Net sales and profit
Net sales and profit
October – December 2019
Group net sales for fourth quarter 2019 increased by three percent and amounted to SEK 15,312 million (14,845).
Net sales in business area Construction increased by two percent. Net sales in business area Civil Engineering and Industry showed lower net sales of nine and six percent, respectively. Lower net sales in business area Civil Engineering are due to a decline in Operation and maintenance and Infrastructure. In business area Industry the reduction is largely due to lower net sales in Asphalt, where there was an extremely high level of activity in the fourth quarter 2018. Net sales in business area Project Development increased by twelve percent compared to the fourth quarter last year. The increase primarily stems from Housing Development in Sweden.
Of the quarter’s net sales SEK 2,875 million (2,836) were attributable to sales and production outside Sweden.
Operating profit for the fourth quarter 2019 amounted to SEK 755 million (863) and the operating margin was 4.9 percent (5.8). In business area Construction the operating margin was unchanged at 2.5 percent. Even in business area Civil Engineering the operating margin was unchanged at 3.5 percent. Business area Industry had a slightly lower operating margin of 10.1 percent (10.5). During the fourth quarter business area Industry acquired the remaining 40 percent of the shares in AB Smidmek Eslöv. Since Peab has chosen the anticipated acquisition accounting method the effect of the acquisition has been recognized in the income statement, which affected business area Industry by SEK -47 million. In business area Project Development the operating margin in Housing Development rose to 10.5 percent (10.3) while Property Development showed a slightly lower operating profit.
Depreciation and write-downs for the fourth quarter were SEK -336 million (-281). Depreciation was affected by SEK -44 million through additional IFRS 16, Leases.
Eliminations and reversal of internal profit in our own projects have affected operating profit during the quarter net by SEK -53 million (20). Eliminations of internal profits have increased due to more construction on property on our own balance sheet as well as a greater number of ongoing housing projects in Norway and Finland.
Net financial items amounted to SEK -31 million (-24) of which net interest was SEK -30 million (-13). Net interest was affected by SEK -6 million through additional IFRS 16, Leases in the fourth quarter 2019.
Pre-tax profit was SEK 724 million (839).
Profit for the fourth quarter was SEK 591 million (706).
Operating profit and operating margin, per quarter
Vøyen Hageby
Olso, Norway
January – December 2019
Group net sales for 2019 amounted to SEK 54,008 million (52,233), which was an increase of three percent. Even after adjustments for acquired and divested units net sales increased by three percent.
Net sales in business area Construction grew by four percent and the increase was related to all three countries. Net sales includes a greater portion of other building construction. In business area Civil Engineering net sales decreased with three percent. Net sales grew in Local market but fell in Operation and maintenance and Infrastructure, which had several major projects in full production during 2018. Net sales in business area Industry were relatively unchanged. Net sales grew in all the product areas except Construction System where net sales were lower. In business area Project Development net sales decreased slightly which is attributable to Housing Development.
Of the year’s net sales SEK 9,888 million (10,297) were attributable to sales and production outside Sweden.
Operating profit for 2019 was SEK 2,568 million (2,573) and the operating margin was 4.8 percent (4.9). The operating profit was affected positively by SEK 23 million through additional IFRS 16, Leases during the year.
The operating margin in business area Construction was 2.4 percent which was unchanged compared to 2018. Business area Civil Engineering reported lower earnings in 2019 and the operating margin was 2.8 percent (3.0). The level of profitability in Operation and maintenance was lower than in previous years. The operating margin in business area Industry was 7.0 percent (7.4). The lower operating margin in part stems from higher costs in Rentals as a result of supplementary establishments to increase local presence that do not yet generate their full potential income. In addition, the business area has been charged by acquisition costs of SEK 40 million for YIT’s paving and mineral aggregates operations in the third quarter and the acquisition of the remaining 40 percent of shares in AB Smidmek Eslöv for SEK 47 million in the fourth quarter. The operating margin in business area Project Development improved to 12.4 percent compared to 10.0 percent last year. There was a slight increase in operating profit in Housing Development during the year where the somewhat lower operating profit in Sweden was countered by several projects that were turned over in Norway and Finland. The operating margin in Housing Development was 9.4 percent (8.7). In Property Development Peab’s partially owned company Acturum divested a number of properties in the second quarter. The divestitures had a positive effect of SEK 170 million in profit contributions from partially owned companies. Apart from this no major property transactions have taken place during the year.
Eliminations and reversal of internal profit in our own projects have affected operating profit net by SEK -142 million (0). As a result of more construction on property on our own balance sheet including housing projects in Norway and Finland, apartments for rent in Sweden, Peab’s own offices as well as other commercial property, a higher level of profit has been eliminated than in previous years. Elimination is reversed in connection with the external divestment of a project.
Depreciation and write-downs for the year were SEK -1,260 million (-1,024). Depreciation was affected by SEK -166 million through additional IFRS 16, Leases during the year.
Net financial items amounted to SEK -58 million (-55), of which net interest amounted to SEK -99 million (-48). Net interest was affected by SEK -27 million through additional IFRS 16, Leases during the year. Net financial items included positive effects from, among other things, dividends and activated interest rates.
Pre-tax profit was SEK 2,510 million (2,518). Tax for the year amounted to SEK -418 million (-418), which corresponds to 17 percent (17) in tax.
Profit for the year was SEK 2,092 million (2,100).
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.