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.

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 2020.

In the beginning of 2020 the coronavirus spread over a large part of the world. Governments and central banks have implemented different forms of crisis packages to reduce the negative financial effects. The effects of the coronavirus on Peab’s operations have been limited but we continue to follow developments closely so that we can assess any further effects. For more information see the section Coronavirus under Important events during the period.

On July 6, 2021 the Supreme Land and Environment Court dismissed Cementa’s application for a renewed permit to quarry limestone in Slite on Gotland. Stopping Cementa’s limestone mining in Slite will lead to a shortage of cement, which can have considerable consequences for the whole country. Taking into consideration a serious situation that can have a very negative impact on the building of homes and infrastructure, as well as lead to widespread redundancies, a temporary law has been passed regarding the government’s review of limestone quarries in exceptional cases. Thereafter the government granted Cementa a time-limited license until December 31, 2022 to mine the volumes that at the time of Cementa’s license application were permitted according to a valid license but which had not been mined due to the time limit of the license. In addition to this, Cementa is expected to receive limestone deliveries from Nordkalk for its cement production during the period the time-limited permit is in force. However, the government’s decision has been appealed to the Supreme Administrative Court. If the Supreme Administrative Court invokes an inhibition during the trial process quarry operation at Slite site would be stopped until the matter is decided. Cementa has also started a process for a shorter permit of three to four years but it is unclear when a decision on this matter will be announced.

A shortage of cement may still occur depending on what happens going forward. A substantial shortage of cement would impact the entire construction and civil engineering market in Sweden. As a significant actor Peab would therefore also be affected by the situation. Peab has already begun working with our own alternative binder and certain degree of cement importation.