Comments from the CEO

Group development

The year 2024 was characterized by continued varied activity on Peab’s different markets. Operations in business area Civil Engineering and paving in business area Industry developed very well with higher net sales while Construction and Project Development had lower net sales. Group net sales were unchanged for 2024 at SEK 58,697 (58,821) million. After declining net sales in the first half of the year Peab grew during the last two quarters.

Operating profit increased to SEK 2,763 million (1,853) and the operating margin improved to 4.7 percent (3.2). During the year we carried out two major transactions in business area Project Development that contributed to the positive development. Last year was charged with provisions, write-downs and restructuring costs for a total of SEK 525 while a positive effect of SEK 400 million resulted from a judgement in the Mall of Scandinavia arbitration. Cash flow before financing improved considerably during the year and amounted to SEK 2,601 million (-1,317) leading to a lower net debt/equity ratio that at the end of 2024 was 0.5 (0.6).

The level of orders received was high for the year, especially after two record quarters during the first half-year and despite the weak housing market. During 2024 the level of orders received increased by 25 percent to SEK 56,510 million (45,108). This was primarily due to business area Civil Engineering where major projects like developing the New Bodø Airport and building a new dock in Skellefteå contributed. The level of orders received also rose in Industry and Project Development where the first business area benefitted from more paving commissions, particularly in Finland. In Project Development we started up several new housing projects in Sweden and Finland. The high level of orders received means we have extended our order backlog which at the end of the year amounted to SEK 44,906 million (39,060).

As previously stated operations in Construction and Civil Engineering increasingly participate in dialogues early on with customers prior to planned projects and we are therefore experiencing a greater number of preliminary agreements, so-​called phase 1 contracts. Currently the potential worth of the final construction contracts from these preliminary agreements is around SEK 13 billion over the next two years (SEK 19 billion December 31, 2023).

Business area development

Net sales contracted in business area Construction due to the weak housing market which other kinds of projects have not been able to fully compensate for. Meanwhile demand in other building construction is good, primarily from the public sector, and counteracts the impact of fewer housing projects. The operating margin in Construction amounted to 1.7 percent for the year. The operating margin in business area Civil Engineering, which benefitted from many public sector investments and was highly active in 2024, was 3.0 percent. In total, the operating margin for the construction contract businesses was 2.3 percent. The profit and margin in business area Industry increased significantly as a result of the high activity in paving operations, particularly in Finland due to the government’s extra funds for road maintenance in 2024. The operating margin was 6.6 percent. On the other hand, operations in concrete, prefab and rentals have been affected by the weak housing market and activity in them was lower in 2024 compared to 2023. Operating profit and the operating margin in business area Project Development increased due to capital gains in Property Development from the divestiture of Peab’s shares in the joint venture company Tornet Bostadsproduktion and the division of assets in the joint venture company Fastighets AB Centur. The total effect on profit of these transactions was SEK 620 million. These are not transactions that reoccur annually but they exhibit our ability to build value over time in Property Development, both on our own balance sheet and together with partners in joint venture companies.

The level of sales in our own developed homes continued to be low but we have sold them at an even pace. During the fourth quarter we started up 370 homes, of which 167 were converted from rental apartment projects on our own balance sheet to tenant-owner apartments/condominiums. This illustrates the continuing trend that sales opportunities increase as the project approaches completion. For this reason we are further developing the strategy of starting projects on our own balance sheet to then convert them into tenant-owner apartments.

 

This entails more tied-up capital and deferred effects on profits compared with our traditional method of advance sales before production starts of our own developments. There is an underlying need for new housing although aspects like high construction costs and downward revised forecasts regarding population growth make it harder to assess demand in the medium-term.

Market and prospects for the future

Prospects for the Nordic construction markets are on the whole the same as they were in the previous quarter. The housing markets are expected to improve during 2025 as lower interest rates take effect, although from a low level. Development in other building construction is expected to be somewhat more diversified even if investments in general are stable in the segment. In 2025 civil engineering investments are expected to remain stable on a high level.

Peab’s four business areas complement each other well and enable us to take advantage of the demand in our various product segments and the geographic markets. This is particularly evident in how well Peab has developed during the year.

Target outcome 2024

Target outcome in 2024 is good with important progress in our sustainability work despite the rather challenging market situation that has marked the year. Particularly positive is the contracting trend in serious workplace accidents. For the full year 2024 they continued to decline and were 33 (48 per December 31, 2023). We will continue our work to maintain this contracting trend. Our climate and equality targets have continued to move in the right direction as well and for 2025 we are raising our target regarding recruiting women as skilled workers. Both customers and employees alike are pleased with Peab and the outcomes of both CSI och eNPS surpass our targets.

Regarding Peab’s financial targets the operating margin increased significantly to 4.7 percent (3.2) for 2024 compared to the target of six percent. The net debt/equity ratio at the end of the year was 0.5, which is in the middle of the target interval of 0.3-0.7.

Dividend proposal

Taking into consideration profit for 2024, our financial position and future capital needs, the Board proposes that Peab’s Annual General Meeting decide on a dividend of SEK 2.75 (1.50) per share divided into two payments, one in May and one in October. Calculated on the number of outstanding shares, this corresponds to 38 percent of profit for the year according to segment reporting, which is less than our financial target of more than 50 percent of profit for the year.

 

Jesper Göransson
President and CEO