AF Gruppen ASA

Hello, and a warm welcome to the presentation for the first quarter of the AF Group in 2022. I am very pleased that so many are following us digitally, and especially that many have met here at Hotel Continental. The theme part today is offshore and will be presented to Geir Flota, who is the board director for construction and offshore in the AF Group. After the theme part, we summarize and then we log in digitally, and then we have questions and answers for those who have submitted. Over to highlights in the quarter. The turnover in this quarter was 6.8 billion, and we had a result before tax of 209 million, which gives a result margin in the quarter of 3.1%. The cash flow from DRIFTA is at a strong 607 million in this quarter, and the total order reserve is at a record high of 42.7 billion. Net and interest rate demands are 371 million, and the board has, as mentioned earlier, proposed an exchange rate for payments in the first half of the year at 6.50 kroner per share. Here we start with the most important thing for us, and that is the safety and health of our employees and those who work for us. In this quarter, we have had five incidents that have led to damage or serious personal injury. And when we then divide that by the number of million hours we have worked, it has given a H1 value of 0.9. That is far from our goal at zero, but we register that the good security trend continues. The trend that is in the opposite direction is the health care shortage, and in this quarter we have a health care shortage of 5.5%, which is up from last year. It is important to note that more than 1% of this is caused by COVID, or the disease that causes it, when you lower the COVID restrictions earlier this year. If we look at the revenue and results in the quarter, we were up 600 million from last year and ended up at 6.8 billion. The result is down from 245 in last year and down to 209 million this year, which gives a result decline of 0.9% to 3.1%. We are not satisfied with that. The cost-effectiveness requirement in AF is 5%, but we admit that there are many good performance around in the projects, but we are burdened by the market conditions that we deal with, and we will come back to that later in the presentation. Revenue on invested capital is another important target parameter in AF, and the average invested capital is still at the right bottom at 4.5 billion, and the result before tax and interest rates, 12 months in a row, is at the right bottom at 1.6 billion, and that gives a strong revenue on invested capital at 35%, which is far above our target at 20%. If we look at the cash flow, it is up from 205 million last year to 607 million this quarter. Our cash flow is at 974 million. Findekatt takes that to the right in this graph. In addition, we have net demands in a positive direction, and in the opposite direction, rental obligations on our machines and home rental obligations. This gives us a net revenue-bearing demand of 371 million, up from 46 million in response last year. This means that we have an available liquidity of 4 billion. This means that we have a strong financial position. If we look at the balance, there are few changes in it. We have strengthened our own capital from 3.5 billion to 3.639 in this quarter, and a total capital of over 13.5 billion, and our own capital ratio is 26.8%. If we look at the climate and environmental work in the AF Group, we have sorted over 82,000 tonnes so far this year, with a source sorting rate of 89, 880 and 95 percent, which is higher than the authority's requirement of 60 percent. This is good for the climate and the environment, and it is also good for profitability. Further, we have ripped and sorted metals for recycling, over 27,000 tons this year, up from last year. And in return, we have recycled a lot of our environmental parks, over 51,000 tons this year, up from last year. Then we will go on and look at how it is in the business areas in AF. Before I go into that, I would like to take a look at the market conditions that both the industry and the AF group are part of. We are facing a lot of geopolitical turbulence, both with the war in Ukraine, maybe especially with the shutdowns in China and the energy crisis that we are in, which puts pressure on both the price and the supply situation for several of our effort factors. In this picture, you can see the index for some of the raw materials we use in our production. Please note that the prices are going even faster than the indexes show. There is a decline in the indexes. In addition, we work with builders often under collective indexes, such as road blocks in all, as you can see here, which has gone, for example, 12.9 last year. And it is in the middle of this that the risk arises in our projects and in our business. Therefore, we have taken significant losses for future potential losses in this quarter. We will see if we have been sufficient or conservative, but the future will tell. And then I move on to facilities that with their 1.2 billion in revenue and operating results of 84 million, have had a good start this year and a operating margin of 6.7%. Even though it is winter, Målsjæll Maskin has still delivered very good results, and there are also good results in both facilities and Eikon. Konsolvo is in a low season for its part and has had low profitability as a result of that. As earlier mentioned, we have increased the family with a new member, and in this quarter we have completed the purchase of Stenset and RS. We will begin to include the number of judges for next quarter. Otherwise, the annual reserve has gone up by over 5 billion. The annual reserve is now at a strength of 12.4 billion, and it is in particular the VAV project, which we have previously talked about, together with the Italian GELLA, and that we have got a project for Equinor on a new landfilling tunnel for StatPipe on Karmøy, which are the important contribution areas to that. We mean that we have a strong and good order reserve in our facilities in the future. If we look at construction, we have had growth from 1.8 billion last year to 2.3 billion and 2.5 billion this year in turnover, but we have a operating profit of 18 million, which gives a operating margin of 0.7%. Most units have been hit by what started with the challenges around us and in the market. However, we have seen that single units have also stood out in this quarter. Haga Berg has delivered very good results in this quarter, and it is also great to see that both Bygg Oslo and Åsane Byggmesterforetning deliver well in this quarter. The reserve went up from 12 billion last year to 13.2 billion this year, and we can mention three projects with both Storøykilen for Bygg Oslo, and that we have had two fine projects with Lab Entrepeneur in Vikkommune and before Bonava. If we look at the concrete mast, they have a turnover of 1.2 billion, and a operating result of 23 million in this quarter, which gives a operating margin of 1.8%. Here there is also an impact on energy prices and material prices. We see there are three companies that stand out in this quarter, both Romerike, Rødsand and Østfold. And then we have, as earlier mentioned, Selt, Betongmast, Telemark in this quarter, but that sale has not had any effect on this result. The annual reserve is 6.2 billion. In this picture, you can see Hasle Line Quality Hotel. We managed to sell it in this quarter. It was developed by Feiendom and partners, and built by Bygg Oslo. A really nice hotel, and we are extremely pleased to have sold it. The effects of that will come in the second quarter. Furthermore, the housing sales have been low this quarter compared to the previous quarter, but we are looking forward to high production and that we have six housing projects with a total of 770 units that we have produced in this quarter. If we look at the Swedish business, we have had good growth, from just under 1.4 billion in revenues last year, to just below 1.6 billion this year, with a operating profit of 46 million, which gives us a operating margin of 2.9%. It is worth noting that we have transferred BetongMass's Swedish business to this business area in this quarter, so it is below 600 million with low profitability that we have transferred. Other businesses here in Sweden have delivered satisfactory profitability. We have in particular the cannonade, which has done well here, with both revenue growth and solid results in this quarter. And we also have our Rive business, Hørnesand Byggereturer, which delivers good and good profitability in this quarter. The annual reserve is up from 5.4 billion and up to over 8.5 billion in this quarter. If we continue to look at energy and the environment, we have had margin improvements in this quarter. They have climbed up 0.5% to 4.9% in profitability in this quarter, and it is AF Dekom that continues to push and deliver both increased activity and good profitability in 2022. At the same time, we see that the environmental parks have a seasonal low activity, but we are confident that this will be resolved this year. AF Energy continues to deliver low revenues and weak results compared to last year, and we see that there is varying profitability in the project portfolio. The annual reserve is up from 700 to 763 million. Offshore continued the strong performance they had in 2021, with both increased turnover and strong profitability. Geir will get more into this business area in his presentation, so I will quickly go over this with me today. And then we can look at the overview of our order reserve. Buildings are the largest at 13.2 billion, followed by facilities, which are now up to 12.4 billion. And Sweden with 8.5 and Betongmast with 6.2 as the largest. And the sum of the order reserve is now at record highs, 42.7 billion each. Something that we consider to be very solid and that we think will last well in the future. And now we have come to the theme presentation, which was previously announced, and that is Geir Flota.

Here you go. Thank you, Amund. My name is Geir Flotta, and I am responsible for design and offshore in the AF Group. I will tell you a little more about offshore today. As you can see in this picture, it tells you a little about the dimensions we have in offshore. The platform that is to be torn is the one in the middle. The other two are the lifting ships. The size here is 50,000 tons on the platform that is to be torn. We try to put it in context, so it is 25,000 Tesla Model Y. Safety comes first with us, and we have a goal of zero serious personal injuries and work-related negligence. We work hard every day to maintain safety on our buildings and construction sites. And we do this by measuring and learning from our events to constantly challenge ourselves to get better. With the exception of one event we had in 2021, we have not had serious injuries in the last three years. When it comes to source sorting, we are close to 100% sorting level. I will come back to the recycling level later in the presentation. In the operating area offshore, we have a varied activity towards the marine market and the oil and gas sector. The services range from the reconstruction and modification of energy systems for climate control, what we call HVAC, to the removal and recycling of offshore installations. In addition, we have a modern facility for environmental sanitation in VATS, which I will tell you more about later. Offshore increased activity levels and delivered a very good result in the quarter, with a operating margin of 9.4%. We also have a robust annual reserve of 1583 million. Offshore consists of the units AF Offshore DECOM, with sub-units AF Offshore DECOM UK and AF Miljøbase VATS, in addition to AF Aeron Molière. We carry out the removal of offshore, and we have recently arrived in the country after a successful offshore mining campaign with the Døndelin platform. There were 180 employees on our side. Here we are a consortium together with HEREMA, and where we have now made the platform ready for removal and recycling. In advance of this campaign, we have had a good and thorough design and planning phase. It has been taken down a lot of time to map the platform, both when it comes to the structural, but also when it comes to dangerous waste. The VATS environmental base is located in Tysver municipality, right in front of the deep Yrkesfjord. Miljøbaset VATS is the core of the cleaning activity in Nordsjøen. It is Europe's most modern and environmentally friendly facility for environmental sanitation and recirculation. Here we have a wide deepwater basin, a large storage and drainage area with asphalt, membranes and cleaning facilities to meet the strict environmental requirements. The deepwater basin can accommodate vehicles up to 240 meters. In addition, we have good office and housing facilities. Miljøbaset VATS can also benefit from the offshore wind market. In addition, the facility can be expanded and adapted to other types of activities in the future. In 2021, we sanitized 57,000 tons of the facility. A little back to the dimensions. If you see the jacket in the background, it is 100 meters high. AFA Aeron Moller is a supplier of future-oriented energy systems, where the energy optimization of the marine sector is increasingly sought after by our customers, while robust and smart systems and solutions from the oil and gas industry are now being used in the offshore wind sector. The first ocean wind project is already underway. To the marine market, we offer a system called ARS. ARS stands for Aeron Energy Recovery System. The purpose of the system is to use as little energy as possible to drive the energy systems on board the ships. The system uses the heat from technical equipment for heating and seawater for cooling. Unused energy is stored in tanks that we can use later. AF Aeron Moller is a future-oriented supplier of green services in the market. I have already mentioned two projects that contribute to a sustainable green transformation of the offshore sector. We have a goal of a balanced portfolio, where we perform tasks both offshore and onshore. We have several large projects ongoing in AF Offshore Dekom, and we have a significant portfolio in AF Aeron Moller, both within the marine sector and towards offshore. In addition, we have framework agreements within the reconstruction and modification of energy systems for climate control, both offshore and towards the marine. Here we see examples of projects with the offshore wind project Sunrise Wind, which we have recently started, and environmental sanitation by FBZON Kølu, which is now in VATS. We have a very strong environmental profile and contribute to the circular economy. Today's button on raw materials makes recirculation more important than ever before, combined with increasingly stricter regulations. On average, 98% of all materials that are received in AF Miljøbase VATS are recycled. The electrification and energy efficiency of offshore and the marine market contributes to the green shift, and we have the potential to expand the value chain further within offshore.dk. An expansion of the value chain will build on our existing project and engineering competence. The turnover for offshore has been in strong improvement after demanding market conditions the previous year. For us, it has been more important to choose the right projects than to grow. We have a solid year's reserve for the segment. And I will tell you a little more about how we ensure solid profitability and growth over time. As other companies in the AF Group, we are actively working with risk management. Our ability to take on and handle risks that we can influence and grasp opportunities has historically given us solid profitability. We have put in place systems for choosing the right projects, where we use our competitiveness, and not least, and perhaps the most difficult, to choose projects and customers that do not make us good. The activities in Nordsjøen started with us taking advantage of the skills we had built up on land, out offshore. This is an example of what we at AF call entrepreneurship. Today we have engineers and expertise in the world class, and our employees have developed a commercial team that I think is decisive to succeed. In the future, we will develop our competence, we will seek growth, both geographically and in the development of the value chain, and we will strengthen our green services in the market. We will orient ourselves towards partners where it is best for our customers and for us. In sum, we will contribute to an essential green global transformation in the sector. Globally, there are over 10,000 offshore installations in operation today. The picture you see here shows the size of these markets, and where the blue square shows where we are positioned today. A large number of these 10,000 installations are expected to close before 2030. A large global decomarket, and we expect to see a strong growth in demand in the coming years and ten years. Gradually, the field will be completed and the platforms will close. We have a significant growth potential globally. Our solutions to contribute to a sustainable and green transition of the offshore sector are based on megatrends globally. There is a significant potential for offshore wind and to contribute further to the circular economy. The results will be measurable and concrete reduction of climate gas emissions. There is an increasing need for the electrification of the offshore sector. We will show practical and energy efficiency for the contractors. We are well positioned to solve challenges with increasingly stricter regulations, and we use increasingly more tools for increased digitalization. To sum up, we are well equipped to grasp opportunities today, and positioned to be a leading supplier in the future. We have a culture to handle risks and choose the right projects. We have the right people to meet tomorrow's challenges within the climate and environment. We have a solid order reserve, and we will make use of our own competence with complementary partnerships, also globally. The people are our most important resource, so together with a robust organization, good structure and a strong financial position, we are definitely part of tomorrow's solution. If we are to contribute to green transformation and a circular economy, it will be in practice. Then I give the floor back to you, Jamun, who can summarize the quarter.

Tusen takk Geir. Sterke prestasjoner og mye spennende på gang i offshore altså. Let's sum up this first quarter in AF. The positive trend in security work continues. We have seen a turnover growth of over 9%, but that profitability is weighed on higher prices and delivery challenges in our projects, and especially in the construction industry. We have had a strong cash flow from the operations, and we have a strong financial position, and the order reserve is at a record high of about 42.7 billion. As previously mentioned, Styre has proposed an exchange rate of 6.50 kroner per share. And even if it's a bit messy now, we at AF will continue what we have always done. We will work on choosing the right projects. We will be organized robustly. We will be ready for operation and implementation. Pay attention to the money, and last but not least, we will pay attention to our people. And then this will continue to go well, so we are optimists in the future, even if the short picture can be a bit blurry. That was what we were going to say today, so we thank those who have followed us digitally, and wish you a good weekend afterwards.