Comments from the CEO

Group development

Group net sales contracted somewhat during the period January-September 2025 and amounted to SEK 41,464 million (41,912). Operating profit increased to SEK 1,630 million (1,508) and the operating margin improved to 3.9 percent (3.6). Civil engineering operations, premise construction and large sections of business area Industry continued to develop well while the low level of housing construction impacted operations in project development, construction system and crane rentals. Cash flow before financing was strong during the quarter and amounted to SEK 2.8 billion (1.2). During the quarter Peab received a billion kronor as a result of the settlement agreement with Unibail Rodamco Westfield concerning the lengthy dispute about the construction contract for Mall of Scandinavia in Solna. The agreement meant that our accessible liquidity increased by the same amount but net debt remained unchanged. Net debt per September 30, 2025 amounted to SEK 8.0 billion (8.4) and the net debt/equity ratio was 0.5 (0.5).

The level of orders received continued to be stable during the third quarter including several new orders in business area Civil Engineering. The level of orders received for the for the period January-September 2025 amounted to SEK 40.0 billion (44.5). The comparable period included several billion kronor orders, among them development of the New Bodø Airport worth NOK 3.3 billion. Order backlog per September 30, 2025 increased and was SEK 48.3 billion (47.0). We also had a stable level of incoming phase 1 contracts which are preliminary agreements that can lead to construction contracts. The potential value of final construction contracts at the end of the third quarter was around SEK 17 billion over the next two years (SEK 13 billion per December 31, 2024).

Business area development

Net sales contracted slightly 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. As the level of housing construction has drastically dropped there has been a rise in premise construction, primarily for public customers. We are also just about to start on a number of major industrial projects such as the ones in Ludvika and Västerås for Hitachi. The operating margin improved in the period to 2.2 percent (1.9).

Activity continued to be high in business area Civil Engineering in both Sweden and Norway. Several Nordic governments have announced major investments in infrastructure, both new investments and operation and maintenance. In addition, public projects are being carried out in areas such as water and sewage and power supply as well as in investments related to the ongoing climate transition. Net sales increased by six 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 seven percent. The decrease is primarily related to Finnish and Norwegian paving operations. Operating profit increased in the period to SEK 870 million (818) and the operating margin improved to 5.8 percent (5.1). Mineral aggregates and concrete improved operating profit during the period while profitability in construction system and rentals was lower. Operating profit in paving was relatively unchanged during the period.

Business area Project Development continues to be marked by the lower demand for housing in the Nordic region. Net sales in Project Development for January-September 2025 amounted to SEK 2,634 million (2,533). Operating profit was SEK 118 million (207) and the operating margin was 4.5 percent (8.2). 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. The low level of production starts and few ongoing housing projects in production contributed to the operating margin in Housing Development landing at -1.0 percent (-3.3).

The housing market seems to have landed on a new level where in recent 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 that 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 largely concerns projects in metropolitan areas. In total, during the period January – September 2025 we production-started 803 (245) of own developed homes. Of these, 555 (245) were tenant-​​owner apartments/condominiums of which 236 were converted from homes on our own balance sheet. During the quarter we converted an ongoing housing project with 111 homes in Gothenburg. 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 third quarter 2025 we report on three of our nine external targets: operating margin, net debt/equity ratio and serious accidents. The operating margin was 5.0 percent calculated on a rolling twelve month basis, which can be compared to 4.7 for the full year 2024 and our target of six percent. The net debt/equity ratio was 0.5 (0.5) at the end of September, which is in the middle of the target interval 0.3-0.7. The trend in the level of serious accidents is lower compared to the full year 2024 and the number of serious accidents over a rolling twelve month period per September 30, 2025 was 29 (33 per December 31, 2024). We will continue to work with unabated intensity to maintain a contracting trend in serious accidents.

Market and prospects for the future

Geopolitical unpredictability continues to result in a cautious market, uncertainty concerning investments and consumers with tight purse strings. Macroeconomic recovery is therefore proceeding slower than previously expected despite lower inflation and interest rates along with real wage growth. At the same time the effects of ongoing infrastructure investments and the fact that governments in the Nordic countries have announced substantial plans for both investments and maintenance are palpable.

In certain 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 as well as NATO-related infrastructure projects. Prospects for the Nordic construction and civil engineering markets are on the whole positive. Housing markets are expected to improve even if it takes longer than previously thought. Expected premise construction development also points to a continued positive market, although this is more diversified among the Nordic countries. Continued good growth is expected for the civil engineering market.

External and market developments favor Peab and our broad business model. Thanks to our four business areas we are highly capable of taking advantage of the demand in the various product segments and geographic markets we operate in.

 

Jesper Göransson
President and CEO