Net sales and profit

Net sales and profit

April – June 2019

Group net sales for the second quarter 2019 increased by seven percent and amounted to SEK 14,336 million (13,453).

Net sales in business area Construction increased by five percent and the increase was related to our Swedish operations. Net sales in business area Civil Engineering decreased by two percent while business area Industry presented an increase in net sales of three percent. Net sales in business area Project Development increased by 17 percent compared to the second quarter last year. The increase stemmed from both Property Development and Housing Development where more turned over housing projects in Norway and Finland had a positive effect.

Of the quarter’s net sales SEK 2,506 million (2,351) were attributable to sales and production outside Sweden.

Operating profit for the second quarter 2019 amounted to SEK 821 million (677) and the operating margin was 5.7 percent (5.0). In business area Construction operating margin improved to 2.6 percent (2.4) and in business area Civil Engineering the operating margin was 3.7 percent (3.8). Business area Industry showed a margin of 7.0 percent (7.3). The lower operating margin in Industry is partially explained by seasonal effects, primarily in Asphalt. In addition, Rentals sustained higher costs from the establishment of complementary units aimed at increasing local presence that do not yet generate maximum income. Business area Project Development had a higher operating profit in both Property Development and Housing Development. In Property Development Peab’s partially owned company Acturum divested a number of properties in the second quarter, which was announced earlier. The divestitures had a positive effect of SEK 170 million in profit contributions from partially owned companies. In Housing Development operating profit and operating margin contracted in Sweden while more turned over housing projects in Norway and Finland had a positive effect.

Depreciation and write-downs for the second quarter were SEK -306 million (-247). Depreciation was effected by SEK -36 million through additional IFRS 16, Leases in the second quarter 2019.

Net financial items amounted to SEK -10 million (-4) of which net interest was SEK -24 million (-18). Net interest was effected by SEK -8 million through additional IFRS 16 Leases in the second quarter 2019.

Pre-tax profit was SEK 811 million (673).

Profit for the second quarter improved to SEK 688 million (572).

Operating profit and operating margin, per quarter

January – June 2019

Group net sales for the first half-year 2019 amounted to SEK 25,695 million (24,943), which was an increase of three percent. Even after adjustments for acquired and divested units net sales increased by three percent.

Net sales in business area Construction grew by four percent and the increase was related to our Swedish operations. Net sales includes a greater portion of other building construction. In business area Civil Engineering net sales were unchanged compared to same period last year. Net sales in business area Industry grew by three percent with an increase in all product areas except Construction System where net sales fell. In business area Project Development net sales grew in Property Development but contracted in Housing Development where the decrease was related to our Swedish operations.

Of the period’s net sales SEK 4,431 million (4,876) were attributable to sales and production outside Sweden.

Operating profit for the first half-year 2019 improved to SEK 1,086 million (967) and the operating margin increased to 4.2 percent (3.9). The operating profit was effected positively by SEK 11 million through additional IFRS 16 Leases in the first half-year 2019. The operating margin for the latest rolling 12 month period was 5.1 percent compared to 4.9 percent for the entire year 2018.

The operating margin in business area Construction was 2.4 percent (2.3) during the first half-year 2019. In business area Civil Engineering the operating margin was 2.5 percent (2.7). Operating margin in business area Industry was 3.6 percent (3.9). The lower operating margin in Industry is partially explained by seasonal effects, primarily in Asphalt, where larger operations require more maintenance. In addition, Rentals sustained higher costs from the establishment of complementary units aimed at increasing local presence that do not yet generate maximum income. The operating margin in business area Project Development was higher than the corresponding period last year. In Housing Development operating profit contracted slightly in Sweden in the first half-year which was for the most part countered by more turned over projects in Norway and Finland. The operating margin in Housing Development was 8.8 percent (8.4). In Property Development Peab’s partially owned company Acturum divested a number of properties in the second quarter. The divestitures had a positive effect of SEK 170 million in profit contributions from partially owned companies.

Eliminations and reversal of internal profit in our own projects have affected operating profit by SEK -55 million (-15). As a result of more construction on property on our own balance sheet including housing projects in Norway and Finland, apartments for rent in Sweden, Peab’s own offices as well as other commercial property, a higher level of profit has been eliminated than in previous year. Elimination is reversed in connection with the external divestment of a project.

Depreciation and write-downs for the period were SEK -598 million (-485). Depreciation was affected by SEK -80 million through additional IFRS 16, Leases in the first half-year 2019.

Net financial items amounted to SEK -6 million (-38), of which net interest amounted to SEK -42 million (-21). Net interest was affected by SEK -14 million through additional IFRS 16, Leases in the first half-year 2019. Net financial items included positive effects from, among other things, dividends and currency exchange rates.

Pre-tax profit was SEK 1,080 million (929).

Profit for the period improved to SEK 912 million (790).

Seasonal variations

Group operations, particularly in Industry and Civil Engineering, are affected by fluctuations that come with the cold weather during the winter half of the year. Normally the first quarter is weaker than the rest of the year.

Operating profit and operating margin, rolling 12 months