Comments from the CEO

Peab continues to develop positively with a high level of orders received, higher net sales and operating profit. Several large projects that we have been working on for quite some time were finalized in the second quarter and they strengthen and lengthen our order backlog. There is an increase in civil engineering projects among the orders received for the quarter, and in Construction other building construction continue to compensate for lower volumes in our own home development projects. All the business areas report improved profits for the quarter.

Market conditions

The housing market in Sweden is expected to slow in 2018 while private and public premise construction is expected to rise. The construction market in Norway is similar with an expected decline in housing construction while other building construction is expected to grow. The construction market in Finland is affected positively by the growth in the economy and all segments are expected to have a good growth rate in 2018. Market prospects for the civil engineering market in Sweden and Norway continue to be good, primarily due to government infrastructure projects.

Order situation

The substantial level of orders received in the second quarter entailed an increase for the first half-year 2018 to SEK 29,2 billion (25,3). The rise in orders received was generated in business areas Construction and Civil Engineering. There is an increase in civil engineering projects among the orders received for the quarter, and in Construction other building construction continues to compensate for lower volumes in our own home development projects. Examples of larger projects are the expansion of the railway overpasses at the Olskroken junction in Gothenburg, construction of the new psychiatric premises in Kalmar, construction of the office building Gårda Vesta in Gothenburg and the construction of the office block Platinan in Gothenburg. Order backlog was SEK 47.5 billion (39.5). The orders are well spread geographically and there is good product diversity.

Business areas development

Net sales and operating profit increased in business areas Construction and Civil Engineering compared to the first half-year 2017. Net sales and operating profit in business area Industry were on the same level as the corresponding period last year. Net sales in business area Project Development were slightly less and operating profit was unchanged. Net sales in Housing Development increased while the operating margin for the first half-year was unchanged. Property Development continues to develop well in both our wholly owned holdings and our joint venture companies. The comparable figures for Property Development included capital gains from the sales of joint venture companies of SEK 75 million while no property divestitures of significance have occurred in the first half-year 2018.

Group development

Net sales for the period amounted to SEK 24,943 million (23,896), which was an increase of four percent. Operating profit was SEK 967 million (951) which meant an operating margin of 3.9 percent (4,0). Cash flow before financing was SEK -1,094 million (683), including asset divestitures in Arenastaden of around SEK 835 million in the comparable figures. Net debt was SEK 3,592 million (2,707), of which paid dividends charged the second quarter by SEK -1,180 million (-1,062).

Outlook for the future

The outlook for Peab is positive with a solid order backlog, a good project mix, a well-dimensioned development rights portfolio and a strong financial position. The market situation continues to be good with a stable demand in Sweden, Norway and Finland. Thanks to the wide range of our business we can handle a downturn in some product areas with an upturn in others.

There is a substantial need for housing in Peab’s markets, which we experience by a continued strong demand for apartment building projects from external customers. These are traditional apartment buildings and different kinds of category housing such as student housing. The slowdown on the tenant-owned housing market has affected the second quarter as well through less activity, particularly in Stockholm.

We have a unique position through our four complementary business areas and all our employees who are welded together by a strong company culture. Our business model creates opportunities throughout the entire value chain in a construction project and provides us with a good platform to deliver comprehensive solutions to our customers. From this foundation we will continue to strive towards our strategic goals to have the most satisfied customers, be the best workplace and the most profitable company in the industry.

 

Jesper Göransson
CEO and President