Comments from the CEO

After a strong finish we can conclude that 2018 was a stable year in which our business developed positively. Net sales, profits and margins all grew and we start 2019 with a large and well diversified order backlog.

Market conditions

The housing market in Sweden is expected to continue to decline in 2019 while other building construction is expected to stay on the same level. In Norway housing construction and other building construction is expected to level off in 2019. The construction market in Finland is expected to show an upswing in housing construction in 2019 and sideways development in other building construction. Market prospects for the civil engineering market in Sweden and Norway continue to be good, primarily due to government infrastructure projects.

Order situation

The level of orders received in the fourth quarter was slightly lower than in the others in the year but still it continued to be high, which meant that the total amount of orders received for 2018 rose to SEK 51.1 billion (49.0). The increase in orders received was generated in business areas Construction and Civil Engineering. There continues to be a shift to civil engineering projects among the orders received for the quarter, and in Construction other building construction continues to grow in relation to our own home development projects. Order backlog at the end of the year was SEK 45.8 billion (40.2). The orders are well spread geographically and there is good product diversity.

Business area development

Net sales increased by six percent in business area Construction in 2018 with higher operating profit and operating margin. Net sales in Civil Engineering increased by 16 percent with improved operating profit. Net sales increased by four percent in business area Industry and operating profit and operating margin improved. Net sales and operating profit in business area Project Development fell somewhat. Housing Development presented slightly lower net sales with lower operating profit for the entire year. In Property Development both our wholly owned holdings and our joint venture companies continued to develop well.

Group development

Net sales amounted to SEK 52,233 million (49,981) in 2018, which was an increase of five percent. Operating profit was SEK 2,573 million (2,418) which meant an operating margin of 4.9 percent (4.8). Cash flow before financing was SEK -1,021 million (2,295). Net debt was SEK 3,551 million (1,216). Cash flow and net debt have been affected by an increase in tied up working capital by, among other things, several ongoing housing projects in Norway and Finland. In addition, we have continued to invest in machines and the development of operations property and investment property.

Outlook for the future

The total market in 2019 is expected to remain on the same level but with different circumstances depending on location and product. The stable economy in the Nordic countries and a significant underlying need provide a good foundation for the construction market in the foreseeable future. We have a strong order backlog in 2019 and with the wide range of our business we can handle a downturn in some product areas with an upturn in others. Peab has a unique position through our four complementary business areas and all our employees who are welded together by a strong company culture.

Our business model creates opportunities throughout the entire value chain in a construction project and provides us with a good platform to deliver comprehensive solutions to our customers. From this foundation we will continue to strive towards our strategic goals to have the most satisfied customers, be the best workplace and the most profitable company in the industry.

Based on the Group’s considerable profitability development, order situation and financial position together with a balanced investment need, the Board proposes that the dividend is raised to SEK 4.20 (4.00) per share.

 

Jesper Göransson
CEO and President