Other information

Risks and uncertainty factors

Peab’s business is exposed both to operational and financial risks. How much risks affect Peab’s profits and position depends on how well the company handles daily operations. In addition, as a construction and civil engineering company, Peab is vulnerable to external risks such as developments in the economy, climate effects and changes in circumstances due to amendments in laws and regulations, and other political decisions.

In the beginning of 2020 the coronavirus spread over a large part of the world. Governments and central banks are introducing different forms of crisis packages to reduce the financial effects. The entire global economy is affected but it is difficult to say how deeply and for how long. Peab is a major employer with many employees and many people at our workplaces. The short-term effects of the coronavirus on Peab’s operations are limited but at the time of publishing this report it is too early to say how Peab will be affected in the long run and what the financial consequences of the coronavirus pandemic will be. For more information see the section Coronavirus under Important events during the period.

Managing operative risks is a continuous process considering the large number of projects the Group is always starting up, carrying out and completing. Operative risks are managed in the line organization in the business areas through established procedures, processes and control systems. Peab’s business is largely project-​related. There are a number of different contract forms where risk levels vary depending on the type of contract. However, with any type of contract ambiguities can arise concerning the terms, which can lead to delimitation issues that create a dispute with the customer.

On December 13, 2019 Peab’s supplier Nynas AB applied for a company reorganization and on March 12, 2020 Nynas AB applied for a further extension of three months which was granted. Nynas AB is an essential supplier of bitumen which is used as a binder in the manufacture of asphalt. If Nynas AB cannot fulfill its obligations it will cause considerable disturbances in the Nordic paving market and affect all the companies involved in asphalt paving, including Peab which is a major actor. Peab has chosen to complement with other suppliers to ensure deliveries of bitumen. Production is limited during the winter period which is why disturbances have not yet been noted.

Financial risks are primarily associated with the company’s need for capital, tied up capital and access to financing. Financial risks are managed on Group level. For further information about risks and uncertainty factors, see the Annual and Sustainability Report 2019.

Holdings of own shares

At the beginning of 2020 Peab’s own B shareholding was 1,086,984 which corresponds to 0.4 percent of the total number of shares. No changes have taken place during the first quarter 2020.

The Peab share

Peab’s B share is listed on the Nasdaq Stockholm, Large Cap list. As of May 5, 2020, the price of the Peab share was SEK 74.70 a decrease of 20 percent during 2020. During the same period, the Swedish stock market decreased by 14 percent according to the general index in the business magazine “Affärsvärlden”. During 2020 the Peab share has been quoted at a maximum of SEK 110.70 and a minimum of SEK 59.30.

Important events during the period

Dividend and distribution proposals and withdrawal of proposals

In conjuncture with the year-end report 2019 Peab’s Board decided to propose to the AGM an unchanged ordinary dividend of SEK 4.20 per share and an extra distribution of the shares in a newly founded real estate company (Annehem Fastigheter).

When the decision was made the global spread of the coronavirus had not yet begun. It has thereafter developed into a pandemic, which in turn has created enormous uncertainty concerning global financial developments.

On March 24, 2020 the Board reviewed the decision of an extra distribution of the shares in Annehem Fastigheter. The strategy to create the company, distribute and list it has not changed. However, the decision to actually distribute and list the company has been put off until there is less uncertainty and circumstances have improved. For more information see the section Annehem Fastigheter.

On April 7, 2020 Peab’s Board also decided to withdraw in its entirety the proposal to the AGM for an ordinary dividend of SEK 4.20 per share. The Board and executive management have reviewed the situation focusing on identifying measures needed to be taken for different scenarios on the Nordic construction market. Their main purpose is to be able to create the prerequisite conditions to handle overhead in a contracting business and at the same time safeguard long-term production capacity. Examples of measures are furloughs and training. The measures will be implemented successively based on market developments.

The Board’s ambition is to regularly evaluate the dividend capacity and depending on developments make a decision on both an ordinary dividend and when distribution of all the shares in Annehem Fastigheter can take place.

Coronavirus

In the beginning of the year the coronavirus spread to a large part of the world. Countries are putting different measures into effect on short notice to limit the spread of the infection, for example entry and quarantine regulations. Stock markets all over the world have plunged during March. Governments and central banks are introducing different forms of crisis packages to reduce the financial effects. This will affect the global economy but to what extent is difficult to say at this moment.

Peab is a major employer with many employees and many people at our workplaces. As a big employer we care about our employees but naturally we also care about our customers, subcontractors, suppliers and other partners. For Peab it is important from a societal perspective that we do everything we can to maintain calm, thwart the spread of infection and keep our operations going.

Peab’s measures to limit the spread of the infection are founded on The Public Health Agency of Sweden’s guidelines and instructions as well as those that correspond in the other countries we work in. Since the situation and instructions from the authorities are constantly changing, we closely follow developments and adopt to them. Above all they affect the directives we give our employees.

Based on this we focus on maintaining stability in our business. The short-term effects of the coronavirus on Peab’s operations are limited at the moment but naturally we closely follow developments so that we can continually assess possible affects in a longer perspective. Under the current circumstances we see what a strength it is for us to be the local company with the big group resources. Peab has four business areas – Construction, Civil Engineering, Industry and Project Development that collaborate locally and a large part of input goods and personnel are our own. This gives us good control over the construction process and makes us therefore less vulnerable to production disruptions.

As a company we do everything in our power to thwart the spread of the coronavirus and continue to work on our community building. This is how we contribute to people’s safety and wellbeing.

Under the leadership of our specially assembled corona team we are closely following developments and will update information as the need arises.