Comments from the CEO

Peab has started the year strongly despite rising turbulence in the world around us. We present a continued stable level of orders received, improved profit and we end the quarter with the highest order backlog in Peab’s history. 

Construction contract operations in Construction and Civil Engineering are growing profitably. Market developments are similar to previous quarters where demand is good in all our segments, except housing and commercial offices. During the quarter we signed contracts for new projects in everything from waterworks, new stabling tracks och contracts for road maintenance in business area Civil Engineering to schools, hospitals and hotels in business area Construction. We also see good demand for phase 1 contracts with a robust inflow of projects that are entering the planning phase.

During the quarter we sold our construction operations in K Nordang AS in Western Norway to a partly owned company with the KB Group in order to take greater advantage of the demand for construction contracts in northwestern Norway. Peab owns 37.5 percent of the company, which means it is reported as an associated company in business area Construction. The deal had a positive effect of about SEK 100 million on operating profit in Construction during the first quarter 2026.

Activity is always low in Industry’s operations in the first quarter since the paving season starts during the second quarter. The level of orders received was somewhat lower in the quarter but profit improved. Last year we began an overhaul in some of our operations in the unit Swerock/Asphalt in Norway, which charged operating profit. During the quarter the divestment of fixed assets generated positive effects and there were also positive profit effects from forward hedging of commodity contracts. Operations in the unit Construction systems continue to be impacted by the low demand for housing but the year started with stable development nonetheless.

No major property transactions occurred in business area Project Development during the quarter. We production started own housing development project of 46 apartments in Ålesund and converted another one with 63 apartments in Lund. In general, the low activity continues to have a negative impact on the level of orders received and operating profit.

Market prospects for housing have not changed since the previous quarter which means that the market has stabilized but differs between different geographies. Markets in the big cities and good micro locations are better than in other locations that remain weak. This development is similar in Sweden, Norway and Finland. In the second quarter we will take over a development right in Oslo that is zoned for developing around 130 apartments. This boosts Peab’s operations in the capital region and is a good example of an area with a high demand for housing. Our strategy to, from time to time, build on our own balance sheet and then convert to tenant-owned/condominium apartments entails more tied up capital and a bumpier level of orders received and profit generation.

In 2024 and 2025 we launched new long-term Performance Share Programs that run for three years. They are under construction, which entails higher costs for the Group. The programs comprise some 500 employees and are vital to our continued success, keeping and attracting talented employees and increasing the connection between rewards and shareholder value.

 

After the first quarter 2026 we report on three of our nine external targets: serious accidents, operating margin and net debt/equity ratio. The number of serious accidents was somewhat lower compared to the previous quarter and we continue to work with a laser focus on safe workplaces. The operating margin improved to 4.7 percent calculated on a rolling twelve month basis, which can be compared to our target of higher than 6.0 percent. After the first quarter the net debt/equity ratio was 0.4 which is in the lower span of the target interval. This was despite the seasonally weak cash flow during the first quarter and after the SEK 500 million share repurchasing program. Peab entered into an agreement for a new credit facility totaling SEK 8.0 billion to refinance the current credit facility of SEK 7.0 billion during the quarter, all of which provides us with a stable financial base for the future.

Despite geopolitical uncertainty that risks long-term macroeconomic impacts Peab stands strong and we are ending the quarter with the highest order backlog in Peab’s history – amounting to around SEK 54 billion. In general, market prospects remain the same compared to the previous report with continued good demand in the Nordic construction and civil engineering markets.

 

Jesper Göransson
President and CEO