Comments from the CEO

When we sum up the third quarter Peab’s positive development has clearly continued. The level of orders received has been stable and a strong cash flow has contributed to a boosted financial position. The integration of our acquired units is progressing and operations are developing according to plan. 

Group development

Net sales in the period increased by six percent and amounted to SEK 41,993 million (39,491). Adjusted for acquired and divested units net sales contracted by five percent. Operating profit was SEK 1,716 million (1,813), which corresponds to an operating margin of 4.1 percent (4.6). Not including the acquired operations operating profit was SEK 1,508 million. The comparable period included an income contribution of SEK 170 million from divestitures of properties in the partially owned company Acturum. Cash flow has developed well during the period, which has contributed to reducing net debt.

Business area development

Net sales in business area Construction contracted by seven percent due to lower net sales in Sweden but the operating profit was unchanged. Net sales in business area Civil Engineering contracted by three percent where net sales declined in Local market and Operations and Maintenance. However, operating margin increased. Net sales and operating profit increased in business area Industry where as of the second quarter the Nordic paving and mineral aggregates operations acquired from YIT are included. Business area Project Development reported lower net sales and operating profit. The comparable period included an income contribution of SEK 170 million from the divestiture of properties in the partially owned company Acturum. The effects of the corona pandemic have been most evident in Property Development concerning operations connected to air travel and tourism. We announced the divestiture of Ängelholm Helsingborg Airport in September. Production starts in Housing Development have been stable and housing sales were good in our three countries with more than 2,000 homes sold during the period.

Order situation

Despite the current uncertainty on the market we have maintained a good level of orders received. It increased in all the business areas and in the third quarter 2020 amounted to SEK 11,718 million compared to SEK 9,349 million in the corresponding quarter last year. We are also happy to note that the orders continue to be well spread in both place and product. Order backlog at the end of the period amounted to SEK 44,722 million compared to SEK 43,821 million at the end of the corresponding period 2019. Of this 76 percent will be produced after 2020.

Market and outlook for the future

The prospects for markets in the Nordic region are relatively unchanged compared to last quarter. The housing market has stabilized during the year but the outlook for 2021 indicates some level of downturn. Regarding other building construction investments, particularly private construction, the trends points to continued decline. However, the outlook is brighter for investments in public premises and civil engineering.

The effect of the corona pandemic has been limited so far on the markets we operate in. We continue to keep a close eye on how the market develops and adjust as needed.

 

 

Activities that give our business model an edge

During the period we have continued to prepare for the distribution and listing of the real estate company Annehem Fastigheter. Peab’s Board has summoned an Extra General Meeting to make a decision in this matter and if the proposal is adopted our goal is to list the company in December 2020. In doing this we will list a company on the stock market with an attractive property portfolio, made up largely of newly built commercial property, with a good platform to create value and generate future growth.

As a result of the acquisition in paving and mineral aggregates operations business area Industry has grown dramatically in our Group. In the future companies in Industry will therefore be led operatively by MDs that report to two responsible members of executive management, COO Roger Linnér and CFO Niclas Winkvist. However, Industry companies will continue to report as one business area. Karl-Gunnar Karlsson will leave his role as Business Area Manager, and thereby executive management, and become the MD of subsidiary Swerock.

In order to ensure scale advantages, effectiveness and sustainable products, at the same time we develop our local business, we have to continue to streamline operations. Digitalization enables this work which is why we have appointed Johan Dagertun as CSO. Johan Dagertun has previously been a deputy business area manager for Industry and will in his new role become a member of executive management.

The above measures are a step in our work to further emphasize and strengthen Peab as the Nordic Community Builder according to our business model with four collaborating business areas and our unique presence all over the Nordic region. This provides us with good opportunities to, with our own resources and control over the entire value chain, meet our customers’ varying needs.

In conjuncture with publishing the year-end report for 2020 we will present our revised financial goals. We also intend to arrange a capital market day in close connection with the publication of the year-end report.

Despite the uncertainty about future market developments we are convinced that demand for our offer will long range be good in all the Nordic markets we operate on. We have a strong business model and therefore everything we need 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