Risks and uncertainty factors

Peab’s business is exposed both to operative and financial risks as well as compliance risks and external and market risks. How much risks affect Peab’s profits and position depends on how well the company handles daily operations. External and market risks are events that are out of Peab’s control but which affect the business environment. These are, for example, developments in the economy, customer behavior, climate impact and political decisions.

Managing operative risks is a continuous process considering the large number of projects the Group is always starting up, carrying out and completing. Operative risks are managed in the line organization in the business areas through established procedures, processes and control systems. Peab’s business is largely project-related. There are a number of different contract forms where risk levels vary depending on the type of contract. However, with any type of contract ambiguities can arise concerning the terms, which can lead to delimitation issues that create a dispute with the customer.

A decision in the case between Peab and Unibail Rodamco Westfield regarding the contract for Mall of Scandinavia in Solna was handed down in Peab’s favor on June 30, 2023. In August Unibail Rodamco Westfield petitioned the Swedish Court of Appeal to set aside the judgment in its entirety in a so-​called protest action. In conjunction with this a request for a suspension was made and also granted. This means that for the time being the judgement cannot be enforced and therefore Peab has not received a payment in the third quarter. After a thorough legal trial through arbitration lasting nearly seven years Peab cannot see any grounds whatsoever for a protest action. Peab will counter the protest action and request that the Swedish Court of Appeal reconsiders its decision to suspend the judgement. As long as the arbitration judgement is suspended it is not enforceable, which defers the time of payment. For details see Other information.

Financial risks are primarily associated with the company’s need for capital, tied-up capital and access to financing. Financial risks are managed on Group level. For further information about risks and uncertainty factors, see the Annual and Sustainability Report 2022.

In recent years there has been a significant rise in the price of materials and energy. We continually work to adapt and streamline production all the while expecting continued high construction costs if the trend in material and energy prices does not turn. High construction costs and interest rates make it harder for calculations to come out ahead, which dampens demand on the construction market throughout the Nordic region.

Interest rates have continued to rise and central banks have raised policy interest rates several times during the last year. Higher interest rates are expected to stymy investment appetite and diminish demand.

Since Russia invaded Ukraine in February 2022 the global situation has changed dramatically. In addition to the terrible tragedy for the people the war touches, the situation risks further hampering macroeconomic growth in the world. The construction industry is affected through greater uncertainty and cautiousness concerning investments, continued high material and energy prices. Peab is not directly exposed to Russia, Ukraine or Belarus but may be indirectly affected through material suppliers. We follow developments carefully to continually assess any effects on Peab.