AF Gruppen ASA

Hello, and a warm welcome to the quarter presentation for the fourth quarter 2022 in the AF Group. Today's theme is facilities, which will be presented to the responsible board director for the business area, Geir Flotta. We will have questions and answers after the presentation for the upcoming meetings here at Continental. The high points in this quarter are both good growth and good results. We have had a turnover of 8.5 billion in the quarter, and this year we are at 31 billion. The result before the tax was 502 million, and that gave a result margin of 5.9%. The cash flow from the drift this year was 1,460 million, and we had a total order reserve per 31.12 on the right bottom edge of 40 billion. Net profit per 31.12 is 329 million kroner, and profit per share for 2022 ended at 8.96 kroner per share. The Board proposes an exchange rate of 6.50 kroner per share for payments in the first half of 2023, which is the same as last year. The safety and health of those who work for us is the first and most important thing for us in the A-group. In this quarter, we had four incidents that led to emergency or serious personal injury without emergency. And when we divide that by the million hours we have performed, we get a H1 value of 0.9 in the quarter and 1.1 for the year in total. It is worth noting that we also include our sub-entrepreneurs, and our goal is zero, so we are not satisfied with this, and the reason for this is that everyone should come home safely from our business on the first day. If we move on, and in addition to the H1 value, apply the number of injuries with medical treatment and the injuries that have led to alternative work, we get the H2 value. and it ended at 9.2 in this quarter, and 8.6 for this year. That's well over our goal of 5. If we look at the third KPI in this topic, it is health care. It ended at 4.7% in this quarter, and accumulated 4.6% this year, as well as the previous two years. We target about 3% health care. We do this because we see that it is healthy health care, and it says something about the working environment, health, and production, and that we actually have high satisfaction in the organization. If we look at the numbers for the quarter, we have had over 5% growth in this quarter, from 8.1 to 8.5 billion. The result before the tax ended at 502 million, which gives a result margin of 5.9%. Isolated before the quarter, we are happy with the margin and profitability, but if we look at 2022 under 1, there have been many very strong performances, but the variations have been too big, and we are not happy with the profitability for 2022 in total. If we continue to look at the return on invested capital, we had the result before the tax and with returned interest rates in the last four quarters rolling at just over 1.4 billion, and an average invested capital of about 4.5 billion, which gives a return on invested capital of 32%. That's four percentage points below last year, but well over our target of 20%. If we look at the cash flow, the cash flow ended before 2022 at 1,460 million, and we have 765 million in liquid funds. The 765 have been found to the right of this slide, and if we add to the interest rate requirements and subtract from the house leasing obligations, the leasing obligations we have on machines and interest rates, we have a net interest rate of 329 million. In addition, we have a subtraction facility of 3 billion, which gives us an available liquidity of just over 3.3 billion. and we mean that we are in a solid financial position. If we look at the balance, the equity is almost unchanged at 3.5 billion. The balance has increased to 14.4 billion, which gives an equity share of 24.2%. On this collected background, the board has chosen to propose an exchange rate of 6.50 kroner per share for payment in the first half of the year. We are seeking to develop socially beneficial projects and that we solve them in a good way. This also means that we take responsibility for the climate and environmental impact that our business has. Among other things, we measure these parameters. I will start with source sorting. We have sorted more than 270,000 tons of waste in 2020, with a sorting rate of 86, 89 and 95 percent. That is well over the authority requirement of 60 percent. We have also collected and sorted for recycling more than 54,000 tons. Our environmental parks have collected more than 315,000 tons in 2020. And together, this has been able to track the climate for more than 133,000 tons of CO2 equivalents. We are going to take a look at business areas for the fourth quarter. We start with facilities that have had a very good result in this quarter. Income ended at just below 1.7 billion, with a operating profit of 170 million, giving it a operating margin of a strong 10.1%. And all units in the facility delivered very good results in this quarter. And the order reserve has gone up from 6.8 billion to 15.3 billion. Geir will talk more about facilities later today, so we move on to construction. There we have had a quarter with still varying results and poor profitability. The revenues ended at just over 3 billion, with a operating profit of 122 million, which gives a operating margin of 4%, which is down 1.4 percent points from last year. There has been both high activity, but also great variation, and to start with those who have performed very well, it is AF Bygg Oslo, Haga Berg, and very happy Åsane Byggmesterforetning, which delivers very good results in this quarter. At the same time, we look forward to Strøm Gunnarsen and HTB delivering good results in this quarter. On the other side, we find Fundamentering. We find AF Bygg Fornyelse, AF Bygg Østfold, and AF Fontverk, which deliver weak results in this quarter. The oil reserve in bygg is now going down, and it is now on the right edge of 10 billion. If we take a look at Betongmast, we can see that there is a lot of good profitability in Betongmast this quarter. We have revenues on the right edge of 1.3 billion. We have a operating profit of 78 million, which gives a operating margin of 5.6%. This is a lot for Betongmast, and the units that have stood out are Betongmast Oslo and Romerike. Buskerud Vestfold, Trøndelag, Asker og Bærum, and Østfold, who deliver extremely good results in this quarter. We also have Betongvast Røsand, who, among other things, has delivered this project, you can see in the picture, which is the Kårevåg School in Averøy, which also received the Klima Snu Award from the Minister of Environment in 2022. We are also looking forward to the fact that Røsand delivered a good result this quarter. We have concrete-based residential buildings and concrete-based inland areas that continue to deliver weak results in this quarter. The annual reserve is significantly lower, from 7 billion to 4.4 billion. If we look at it individually, we had a turnover in the quarter of 21 million and 75 million collected this year, which we are pleased with in this market. There is a low housing sale in this quarter, where we have sold 3 against 60 in 2021, which is a sign of the market that we also see around us in general, and not just in our portfolio. We have had seven housing projects with 940 units in production in this quarter, and the sales rate in these projects is 76 percent. We have also handed over bread to Rasse, and in addition to the business property Hasle 3, as you can see in the picture here, where Redd Barna is a landlord and has moved in. If we look at the chart, Sweden has had a demanding quarter with a weak result, and in this quarter with revenues that ended at just over 2.1 billion, with a operating result that is significantly higher from the third quarter, but ends at 44 million, which gives a operating margin of 2.1%. It is important to note that there is a very large variation between the units. In the positive end, Kanonaden, Prefab Melardalen, Hørnassand and Bygg Syd have delivered very good results this quarter. We are also looking forward to HMB delivering good results. We still have weak results in what used to be the Swedish portfolio of concrete masts. This is followed by further declines in project estimates in this quarter. The oil reserves in Sweden are at 7.6 billion by the beginning of 2022. Moving on to the two green business areas. We start with energy and the environment. It is good to see that there has been good profitability in this quarter. Income has held up to the same level as last year, at 310 million. The operating result at 33 gives a operating margin of 10.5%. AF Dekom continues to deliver very good results, despite the fact that the activity here is lower than last year. And we also see the opposite, that AFEnergi has increased demand for its services, which is for increased activity, and they also deliver good results in this quarter. It is not only the operations in the AFEnergi projects that are doing well, they also have in this quarter a profit from a sale to the energy center in Håvindbyen, which has a positive impact. The oil reserves are at 640 million for energy and the environment. If we look at offshore, they have had a strong growth of over 60% to 368 million in this quarter. The operating results ended at 59 million, which gives a operating margin of a strong 16%. Offshore Dekom has had a high level of activity, both in the water and in the sea, and has delivered good operations. It is also very happy that Aeromiljøet not only has grown, but has delivered good profitability above the margin requirement for the AF Group in this quarter. We are looking forward to that. Our reserve is at the bottom of 1.7 billion for offshore. If we then look at the order reserve collected, we have a stable order reserve right at the bottom at 40 billion. It can be worth noting that we have 10 steps in the facility and up to 15.3 billion, which is larger than both construction and concrete mass collected at a ratio of 10 and 4.4 billion. And we have 7.6 billion in order reserves in Sweden, and 1.7 billion in offshore, which are the largest order reserves in the business areas. With that, I hand over the floor to the theme of the day and Geir Flota, who is the director of investment and ownership in the AF Group.

Thank you for that, Amund. My name is Geir Flotta. I am the head of the board of directors responsible for construction and ownership in the AF Group. A little over two years ago, I was here and was looking forward to getting a little closer to the AF construction company. That was after Q3 in 2020. Today, I will present to you a little bit of the development since last year and a little bit about our future plans. Here on the picture you can see three beautiful wells from project E39 Kristiansand Vest-Mandal Øst, a project that is being delivered to Nye Veier now in Q4. We have a large course in the construction business, and the profitability is good, with a operating margin of 7.5% for the year and 10.1% for the quarter. We are not satisfied with the safety performance. In AF, everyone should come home safe, and our goal is zero serious personal injuries and work-related accidents. In the facility, we have several branded goods out of the AF-branded goods. The sister companies, as you can see here, carry out projects in both new construction and rehabilitation, or take care of what has already been built. We mainly carry out projects in collaboration between infrastructure, power and industry, while the subjects we deliver in self-production are in tunnel business, mass transportation, ground work and concrete work. We have increased concrete work significantly over the past year. We must be best at the subjects we offer. Therefore, we must prioritize hard work, and we must train to become the best. We operate mainly in Norway, but we are curious about more tunnel operations in Sweden, if the conditions are right. Now I will take you through what has happened since I was here last. We have launched a new corporate strategy. We have bought Stensett & RS, a clean-worked concrete company with a specialty in raw building, floor and construction concrete. Stensett & RS carries out projects directly for customers and entrepreneurs such as AF and others. Concrete is a critical subject in both construction and construction, and we expect increased demand in the future. We also believe that self-production becomes more and more important, and increased specialization is the future. After the purchase, we are about 800 concrete workers in the Aarhus Group. The team in the facility has never been stronger than it is now, and the satisfaction is high. The fact that we have developed a team over time has also given us the opportunity to take on the largest project in our history, the new rent tunnel in Oslo, a project of almost 9 billion. We must take care of the climate and environment in everything we do. It is inspiring to see how much we can achieve when we set ourselves goals and we prioritize with our best women and men. We will increase the pace in the future with a robust and good order reserve. We launched our corporate strategy in 2021, and we have set some hard goals for 2024. For the growth business, we will double the activity level from 5 billion to 10 billion a year in Norway, and we will be Norway's most profitable growth actor. We have a very solid position and a good foundation for further growth. Most of that growth will come through the companies we have today. While strategically important professions, services or geographies, where we are looking for growth, we can make strategic moves. Today's infrastructure must be improved to meet the needs of the future. And we believe in more consistent expansion. Public and private actors will largely take care of what has already been built, and we know that the demand is great. And as we see it, it is a strength to be positioned around big cities, even though mobile capacity is the core of our business. Robust organization, risk control and strong self-production are more important than ever. When I started at AF almost 20 years ago, I was part of AF's largest project at the time. A gigaproject for 830 million kroner. The expansion of the snow white field outside Havnefest. Now we have started a project that has grown ten times bigger, but we have never been better equipped for the implementation. We are all dependent on water. It is incredibly meaningful to carry out such an important social project as the new Rentons tunnel in Oslo. The project is both complex and extensive. Most of the work will take place underground, and the project sets very high standards for safety, climate and environment. In total, we will build a water distribution network with an 11 km tunnel, with a tunnel drilling machine, what we call TBM, and 7 km with drilling and drilling. In addition, we will have clean water pools and pumping stations. This is a project that challenges us, that inspires us, and where we take new steps to develop our competence. Here we are collaborating with GELLA, an Italian company that specializes in TBM. Cooperation with the municipality of Oslo is good, and we have also allocated a water treatment plant in Huseby, where we are now preparing for the start of the implementation. This project has a estimated value of about 3 billion kroner. Both of these two projects will be completed by the end of 2027. We will save the environment for unnecessary climate gas emissions in all our companies. And we have set a goal of halving our climate gas emissions by 2030. But that is what we actually do and get, which means something. To involve the entrepreneur early in the project contributes to finding good solutions with high benefit. Here you can see in the upper picture a sketch of the bridge solutions for crossing the Lågen with Lillehammer on the road project E6 Rotherød-Storhavet. The large bridge you see in the picture was the one we got presented and was part of the original plan. With AF on the team, we have now managed to simplify the bridge solution and shortened the bridge from 960 meters to 540 meters and reduced climate gas emissions by 67 percent. That is to say 20,000 tons of CO2 equivalents. In comparison, this corresponds to all annual construction activity that takes place in Lillehammer municipality. Projects have also made significant improvements in relation to reduced intervention in nature, with optimized lineage, improved fundamental solutions and reuse of existing roads. Much of the innovation that is used at E6 Roterød Storhavet is experience transfer and improvement from, among other projects, as you can see in this bottom picture, which is E39 Kristiansand-Mandahl, but also several other projects. Here we have also learned a lot about combining innovation and digitalization. Whether it comes to designing and building model-based and design-free, or that we reduce mass movement by using AI and data power for optimal loading and transport. This is probably some of what drives us. We will increase the activity level in facilities in the future. We have an order reserve that is all time high. The total order reserve now is over 15 billion, a doubling since last year. And in that order reserve I have not included new air. We have the best people in the industry, but we must attract, develop and retain new talents. For us, it is fundamental to build our own leaders and specialists to develop robust project organizations. New graduates and students come into solid teams and projects, and with that we create new, safe, competent and satisfied people who bring and develop the AF culture further. AF has established the competence and capacity to carry out the largest and most complex application projects in Norway and Sweden. But it is not only the largest projects that attract us. To develop our companies and to develop the people, we must have a balanced portfolio and a broad customer spectrum within different segments. We have many small and large projects across fields and markets. Here you can see some of the projects we carry out. Among other things, I can mention the hospital in Drammen, the upgrade of the T-Bahn in Oslo, the rehabilitation of Nersjødammen, a new tunnel in the form of a new gas pipeline that will enter Kalstå and then eventually Kårstø outside Haugesund, Eikon, which builds the basement of our new headquarters, Construction City, And we continue the framework of the Equinor dairy farm with five new years. As you know, we built the dairy farm in its time from 2002 to 2007, and we have had the same contract since 2012. It's fun that we can continue. To give some more examples, here is an industrial area outside Narvik, where Målse Maskin & Transport carries out timber processing and infrastructure. Stensete Eire, which builds several of the raw buildings in a new government quarter. New Lufthamn in Mo i Rana, which is in the development phase. New water treatment facility in Oslo. And Fjærby, which carries out mountain safety work on the new E39. And not least the major project and tunnel project, Love, which is on the E4 bypass in Stockholm, Sweden. We give in to a market that is in strong change. Whether it is the aftermath of the pandemic, geopolitical challenges, or a price increase few of us have experienced before. This also has consequences for our industry. What we are looking for is as much as possible predictability. Preparation and positioning for a large project is not something we prioritize in the last months of development. This is perhaps something we have seen and planned for many months or years in advance. The projects are getting bigger, and for us, it's not a project that's too big. But we want a diversified portfolio, with bigger and smaller projects. It's about risk, and it's about having the best people available. Total enterprises in different forms are becoming more and more relevant within the institution. And preferably with collaboration in advance. This is reasonable in the larger and more complex projects, but it also requires predictability from customers and authorities. It is not sustainable with annual negotiations to ensure that authorities re-prioritize and do not carry out the project. The industry must work closer together. Then we exploit each other's skills that provide improved solutions. The risk must also be distributed to those who can handle it best. The climate and innovation and digital solutions will become more and more integrated in everything we do. And we also believe that is the solution when we look at everything together. Then the total cost-benefit will be better taken into account. New infrastructure will be built. But we have to take care of what has already been built. And we need new and more traffic-safe roads. And especially in the last year, the world needs more climate-friendly energy. That means new or renewal of power plants, and offshore wind will come strong. We will contribute with our competence and capacity, which will benefit our employees, our owners, customers and the society around us. To sum up, we are well positioned and we have a targeted focus on complex projects and new segments and developed geographies. The team is becoming increasingly stronger, we have competent leaders and the best professional leadership in the industry, and we are going to develop more. We always have our own production of the projects we carry out in the facility, and we will be best at that. Everything we provide is risk-based to identify and deal with possibilities and threats. This gives the basis for improvement that drives us forward. We have a robust order server that gives increased pace. We look forward to the future. Thank you.

Thank you very much, Geir. Now we will go over to the summary of the quarter. We have had a quarter with a turnover of 8.5 billion, and a turnover of 502 million, and a turnover margin of 5.9%. We have had turnover growth and good profitability, and we believe we are in a strong financial position. The reserve is at the bottom of 40 billion, and as promised, Styre Forensli has an exchange rate of 6.50 kroner per share for payment in the first half of 2023. The profitability and performance in this quarter is good in isolation, but as we have said, we are not satisfied with the profitability for the 2022 collection set. When that is said, we have seen many very strong performances this year, but the variation is too big. What we have seen, and which is very clear to us, is that the good performances will come where we are good at having robust organization, we have good risk management, we are ready for action, We take care of the money, and last but not least, we take care of our people. We look forward to a real start in 2023. With that, I would like to thank you for joining us for this presentation. Have a good weekend when that time comes.