Net sales and profit
New accounting principles for income
IFRS 15 Revenue from contracts with customers, replaces as of 2018 previous standards related to revenue recognition such as IAS 18 Revenue, IAS 11 Construction contracts and IFRIC 15 Agreements for the construction of real estate. No material effects have been identified. Up until the end of 2017 there were differences between operative and legal accounting in Project Development. This difference was also reflected in the way executive management and the Board followed up the Group as a whole. The operative and segment accounting was based on the percentage of completion. Swedish tenant-owned housing projects will continue to be recognized as previously through “revenue over time” while our own home developments in Sweden will, as of the implementation of IFRS 15, change over to “revenue over time”. IFRS 15 will not lead to any changes in reporting regarding housing projects in Finland and Norway compared to the current application since revenue is first recognized when the home is handed over to the buyer. As of implementation of IFRS 15 segment reporting mirrors legal reporting. The differences between operative and legal reporting therefore no longer exist for either business area Project Development or the Group as a whole. For business area Project Development this has entailed recalculating comparable figures in Housing Development. Peab has chosen to apply IFRS 15 retroactively by recalculating the financial reports for 2017. The recalculations have not had any material effect on either business area Project Development or the Group as a whole. All comparable figures for 2017 and 2016 in subsequent reports are recalculated if not otherwise noted. For more information regarding IFRS 15 and comparable figures please see note 1 or www.peab.com/ifrs.
Net sales and operating profit
Group net sales for first quarter 2018 amounted to SEK 11,490 million (11,105), which was an increase of three percent. Even after adjustments for acquired and divested units net sales increased by three percent.
Net sales in business area Construction grew by three percent and the increase is related to Finnish operations. In business area Civil Engineering net sales increased by 18 percent generated in Local market and Operations and maintenance. Net sales in business area Industry contracted slightly due to less activity in Asphalt, Gravel and Rock and Transportation and Machines. In business area Project Development net sales were higher in Housing Development but lower in Property Development. In the first quarter last year net sales in Property Development were affected by SEK 577 million from sales in Arenastaden to Fabege.
Of the period’s net sales SEK 2,525 million (1,953) were attributable to sales and production outside Sweden.
Operating profit for the first quarter 2018 amounted to SEK 290 million (320) and the operating margin shrunk to 2.5 percent (2.9). The operating margin for the latest rolling 12 month period was unchanged at 4.7 percent compared to 4.8 percent for the entire year 2017.
The operating margin in business area Construction was unchanged at 2.2 percent compared to the corresponding quarter last year. In business area Civil Engineering the operating margin was 1.5 percent (1.6). Operating profit in business area Industry was slightly lower compared to the corresponding quarter last year as both Asphalt and Gravel and Rock were affected negatively by the stringent winter. Operating profit in business area Project Development was slightly lower than the corresponding period last year. The comparable period contained capital gains of SEK 75 million from the sales of Peab’s share of joint venture companies to Catena. The sales in Arenastaden during the comparable period had no net effect on operating profit. The operating margin in Housing Development contracted to 7.1 percent (8.5).
Eliminations and reversal of internal profit in our own projects has affected the result net by SEK -3 million (-10). Elimination is reversed in connection with the external divestment of a project.
Depreciation and write-downs for the period were SEK -238 million (-217).
Net financial items amounted to SEK -34 million (-9). Net interest improved to SEK -3 million (-15).
Pre-tax profit was SEK 256 million (311).
Profit for the period was SEK 218 million (277).
Seasonal variations
Group operations, particularly in Industry and Civil Engineering, are affected by fluctuations that come with the cold weather during the winter half of the year. Normally the first quarter is weaker than the rest of the year.