Comments from the CEO
Peab’s order situation has been consistently growing for some time which has contributed to higher net sales and a better result for the first half-year 2017. This high level of orders together with select investments in Project Development and Industry create stable conditions for the future.
Market conditions
After very strong development during 2016 in started-up building construction investments in Sweden construction is expected to even off on a high level in 2017, primarily as a result of capacity limitation on the market. After a strong beginning in Norway all indications point to the same high level of started-up building construction as in 2016. Even in Finland building construction volumes are expected to remain on par with 2016, which is when the Finnish market turned upward. Market conditions in civil engineering in Sweden and Norway are expected to continue well.
Order situation
Order volumes continued to grow in the second quarter amounting to orders received for the first half-year 2017 of SEK 23.3 billion (22.1). Order levels are high in all the business areas. Volumes in our own developed housing projects remain on a high level and well spread geographically in Sweden, Norway as well as Finland. Order backlog amounted to SEK 37.3 billion (33.5).
BUSINESS AREA DEVELOPMENT
Net sales in business area Construction increased compared to the first half-year 2016 with higher operating profit. Net sales in business area Civil Engineering increased with an unchanged operating profit. Business area Industry showed an increase in net sales and a better operating profit. Net sales in business area Project Development increased and operating profit rose. The operating margin in Housing Development continued to improve. Capital gains from the divestiture of joint venture companies affected Property Development positively by SEK 75 million during the first quarter. Property Development reported capital gains of SEK 104 million during the second quarter 2016 from the partial sales of a hotel property and development rights in Hyllie.
GROUP DEVELOPMENT
Operative net sales in the first half-year were SEK 23,909 million (21,473), which was an increase by eleven percent. Operative operating profit improved to SEK 947 million (812) and the operative operating margin improved to 4.0 percent (3.8). Cash flow from current operations amounted to SEK 983 million (1,342). We have a general seasonal increase in working capital during the second quarter and, in addition, development rights in Kvarnholmen in Nacka were acquired for around SEK 600 million. Net debt was SEK 2,707 million (3,154), where paid dividends in the second quarter charged with SEK 1,062 million (767).
OUTLOOK FOR THE FUTURE
The outlook is positive for Peab with a solid order backlog, a good project mix, a well-dimensioned development rights portfolio, continued positive market prospects and our strong financial position. At the same time there are a number of challenges to deal with such as capacity limitations in the form of resource shortages, primarily in big city regions, increases in costs for subcontractors and rising land prices.
Our four complementary and cooperating business areas create opportunities throughout the entire value chain in a construction project. This provides us with a unique capacity to deliver comprehensive solutions to our customers. Thanks to this business model in combination with our skilled employees and strong financial position I feel confident about Peab’s future.
We continue to work on our ambition to be the best company in the industry. We have established three target areas to achieve this:
- Most satisfied customers in the industry
- Best workplace in the industry
- Most profitable company in the industry
Jesper Göransson
CEO and President