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 2021.

Access to cement is vital to the construction and civil engineering industry. On December 13, 2022 Cementa was granted permission to quarry limestone for four more years in Slite. In 2023 Cementa will submit an application for a longer permit to ensure long-term conditions for a reliable supply of cement.

There has been a significant rise in the price of materials and energy during 2021 and 2022. We have handled cost increases along with supply chain disturbances through adjusting and streamlining operations as well as in pricing to customers although the cost increases have not been fully compensated, which has affected the operating margin. We continually work to streamline production all the while expecting a gradual increase in construction costs if the trend in material and energy prices does not turn.

Long-​term interest rates have continued to rise and in Sweden The Riksbank raised the policy interest rate several times during 2022 and further interest rate increases are expected. Inflation has tightened its grip on the global economy and several central banks indicate further hikes in interest rates. Higher interest rates are expected to stymy investment appetite and diminish demand.

The recent dramatic developments in Ukraine have a key impact on the world around us. In addition to the terrible tragedy for the people the war touches, the situation risks hampering macroeconomic growth in the world. For Peab this can affect the construction industry through greater uncertainty and cautiousness concerning investments, continued high material and energy prices and material shortages and delivery problems. We are not ourselves directly exposed to Russia, Ukraine or Belarus but may be indirectly affected through material suppliers. We follow developments carefully to continually assess any effects on Peab.