Net sales and profit 1)

October – December 2017

Group operative net sales for the fourth quarter 2017 increased by seven percent and amounted to SEK 14,794 million (13,795). Adjustments in housing reporting affected net sales by SEK -238 million (84). Group net sales for the fourth quarter 2017 increased to SEK 14,556 million (13,879).

Net sales have increased in every business area in fourth quarter. Net sales in business area Construction increased by nine percent, in business area Civil Engineering net sales increased by 15 percent and in business area Industry net sales increased by six percent compared to the corresponding quarter the previous year. In business area Project Development net sales increased by five percent, attributable to Housing Development.

Of the quarter’s net sales SEK 2,377 million (2,273) were generated by sales and production outside Sweden.

Operative operating profit for the fourth quarter 2017 amounted to SEK 774 million (641) and the operative operating margin improved to 5.2 percent (4.6). The margin in business area Construction improved to 2.4  percent (2.1) while business area Civil Engineering has an unchanged margin of 3.6 percent. Business area Industry showed an improved margin of 8.2 percent (6.6). Business area Project Development had a higher operating profit in the fourth quarter and the operating margin was 10.6 percent (10.8), of which the margin in Housing Development amounted to 10.9 percent (10.6).

Adjustments in housing reporting amounted to SEK -32 million (32). Operating profit for the fourth quarter 2017 was SEK 742 million (673) and the operating margin improved to 5.1 percent (4.8).

Depreciation and write-downs for the fourth quarter were SEK -257 million (-232).

Net financial items amounted to SEK 72 million (-5) of which net interest improved to SEK 0 million (-11). Net financial items include capital gains of SEK 93 million from the divestiture of 2,458,447 shares in Lemminkäinen Oyj.

Pre-tax profit was SEK 814 million (668). Profit for the fourth quarter improved to SEK 671 million (561).

Operative operating profit and operative operating margin, per quarter

January – December 2017

Group operative net sales for 2017 amounted to SEK 50,267 million (46,489), which was an increase of eight percent. After adjustments for acquired and divested units net sales increased by seven percent. Adjustments in housing reporting affected net sales by SEK -177 million (-152). Group net sales for 2017 increased to SEK 50,090 million (46,337).

Net sales have increased in every business area largely due to the favorable construction and civil engineering market. Net sales grew by eleven percent in business area Construction and have increased in all the business area’s regions. Net sales increased by ten percent in business area Civil Engineering generated by greater activity in Local market and Infrastructure. Business area Industry showed an increase in net sales of five percent, with increases in all product areas except Transportation and Machines, which had unchanged sales. Net sales in business area Project Development increased by 13 percent, with an increase in Housing Development by 22 percent while Property Development had lower net sales. During the first quarter 2017 Property Development divested a number of assets in Arenastaden and Ulriksdal in Solna to Fabege, which affected net sales by SEK 577 million. During the second quarter 2016 partial sales of property in Hyllie, Malmö were carried out, worth SEK 777 million.

Of the year’s net sales SEK 9,089 million (7,729) were attributable to sales and production outside Sweden.

Operative operating profit for 2017 amounted to SEK 2,425 million (2,075) and the operative operating margin improved to 4.8 percent (4.5).

The margin in business area Construction was 2.3 percent compared to 2.2 percent for the last year. The margin in business area Civil Engineering was 3.2 percent (3.3). Business area Industry showed a higher margin of 6.8 percent (6.2). Operating profit in business area Project Development improved during the year, both in Housing Development and Property Development. The margin in Housing Development improved to 9.4 percent (8.5). Profit in Property Development included capital gains of SEK 75 million from the divestiture in the first quarter of joint venture companies with development properties in Skåne. The transactions regarding Arenastaden and Ulriksdal, which were carried out during the first quarter 2017 had no net effect on profit since the divestitures in Ulriksdal had a positive effect on operating profit by SEK 180 million and the sales of assets in Arenastaden had a negative effect of SEK 180 million. The second quarter 2016 included an effect on operating profit of SEK 104 million from the partial sales of property in Hyllie.

Eliminations and reversal of internal profit in our own projects has affected operating profit net by SEK -1 million (-75). Elimination is reversed in connection with the external divestment of a project. Adjustments in housing reporting affected operating profit by SEK -20 million (23). Operating profit for 2017 was SEK 2,405 million (2,098) and the operating margin amounted to 4.8 percent (4.5).

Depreciation and write-downs for the year were SEK -957 million (-862).

Net financial items amounted to SEK 40 million (-48) of which net interest improved to SEK -44 million (-71). Net financial items include dividends from Lemminkäinen Oyj of SEK 16 million (-) and capital gains of SEK 93 million from the divestiture of 2,458,447 shares in Lemminkäinen Oyj.

Pre-tax profit was SEK 2,445 million (2,050). Tax for the year amounted to SEK -388 million (-323), which corresponds to 16 percent (16) in tax. The lower tax amount is mainly due to non-taxable profit from the sale of shares.

Profit for the year improved to SEK 2,057 million (1,727).

Operative operating profit and operative operating margin, rolling 12 months

Seasonal variations

Group operations, particularly in Industry and Civil Engineering, are affected by fluctuations that come with the cold weather during the winter half of the year. Normally the first quarter is weaker than the rest of the year.

1) Peab applies IFRIC 15, Agreements for the Construction of Real Estate, in legal reporting. IAS 18, Revenue, is applied on Peab’s housing projects in Finland and Norway as well as Peab’s own single homes in Sweden. Revenue from these projects is first recognized when the home is handed over to the buyer. Segment reporting is based on the percentage of completion method for all our projects since this mirrors how executive management and the Board monitor the business. There is a bridge in segment reporting between operative reporting according to the percentage of completion method and legal reporting. Operative net sales and operative operating profit are reported according to the percentage of completion method. Net sales and operating profit refer to legal reporting.