Business area Industry

Business area Industry is a complete supplier of the products and services needed to carry out a sustainable and cost-​efficient construction and civil engineering project on the Nordic market. Industry offers everything from mineral aggregates, concrete, paving and temporary electricity to prefabricated concrete elements. Business area Industry also assists with crane and machine rental, distribution of binder to the concrete industry, transportation as well as recycles production waste and rubble.

Business area Industry is run in six product areas: Mineral aggregates, Paving, Concrete, Transportation and Machines, Rentals and Construction System. All the product areas operate on the Nordic construction and civil engineering market.

Acquisition of Nordic paving and mineral aggregates operations

On July 4, 2019 Peab signed a contract to acquire YIT’s paving and mineral aggregates operations in the Nordic region. The transaction was conditional on approval from competition authorities as well as the fulfillment of certain contractual conditions. At the end of March 2020 the transaction was approved by the competition authorities and the acquisition was finalized on April 1, 2020.

Through the acquisition Peab will expand its presence in Sweden, Norway and Finland and become established in the paving business in Denmark. This will give Peab a unique and market leading position in this business in the Nordic region. The acquisition entails taking over some 2,000 employees, around 200 strategically located quarries along with 63 production asphalt plants in the Nordic region. The operations are primarily integrated into the companies Peab Asfalt and Swerock and for Peab Asfalt it means establishing operations in Finland and Denmark. The acquisition also provides conditions for further expansion and development in other operations such as Recycling and Concrete.

The transaction is a combination of an asset deal and share purchase. The purchase price (including redemption of shareholder loans to the seller) amounted to SEK 3,184 million for a debt-​free business and is fully financed.

The acquired operations had net sales of SEK 5,878 million with an adjusted EBITDA of SEK 282 million in 2019.

Net sales and profit

April – June 2020

Net sales for the second quarter 2020 increased by 45 percent and amounted to SEK 5,343 million (3,697), of which the acquired operations contributed by SEK 1,741 million. Not including the acquired operations net sales contracted by three percent and amounted to SEK 3,602 million.

Operating profit for the second quarter 2020 amounted to SEK 303 million (258) and the operating margin was 5.7 percent (7.0). Not including the acquired operations, operating profit was SEK 262 million and the operating margin was 7.3 percent. The improved operating margin is mainly due to higher earnings in Mineral Aggregates and Paving.

The acquisition of the paving and mineral aggregates operations was finalized on April 1, 2020, which means the acquisition occurred when the season started. The underlying operations in the acquired companies contributed by SEK 149 million in the second quarter. Depreciation on surplus values for, among other things, customer contracts in the order backlog taken over and fixed assets amounted to SEK -63 million. Depreciation on surplus values for customer contracts in the order backlog taken over will be high throughout 2020 and part of 2021. In addition, acquisition costs and transfer tax in Finland have charged profits in total by SEK -45 million. All in all operating profit for the second quarter was positively affected by SEK 41 million related to the acquired operations.

January – June 2020

Net sales for the first half-year 2020 increased by 28 percent and amounted to SEK 7,558 million (5,927), of which the acquired operations contributed by SEK 1,741 million. Adjusted for the acquired operations, net sales contracted by two percent to SEK 5,817 million. Net sales have mainly increased in Paving and Mineral Aggregates while net sales in Rentals and Construction System have declined.

Operating profit for the first half-year 2020 increased to SEK 237 million (214). Not including the acquired operations, operating profit was SEK 206 million and the operating margin was 3.5 percent (3.6). The lower operating margin is due to a lower margin in Rentals and Construction System. The operating margin for the latest rolling 12 month period was 6.4 percent compared to 7.0 percent for the entire year 2019.

The underlying operations in the acquired companies contributed by SEK 149 million. Depreciation on surplus values for, among other things, customer contracts in the order backlog taken over and fixed assets amounted to SEK -63 million. Depreciation on surplus values for customer contracts in the order backlog taken over will be high throughout 2020 and part of 2021. In addition, acquisition costs and transfer tax in Finland have charged profits in total by SEK -55 million. All in all operating profit for the second quarter was positively affected by SEK 31 million related to the acquired operations. Because the acquired operations have a very clear seasonal pattern the first quarter is characterized by considerable deficits since the season starts in the second quarter. If the acquisition had taken place on January 1, 2020 profit in the first quarter would have been affected by SEK -297 million and the underlying operations would have had an accumulated operating profit per June 30, 2020 of SEK -148 million.

Capital employed in Industry was at the end of the period SEK 9,780 million compared to SEK 6,822 million at the end of the corresponding period last year. The increase is due to the acquired operations.