Board of Directors’ Report

The Board of Directors and the Chief Executive Officer of Peab AB (publ), Corporate ID Number: 556061-4330, hereby submit the following annual report and consolidated accounts for the 2024 financial year.
The Group has different accounting principles in segment accounting for our own housing development projects and IFRS 16 (previously operational leases) compared to accounting according to IFRS. For more information concerning accounting principles and the differences between segment accounting and accounting according to IFRS see note 3 and note 4. For information concerning alternative performance measures, see the section Alternative performance measures and definitions.

Net sales

Group net sales according to IFRS for 2024 amounted to SEK 61,283 million (61,600). Adjusted for acquired and divested units and exchange rate effects net sales decreased by one percent. Adjustment to the completion method for own housing development projects affected net sales by SEK 2,586 million (2,779). During the year more homes have been completed and turned over than production started.

Group net sales according to segment reporting amounted to SEK 58,697 million (58,821). The portion represented by the public sector continued to grow and accounted for 56 percent (48) of net sales while private customers represented 44 percent (52).

Net sales in business area Construction decreased by 14 percent compared to the last year. The decrease is due to less activity in new housing production which has not been fully compensated for by other types of projects, and has been experienced in all the countries we operate in. Activity in business area Civil Engineering continued to be high during the year and net sales increased by nine percent. Net sales in business area Industry increased by eight percent primarily due to higher net sales in paving, above all in Finland. Greater government investments in infrastructure have had a positive effect in both business area Civil Engineering and business area Industry during the year. Concrete, construction system and rental operations have been affected by the weak housing market and reported less activity compared to the last year. In business area Project Development net sales decreased by 25 percent due to the weak demand for housing throughout the Nordic region which affected net sales in Housing Development.

Profit/loss

Operating profit for 2024 according to IFRS amounted to SEK 3,163 million (2,586) and the operating margin was 5.2 percent (4.2). Adjustment to the completion method for own housing development projects affected operating income by SEK 364 million (696).

Operating profit according to segment reporting for 2024 was SEK 2,763 million (1,853) and the operating margin was 4.7 percent (3.2). During the year business area Project Development carried out two major transactions that contributed a total of SEK 620 million to the Group. The fourth quarter last year was charged with provisions, write-​downs and restructuring costs totaling SEK 525 million, of which goodwill write-​downs were SEK 125 million. Of the total amount of SEK 525 million, SEK 465 million was charged to business area Construction and SEK 60 million to Group functions. Last year included a positive effect of SEK 400 million resulting from arbitration in the case between Peab and Unibail-​Rodamco-Westfield regarding the construction contract for Mall of Scandinavia (MoS). Excluding the effect of MoS, operating profit in 2023 amounted to SEK 1,453 million and the operating margin was 2.5 percent.

In business area Construction the operating margin was 1.7 percent (0.1 excl. MoS). In business area Civil Engineering the operating margin was 3.0 percent (3.3). All in all the operating margin for construction contract operations was 2.3 percent (1.3 excl. MoS). Business area Industry reported a higher operating margin amounting to 6.6 percent (4.8) for the year. The improvement is due to better earnings in paving, above all in Finland linked to the Finnish government’s extra funds for road maintenance in 2024. Operating profit in product areas concrete, rental and construction system contracted due to the weaker housing market. There were only minor changes in operating profit in Industry’s other product areas. Operating profit in business area Project Development was higher and amounted to SEK 728 million (304). Operating profit included positive effects from capital gains in Property Development of SEK 440 million (96), of which the divestiture of the shares in the joint venture company Tornet Bostadsproduktion contributed by SEK 220 million. During the fourth quarter a division of assets was carried out in the joint venture company Fastighets AB Centur, where Peab and the other owner, Fastighets AB Balder, acquired the majority of the property portfolio. The transactions had a positive effect on operating profit of SEK 367 million and were recognized in Property Development as profit from joint venture companies. Operating profit in Housing Development was negative and the operating margin was -2.7 percent (3.8). The negative operating profit is explained by just a few production starts of our own housing developments during the year and fewer housing projects in ongoing production.

Elimination and reversal of internal profit in our own development projects affected operating profit for the year by net SEK 46 million (-56), of which SEK 33 million was related to transactions in Fastighets AB Centur.

Depreciation and write-​​downs for the year according to IFRS were SEK -1,864 million (-1,904).

Depreciation and write-​​downs for the year according to segment reporting were SEK -1,499 million (-1,532), of which write-downs of goodwill amounted to SEK -10 million (-125).

Net financial items according to IFRS amounted to SEK -383 million (0), of which net interest amounted to SEK -738 million (-458). A large part of the interest expenses refer to financing of own housing development projects, which are capitalized on the properties and therefore have a positive affect on net financial items.

Net financial items according to segment reporting amounted to SEK -338 million (42) of which net interest was SEK -402 million (-30). The comparative period included a positive effect of SEK 390 million as a result of the arbitration in Mall of Scandinavia.

Pre-​tax profit according to IFRS was SEK 2,780 million (2,586). Tax for the year was SEK -392 million (-598) corresponding to a tax rate of 14 percent (23).

Pre-​tax profit according to segment reporting improved to SEK 2,425 million (1,895). Tax for the year was SEK -345 million (-481) and corresponds to a tax of 14 percent (25). The low tax rate is primarily due to capital gains that are not taxable and profit from joint venture companies in business area Project Development.

Profit for the year according to IFRS was SEK 2,388 million (1,988).

Profit for the year according to segment reporting was SEK 2,080 million (1,414).

Financial position

Total assets according to IFRS per December 31, 2024 were SEK 47,768 million (49,176). The adjustment of differences in accounting principles in relation to segment reporting has affected total assets by SEK 2,542 million (4,881). Equity according to IFRS amounted to SEK 16,504 million (14,470) which means the equity/assets ratio was 34.6 percent (29.4). Interest-​bearing net debt according to IFRS amounted to SEK 11,253 million (14,537).

Total assets according to segment reporting per December 31, 2024 were SEK 45,226 million (44,295). Equity amounted to SEK 16,760 million (15,082), which means the equity/assets ratio was 37.1 percent (34.0). Interest-​bearing net debt amounted to SEK 9,118 million (8,676). During the fourth quarter a number of properties in Varvsstaden, Malmö were acquired from the joint venture company Fastighets AB Centur. All in all the transactions resulted in an increase in net debt of approximately SEK 2,000 million. During the first quarter of 2025, net debt is expected to decrease by SEK 1 billion as a dividend will be distributed by Fastighets AB Centur. During the year improved earnings and lower investments in business area Industry had a positive effect on net debt. Net debt includes project financing of the unsold part of our own housing developments while they are in production. The unsold part amounted to SEK 2,237 million (2,685). Interest-​bearing receivables was SEK 1,643 million (2,638). The amount includes a capital claim of SEK 1,067 million (1,067) on Unibail-​Rodamco-Westfield according to the arbitration decision announced on June 30, 2023. For more information, see note 20. The average interest rate in the loan portfolio, including derivatives, was 5.1 percent (5.7) on December 31, 2024.

Group liquid funds according to IFRS, including unutilized credit facilities but excluding project financing, were SEK 8,822 million at the end of the year compared to SEK 6,410 million on December 31, 2023.

As a consequence of Peab consolidating Swedish tenant-​​owner associations according to IFRS, surety for tenant-​​owner associations under production is not reported. When homebuyers take possession of their apartments and the tenant-​​owner association is no longer consolidated in Peab’s accounts, Peab then reports the part of surety that covers unsold homes. Peab has a guarantee obligation to acquire unsold homes six months after completion. Group contingent liabilities, excluding joint and several liabilities in trading and limited partnerships, amounted to SEK 2,179 million at the end of the year compared to SEK 2,428 million on December 31, 2023. Surety for credit lines in tenant-​​owner associations regarding the unsold part after deconsolidation made up SEK 508 million of contingent liabilities compared to SEK 328 million on December 31, 2023.

Investments and divestments

Tangible and intangible fixed assets according to IFRS were net invested in 2024 for SEK 1,048 million (1,702).

Tangible and intangible fixed assets according to segment reporting were net invested in 2024 for SEK 764 million (1,488). The investments mainly refer to investments in machines in business area Industry. Last year included investments in the construction of production facilities for prefab operations in business area Industry as well.

Net investments in 2024 in project and development properties according to IFRS totaled SEK 320 million. Last year net divestments in project and development properties totaled SEK 1,096 million.

Net investments in 2024 in project and development properties according to segment reporting were SEK 2,471 million (1,608). The investments included acquisition of building rights in Nacka through the acquisition of Sickalön Bygg Invest AB in the first quarter. During the fourth quarter investment property and development property in Varvsstaden, Malmö worth approximately SEK 2,000 million were acquired.

Cash flow

Cash flow from current operations according to IFRS amounted during the year to SEK million 5,499 (3,916), of which cash flow from changes in working capital was SEK 1,836 million (631).

Cash flow from current operations according to segment reporting amounted during the year to SEK 1,356 million (-56), of which cash flow from changes in working capital was SEK -1,617 million (-2,357). The improved cash flow is linked to business areas Industry and Project Development. In business area Project Development cash flow from changes in working capital has been affected by the acquisition of development rights in, among other places, Kvarnholmen, Nacka and the acquisition of properties in Varvsstaden in Malmö.

Cash flow from investment activities according to IFRS was SEK 1,245 million (-1,261).

Cash flow from investment activities according to segment reporting was SEK 1,245 million (-1,261). Cash flow has been positively affected by the divestiture of the shares in the joint venture company Tornet Bostadsproduktion in business area Project Development and by repayment of interest-​bearing receivables from joint venture companies. During the year the level of investment in machines in business area Industry has been lower than compared to the last year.

Cash flow before financing according to IFRS was SEK 6,744 million (2,655).

Cash flow before financing according to segment reporting improved to SEK 2,601 million (-1,317).

Cash flow from financing operations according to IFRS amounted to SEK -6 518 million (-2,921).

Cash flow from financing operations according to segment reporting amounted to SEK -2,375 million (1,051). During the year dividends of SEK -431 million (-1,150) were paid to shareholders. Repayment of loans amounted to SEK -1,946 million. Last year loans of SEK 2,201 million were taken out.

Order situation

The level of orders received increased by 25 percent during 2024 and amounted to SEK 56,510 million (45,108). The level of orders received increased primarily in business area Civil Engineering but also in Industry and Project Development. Orders in business area Civil Engineering include among others developing the New Bodø Airport in Norway for NOK 3.3 billion, the Haga-​Rosenlund stage of West Link in Gothenburg worth about SEK 1.5 billion, a new dock in Skellefteå for about SEK 1.1 billion and operation and maintenance contracts worth around SEK 1.1 billion. Orders increased in paving in business area Industry, above all in Finland. In Project Development we started production of several tenant-​owner apartment projects/condominiums in Sweden and Finland, which has had a positive impact. The level of orders received in business area Construction was slightly lower during the year. Orders in Construction included a swimming block in Partille for about SEK 1.3 billion. The level of orders received from the public sector has continued to be good during the year.

Order backlog yet to be produced at the end of the year grew and amounted to SEK 44,906 million (39,060). Of the total order backlog, 37 percent (35) is expected to be produced after 2025 (2024). Swedish operations accounted for 79 percent (82) of the order backlog.

Preliminary agreements

Op­er­a­tions in Con­struc­tion and Civil En­gi­neer­ing in­creas­ing­ly par­tic­i­pate in di­a­logues early on with cus­tomers in prepa­ra­tion for planned projects and we are there­fore ex­pe­ri­enc­ing a greater num­ber of pre­lim­i­nary agree­ments, so-​called phase 1 con­tracts. Through the pre­lim­i­nary agree­ments Peab is con­tract­ed to ar­rive at, to­geth­er with the cus­tomer, an op­ti­mal prod­uct with the right qual­i­ty and also deal with risks and un­cer­tain­ties. As of 2024, we present the po­ten­tial value of the final con­struc­tion con­tracts gen­er­at­ed by these pre­lim­i­nary agree­ments. At the start of 2024 the po­ten­tial value was ap­prox­i­mate­ly SEK 19 bil­lion. Dur­ing the year sev­er­al projects went from phase 1 to phase 2, which meant that the projects be­came con­struc­tion con­tracts and were in­clud­ed in Peab’s or­ders re­ceived. At the same time new projects con­tin­ue to flow into phase 1 but there are oth­ers that fall away. The value of the con­struc­tion con­tracts gen­er­at­ed from these pre­lim­i­nary agree­ments at the end of De­cem­ber was around SEK 13 bil­lion, and these or­ders will po­ten­tial­ly be re­ceived over the next two years.