Street Bank and Trust Co, W9 State, which at this same point in time was the fifth largest shareholder in Peab in terms of votes, has not replied to the request. The Kamprad Family Foundation, the sixth largest shareholder in Peab in terms of votes, replied that it does not wish to appoint a member to the Nomination Committee. Cicero Funds, which was the next largest shareholder, has agreed to participate in the Nomination Committee.

The Nomination Committee therefore consists of the following members:

• Anders Sundström, Ekhaga Utveckling AB
• Ulf Liljedahl, AB Axel Granlund
• Christer Sterndahlen, Cicero Funds
• Anders Runevad, Chairman of the Board of Peab AB
• The Nomination Committee has appointed Ulf Liljedahl to be Chairman of the Nomination Committee.

Acquisition of development rights

On De­cem­ber 22, 2023 Peab signed a con­tract to ac­quire Folk­sam’s shares in Sick­laön Bygg In­vest AB that part­ly and whol­ly owns de­vel­op­ment rights in Kvarn­hol­men in Nacka. Peab there­by in­creas­es its own­er­ship from 50 to 100 per­cent. At the same time Peab also signed a con­tract to di­vest its 33.3 per­cent own­er­ship in Tor­net Bostad­spro­duk­tion to the other own­ers Folk­sam and Fastighets AB Balder. Both deals were con­clud­ed in Jan­u­ary 2024, en­tail­ing in total un­changed net debt as well as cap­i­tal gains of SEK 220 mil­lion. Through the two deals Peab di­vest­ed fin­ished prop­er­ties that are cur­rent­ly being man­aged and used the freed cap­i­tal to in­vest in de­vel­op­ment rights for fu­ture de­vel­op­ment.

Peab has de­vel­oped homes on Kvarn­hol­men since 2013. Sick­laön Bygg In­vest AB has more than 270 zon­ing ap­proved, whol­ly owned de­vel­op­ment rights for a gross area of 26,000 m². In ad­di­tion, the com­pa­ny owns 50 per­cent of the shares in Kvarn­hol­men Utveck­ling AB that has an on­go­ing zon­ing process for more than 120,000 m² hous­ing de­vel­op­ment rights. Half of them will be turned over to Peab.

Peab has been a part owner in Tor­net Bostad­spro­duk­tion since 2009. The com­pa­ny owns and man­ages around 2,200 rental apart­ments and has some 650 rental apart­ments in pro­duc­tion in a num­ber of cities in Swe­den. In its role as con­struc­tion con­trac­tor Peab has de­liv­ered sev­er­al hous­ing projects to Tor­net over the years. Being an owner has been ad­van­ta­geous and value de­vel­op­ment has been pos­i­tive, which is why the di­vest­ment gen­er­at­ed cap­i­tal gains.

The Peab share

At the end of 2023 Peab’s share capital amounted to SEK 1,583,866,056 divided among a total of 296,049,730 shares, resulting in a nominal value of SEK 5.35 per share. Of the shares, 34,319,957 are A shares with ten votes per share, and 261,729,773 are B shares with one vote per share. All shares carry equal rights to participation in the company’s assets, profits and dividends. There are no restrictions in the articles of association concerning transferring shares or the disposal of votes at the AGM.

On December 31, 2023 there were approximately 68,000 shareholders in Peab. The Group is subject to considerable influence by Mats Paulsson and Fredrik Paulsson together with families, children and companies. Most of the Paulsson families’ indirect holdings are gathered into the company Ekhaga Utveckling AB, which is controlled by Fredrik Paulsson. At the end of 2023 Ekhaga Utveckling AB had 21.6 percent of the capital and 49.0 percent of the votes. Mats and Fredrik Paulsson together with families had 5.5 percent of capital and 11.2 percent of the votes. In addition, the Mats Paulsson’s foundations had 1.3 percent of the capital and 0.6 percent of the votes. The company has no knowledge of any agreements between shareholders that can result in a restriction of the right to transfer shares.

Peab’s AGM decided on May 4, 2023 to authorize the Board to decide, during the period up to the next AGM, on new issues of B shares with rights for current shareholders to participate in the issue or without preferential rights for current shareholders to participate in the issue in connection with acquisitions. The authorization may be used on one or more occasions and correspond to, at the most, a total of 10 percent of the registered share capital at the time of the authorization. During the year the Board has not decided to issue any new shares.

In 2007 Peab established a profit-sharing foundation. According to the foundation’s placement policy its capital should be placed primarily in Peab shares. On December 31, 2023 the foundation owned 13,628,300 B shares in Peab, corresponding to 4.7 percent of the total number of shares.

Holdings of own shares

At the beginning of 2023 Peab’s own B shareholding was 8,597,984 which corresponds to 2.9 percent of the total number of shares. On May 4, 2023 Peab’s AGM decided to continue authorization of the Board of Directors, until the AGM 2023, to repurchase a number of shares so that the company’s holding of its own shares after the repurchasing does not exceed one tenth of all shares in the company. During 2023, Peab has not repurchased or divested any of its own shares. Therefore at the end of the year Peab’s holding of own shares amounted to 8,597,984 B shares.

Corporate governance

For a detailed description of the work of the Board of Directors, corporate governance and systems for internal control see the Corporate governance report.

Remuneration policy for executive management

For information on the latest adopted Remuneration Policy containing guidelines for determining salaries and other compensation to senior officers, see note 9.

The Board of Directors hereby proposes that the AGM decide to adopt the following changes in the Remuneration Policy regarding guidelines for remuneration to senior officers:

Scope

The Remuneration Policy comprises the CEO and the other members of executive management. The Remuneration Policy does not comprise remuneration decided by the AGM.

This Remuneration Policy is applied to new contracts, or changes in existing contracts, with the CEO and the other members of executive management after Peab’s AGM has adopted the policy.

Short-term incentives (STI)

From time to time executive management may be offered STIs. A STI may not exceed for the CEO 70 percent of basic pay and for the other members of executive management 60 percent of basic pay. STIs are based primarily on the Peab Group’s profitability and, at each time, other material Group targets. In the current program result measurements are connected to the company’s strategy in the form of profitability, sustainability and the work environment.

STIs are determined for each fiscal year and are settled the year after being earned. They may either be paid out as salary or be invested as a pension savings in a financial instrument connected to the Peab share.

Long-term incentive programs (LTI)

Every year the Board of Directors must consider whether or not to propose to the AGM a share-related incentive program for the CEO, other members of executive management and key personnel. Share-related incentive programs are performance-based and only deliver an outcome if predefined profit and sustainability targets are met. Share-related incentive programs are decided by the AGM and are therefore not comprised by this policy.

Expectations concerning future development

Sweden

Inflation continued to deflate during the autumn of 2023. Most financial analysists seem to agree that interest peaked when Riksbanken last raised the rate to 4.0 percent. Riksbanken forecasts that the repo rate will remain unchanged in 2024 while the market expects a reduction already in the first half of the year. The high level of prices has a negative effect on both consumption and investments and Sweden’s GNP is believed to have contracted by 0.8 percent in 2023 and that there will be zero growth in 2024. There was a severe decline in housing construction in 2023 due to high costs and interest rates and households’ diminishing disposable income. This decline will most likely continue in 2024 although at a considerably slower rate. Private and public sector’s premise construction will probably also be affected negatively by the higher costs and deteriorating economy but industry’s building construction investments are expected to grow. Overall 2023 entailed a broad decline in other building construction investments. The negative trend is expected to continue in 2024, albeit to a lesser degree. Civil engineering construction is believed to have increased in 2023 through growing private investments in water and wastewater facilities and energy. Growth is expected to level out in 2024.

Norway

The Norwegian GNP has shown zero growth three quarters in a row. According to the forecast the Norwegian mainland economy is expected to grow by about one percent in 2023 and 2024, primarily driven by public consumption and investments and mainland exports. Inflation is on its way down and the interest rate mostly likely reached its peak in 2023. In housing construction new production of apartment buildings has drastically contracted and single home construction has declined as well. Regarding other building construction, there has been a strong positive development in industrial premises and office buildings and retail space appear to have grown as well in 2023. However, there is still a negative trend in public investments. The total volume in building construction investments indicates zero growth in 2023 and a slight reduction in 2024. Civil engineering construction is expected to grow in both 2023 and 2024.

Finland

The Finnish GNP is expected to land at about zero growth in 2023. Gross investments and private consumption have been negatively affected by the weak global economy, high prices and the rise in interest rates. Household’s purchasing power has diminished and homeowners have seen their wealth shrink with the falling price of homes. In 2024 GNP is expected to grow by around half a percent. Housing construction is believed to have contracted considerably in 2023 for both single homes and apartments. Developments in other building construction diverge. While industrial and public sector building construction investments appear to have grown in 2023, office buildings and retail space seem to be headed the other way. Total building construction investments are believed to have diminished in 2023 and will continue to diminish in 2024. Next year the decline in the building construction market will mostly likely be broad, negatively affected by high prices and rising unemployment. Civil engineering is believed to have developed sideways in 2023 while a slight downturn is expected in 2024.

Parent company

The parent company’s business consists of executive management and Group functions. Net sales in 2023 were SEK 267 million (304) and consisted primarily of internal Group functions. Operating profit for the year was SEK -224 million (-215). Profit after net financial items amounted to SEK 3,109 million (769). Net financial items included dividends from subsidiaries of SEK 3,165 million (1,024). Of the appropriations, Group contributions were SEK 993 million (2,240). Profit for the year amounted to SEK 4,207 million (2,473).