Comments from the CEO

Peab has weathered the consequences of the corona pandemic relatively well so far. Our business model with four collaborating business areas gives us stability even in uncertain times. The acquisition of paving and mineral aggregates operations reinforces our business model and Nordic position.

Group development

Net sales in the period amounted to SEK 27,156 million (26,190), which was an increase with four percent. Adjusted for acquired and divested units net sales contracted by three percent. Operating profit was SEK 872 million (1,050), which corresponds to an operating margin of 3.2 percent (4.0). Not including the acquired operations operating profit was SEK 841 million, corresponding to an operating margin of 3.3 percent. The comparable period included an income contribution of SEK 170 million from divestitures of properties in the partially owned company Acturum. Cash flow from current operations for the first half-year was strong and amounted to SEK 2,887 million (697). Net debt decreased to SEK 6,614 million compared to SEK 7,535 milion at year-end.

Business area development

Net sales and operating profit in business area Construction contracted slightly compared to the first half-year 2019. Net sales in business area Civil Engineering were relatively unchanged while operating profit increased. As of the second quarter the Nordic paving and mineral aggregates operations acquired from YIT are included in business area Industry, which tangibly contributed to an increase in net sales. Not including the acquired operations net sales contracted somewhat, mainly in Rentals and Construction System. Costs connected to the acquisition were a charge in the period but the operations already contribute to the business area’s operating profit which in total grew slightly. Business area Project Development reported lower net sales and operating profit. Short-term this is the business area where the effects of the corona pandemic are most evident affecting Property Development negatively by around SEK 50 million in operations connected to air travel and tourism. The comparable period included an income contribution of SEK 170 million from the divestiture of properties in the partially owned company Acturum. Profit in Housing Development increased and housing sales were good during the period even though March and April were clearly affected by the corona pandemic.

Order situation

Despite the current uncertainty on the market we have maintained a good level of orders received. The level of orders received in the second quarter 2020 amounted to SEK 13,220 million compared to SEK 10,817 million in the corresponding quarter last year. The level of orders contracted somewhat in business areas Construction and Project Development while it was unchanged in Civil Engineering. Business area Industry, however, reported a higher level of orders, in part due to the contribution from the acquired operations. Orders received in the second quarter 2020 are well spread in both place and product. Order backlog at the end of the period amounted to SEK 46,123 million compared to SEK 45,873 million at the end of the corresponding period 2019.

Market and outlook for the future

The uncertainty about future market developments brought on by the corona pandemic has not changed and we continue to keep a close eye on how the market develops. The prospects for markets in the Nordic region are relatively unchanged compared to last quarter and indicate in general a downturn in building construction investments in 2020, primarily regarding private construction. However, the outlook is brighter for investments in public premises which are expected to grow. Civil engineering investments are expected to remain on a stable high level.

 

 

 

A tried and true business model

In this uncertain market situation our business has continued during the quarter with both ongoing and new projects, along with our efforts to strengthen the company. We have carried out the previously announced coordination of support functions in our operations in order to achieve lower overhead and enhance our ability to handle different scenarios regarding market developments.

Our work is founded on further developing our business model of four collaborating business areas and extensive local presence in the Nordic region. This gives us the ability to meet customers’ differing needs by having our own resources and control over the entire supply chain. This model has proven to work well for us in good times and makes us resistant in troubled times.

After finalizing the acquisition of YIT’s paving and mineral aggregates operations on April 1st we have been welcoming around 2,000 new Peab employees into our organization. Each one of them contributes to strengthening our business model with local presence in the multitude of places Peab can be found in the Nordic region.

With our some 17,000 employees in mind, many of whom are on project sites where work can entail risks, safety and the work environment are top priorities for us. Focus is on planning and risk assessment as well as learning from reports on risk observations, incidents and accidents. Every reported and remedied risk is one less potential accident.

Despite the uncertainty in the near future we are convinced that demand for our offer will long range be good in all the markets we operate on. Therefore we continue to indefatigably strive to achieve 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