Risks and uncertainty factors

Peab’s business is exposed both to operative and financial risks as well as compliance risks and external and market risks. How much risks affect Peab’s profits and position depends on how well the company handles daily operations. External and market risks are events that are out of Peab’s control but which affect the business environment. These are, for example, developments in the economy, customer behavior, climate impact and political decisions.

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.

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 2022.

In recent years there has been a significant rise in the price of materials and energy. We continually work to adapt and streamline production all the while expecting continued high construction costs if the trend in material and energy prices does not turn. High construction costs and interest rates make it harder to make calculations that come out ahead, which dampens demand on the construction market throughout the Nordic region.

Interest rates have continued to rise and in Sweden The Riksbank raised the policy interest rate several times during the last year. Inflation has tightened its grip on the global economy and several central banks indicate further hikes in interest rates. Higher interest rates are expected to stymy investment appetite and diminish demand.

Since Russia invaded Ukraine in February 2022 the global situation has changed dramatically. In addition to the terrible tragedy for the people the war touches, the situation risks further hampering macroeconomic growth in the world. The construction industry is affected through greater uncertainty and cautiousness concerning investments, continued high material and energy prices and material shortages and delivery problems. Peab is not directly exposed to Russia, Ukraine or Belarus but may be indirectly affected through material suppliers. We follow developments carefully to continually assess any effects on Peab.