Comments from the CEO

Group development

Group net sales contracted somewhat during the first half-year 2025 and amounted to SEK 25,862 million (26,373). Operating profit was SEK 482 million (513) and the operating margin was unchanged at 1.9 percent. Capital gains of SEK 220 million resulting from the sales of Peab’s shares in the joint venture Tornet Bostadsproduktion were included in the first quarter last year. A very positive factor pertaining particularly to the second quarter is that we – thanks to our broad business model – can report an operating margin in excess of five percent despite lower income recognition than previous years in project development operations. Net debt amounted to SEK 9.5 billion (9.6) and the net debt/equity ratio was 0.6 (0.6).

The level of orders received continued to be stable during the second quarter. The level of orders received for the first half-year amounted to SEK 29.8 billion (34.3). The comparable period included several billion kronor orders, among them development of the New Bodø Airport worth NOK 3.3 billion. Order backlog per June 30, 2025 increased and was SEK 51.8 billion (50.6). We also have a stable level of incoming phase 1 contracts which are preliminary agreements that can lead to construction contracts. They therefore provide an indication of future projects in business areas Construction and Civil engineering. The potential value of final construction contracts at the end of the second quarter was around SEK 16 billion over the next two years (SEK 13 billion per December 31, 2024).

At the end of the quarter we reached a settlement agreement in the lengthy dispute with Unibail Rodamco Westfield (URW) regarding Mall of Scandinavia in Solna. The settlement entailed Peab being compensated with an amount equivalent to the amount determined for costs for completing the contract in the arbitral award on June 30, 2023. In the agreement Peab also waived an amount equivalent to accrued default interest. Net financial items were charged in the second quarter 2025 by SEK 611 million due to the write-down of receivables equivalent to the accrued default interest, which did not have any effect on cash flow. On July 2 we received a billion Swedish kronor from URW, which increased our liquidity by the same amount and net debt remained unchanged. After the settlement all transactions between the parties are resolved. We can therefore put the construction contract Mall of Scandinavia behind us and reiterate how proud we are about having built the largest Nordic mall.

Business area development

Net sales contracted in business area Construction due to lower activity in new production of homes which other kinds of projects have not been able to fully compensate for. At the same time the operating margin improved in the period to 2.2 percent (1.8) which signifies stable operations. Construction operations are working on a number of big and small projects all over the Nordic region that include everything from building industrial premises to schools and care facilities. Business area Civil Engineering continues to prove its worth with its high level of activity and projects stretch from port facilities, roads and railroads to energy related projects. Net sales increased by 3 percent and the operating margin improved to 3.9 percent (3.1). In total, the operating margin for the construction contract businesses was 2.9 percent (2.3).

In business area Industry net sales contracted by six percent and the decrease is related to paving and to less activity in construction system and rentals due to the weak housing market. Operating profit increased somewhat in the period and the operating margin improved to -0,1 percent (-0,4). Paving, mineral aggregates and concrete reported improved operating profit for the first half year while construction system and rentals reported lower profit.

Net sales in business area Project Development were basically the same as the corresponding period last year. Operating profit amounted to SEK 82 million (213). Capital gains of SEK 220 million resulting from the sales of Peab’s shares in the joint venture Tornet Bostadsproduktion were included in the comparable period. A number of production starts in Housing Development have impacted the period positively, although the level of activity continues to be low. The operating margin in Housing Development was 1.3 percent (-4.0).

The housing market seems to have landed on a new level where during the past three years production starts of homes are significantly fewer than there used to be. We are adjusting and wherever the market is that’s where we are. At the same time we see the trend of sales increasing as a project approaches completion continues.

As of 2025 we work from the strategy of – given our financial targets – more production of own housing developments on our own balance sheet to later on convert them into tenant-owner apartments. This is preferably on projects in metropolitan areas. In the first half-year 2025 we production-started 803 (137) in total of own developed homes. Of these, 444 (137) were tenant-​​owner apartments/condominiums,125 converted from homes on our own balance sheet. Starting projects on our own balance sheet increases tied-​up capital and defers profit effects in segment reporting compared to our traditional method of pre-sales before production starts of our own development projects.

Target outcome

After the second quarter 2025 we report four of our nine external targets: operating margin, net debt/equity ratio, serious accidents and attractive employer (eNPS). The operating margin was 4.7 percent calculated on a rolling twelve month basis, equivalent to the full year 2024. The target is six percent. The net debt/equity ratio was 0.6 (0.6) at the end of June, which is inside the target interval 0.3-0.7. The trend in serious accidents continues to be lower compared to the full year 2024 and the number of serious accidents over a rolling twelve month period per June 30, 2025 was 29 (33 per December 31, 2024). We will continue to work with unabated intensity to keep the contracting trend going. Even the Group’s eNPS value, if employees are willing to recommend Peab as an employer, notably increased to 32 (28).

Market and prospects for the future

Geopolitical unpredictability continues to result in a more cautious market and investment uncertainty. Macroeconomic recovery is proceeding slower than previously expected but a turnabout is expected in the second half of 2025 with broader financial growth as a result. Meanwhile, in some aspects Peab’s business can benefit from the volatile world around us, such as an increase in funding for the police, the penal system, security and defense related projects along with the accompanying infrastructure. Prospects for the Nordic construction markets are on the whole the same as they were in the previous quarter. The housing markets are expected to improve as lower interest rates take effect, but more slowly than expected. Premise construction development points to a continued positive market, although somewhat more diversified between segments. Forecasts for the civil engineering market in 2025 show good growth there.

Now we are going to continue to make use of Peab’s broad business model with our four business areas that complement each other well and enable us to take advantage of the demand in our various product segments and geographic markets.

 

Jesper Göransson
President and CEO