AF Gruppen ASA

Hello and welcome to the presentation of the first quarter of 2025 for the AF Group. Today's theme is a look at the strategy for 2028 and will be presented in subtitles. There will also be opportunities to ask questions after the presentation. The main points in this quarter were that the turnover was 7.1 billion, and we had a result before tax of 214 million, which gave us a result margin of 3%. The current flow from drift was 330 million, and the order entry in the quarter ended at just over 11 billion. We had an order reserve at the beginning of the quarter of 44.2 billion. So we have a net return per 31.3 on 290 million. In AF, we start with safety first, because the fact that everyone will come home safely from work every single day is one of our main goals. In this quarter, we had four events that give us a H1 value of 0.9. And our goal is 0, so we are thus not satisfied with that. And then we have a H2 value that is healthy and stable at 7, and there the goal for the company is to be below 5. So we have a sick leave that has gone up slightly in this quarter and is at 4.8% and we strive to have a sick leave down to the third quarter. If we look at the figures, we had a stable or weak decline of SEK 7.1 billion in revenue in the quarter. The result before the tax went up from SEK 186 million to SEK 214 million, which gives us a margin improvement of 0.4 percent points, and we ended up at 3 percent. Now we are pleased that there is improvement, but at AF we are working to have 5% every quarter. If we look at the return on invested capital, we had the last four quarters a result before the tax, and we put back the interest rates at about 1.2 billion, and an average invested capital of 4.7 billion, which gives us a return on invested capital of 25.6%. And that is well over the target of the company at 20%. If we look at the cash flow, in 2024 we had 2.2 billion in cash flow from operations. We continue to have a strong cash flow in this quarter with 330 million. And we have liquid funds emerging at just over 1 billion. The billion in liquid funds can be found on the right side of this figure. We also have interest-bearing claims. If we subtract from rental obligations on our machines, house rental obligations and interest-bearing debt, we have a net interest-bearing claim of 290 million. which is a strong improvement from the corresponding 4.5 billion, and we mean that we are in a solid financial position. If we look at the balance, there are almost no major changes in it. We have a total balance of 15 billion, and in Norway the equity has strengthened by about 200 million, and is at 3.6 billion. The equity ratio is given at 24.2%, and the exclusive IFRS F-16 effect is at 25.5%. Alle har et ansvar for å minimere det fotavtrykket som virksomheten påvirker klima og miljø med. Og dagens temapresentasjon kommer til å handle om vår oppdaterte strategi, hvor halvering av fotavtrykket ingår som et nytt mål. We are starting to report on our climate gas emissions for Scope 1 and 2. In the first quarter, we have a climate gas emission from our own company, Scope 1 and 2, of 9895 tons of CO2 equivalents. We have a goal of halving the emissions by 2028, with a base year in 2020. We move on to the degree of source sorting. The purpose of source sorting is to ensure that the materials that the waste consists of can be used as best as possible by being able to be used for material recycling or recycling. This is completely in line with circular economic principles. The source sorting in the first quarter was 93% for the construction activity and 96-95% for rehab and demolition. In total, it was 95%. And then we have recovered a lot of metal for our mining business. And through typical environmental parks and our mining business, we are in a position to reduce climate gas emissions. And the fact that we have both renewable energy and metal, for a business of over 83,000 tonnes in this quarter, we have been able to save climate for nearly 37,000 tonnes of CO2 equivalents in this quarter. Let's move on and take a closer look at our different business areas. We started with facilities, and facilities have continued to grow, with 16% in this quarter, and are now worth 2.3 billion. The operating result is 65 million, which gives a operating margin of 2.8%. This is weaker than what we are used to from facilities, and this is the rise in contracts to AF Anleggning AB in Stockholm, which is the reason for this, and which has affected both facilities and AF in this quarter. As probably most of you are familiar with, the Swedish traffic agency has lifted the contract for the AF-institution AB on the crossing in Stockholm. The company is subsequently reported to the police. AF has been working on this project since the summer of 2020, and we expect to be finished by the end of this year. The recurring production value was about 1 billion, and this was the only project for AF Anleggning AB. We expect that AF Anleggning AB and this company are in a weak position for new projects in Sweden as the twist continues. As a result of this increase, in the first quarter, there has been a decline and a cost reduction of about 100 million kroner. And it is important for me to point out that we take the incident seriously, but at the same time we are strongly disagreeing with the claims that have been made against us from Trafikkverket, and we oppose the lifting, and we will demand compensation for the damage that we have been inflicted. If we look at this single project in AF Anleggning AB and go back to AF Anlegg, AF Anlegg refers to good operation and high activity. Målsær Maskin & Transport delivers a very good result in this quarter, which is a number earlier in the quarter. Stenset and RS had a good result in the quarter, while VSP, which we previously referred to as Consolvo, and Eikon had weak results in the quarter. It is very happy that Nye Veier, on February 25, renewed the trust of the AF Group and has signed the largest contract ever, at 6.3 billion, at E6 Roterud Storhove in the country. As you can see in this picture, we are already well on track with the Nordafør parcel at E6 Storhove Øyer. This is what is seen in the order process, and the order reserve is now at 20.6 billion. Moving on to construction, the turnover ended at NOK 2.1 billion in the quarter, with a operating profit of NOK 69 million, which gives a operating margin of 3.3%, up 0.4% from last year. Here we have Bygg Fornyelse, Bygg Østfold and Strøm Gunnarsen Vestfold ÅBF, which deliver good results in the first quarter. And Haga Berg, who, among other things, has made a 3D-loader, as you can see in this picture, and Lab Entrepeneur, had results below expectations, while Strøm Gunnarsen and HTB reported below expectations. Bygg Oslo, Håndverk and Fas had weak results in this quarter. The order was just under 1 billion, and we had an order reserve of about 10 billion. If we look at concrete masts, the turnover is about 1 billion, with a operating profit of 42 million, which gives a operating margin of 4%. Betongmast Oslo, Buskerud Vestfold, Røsand, Inlandet and Østfold deliver good results this quarter, while Trøndelag, Asker og Bærum deliver under expectations, while Romerike and Boligbyg had weak results this quarter. Betongmast has launched a new stock in this quarter, where Røsand will continue to build on the Kristiansund campus here at the hotel, which has a value of about 320 million. Betongmast Oslo is set to rehabilitate Stovner School at about 300 million. The annual income in the quarter is about 1.1 billion, and we have an annual reserve of about 5 billion. We have sold 25 homes in the quarter and delivered 79. We have one housing project with 95 units in production, where we have sold 32 units. The development portfolio for housing is now at about 1,500 units, and we have over 120,000 BTA in business in our development portfolio. If we look at Sweden, we have nearly 30% decline in revenue, and we end up with 960 million in revenue in this quarter. The operating result is 40 million, which gives a operating margin of 4.2%. Here we still see a somewhat divided picture, where it is Kanonaden, our Swedish construction company, which in particular is involved in the improvement, with very good results, together with Prefab in Melardalen. And then HMB has something under expectation, while Hørnesand, Byggreturer, Bygg Syd, Bygg Øst and Bygg Vest have weak results in the first quarter. The order entry is at about 1.4 billion, and the order reserve is at 5.3 billion. If we look further at energy and environment, there is still growth, and the turnover ended at 365 million, with a turnover of 18 million, which gives a turnover margin of 5%. Energy and Dekom had good results in this quarter, but the environmental parks, such as Rimol, which you can see in the picture here, and which the AF group is, contributed very well in this quarter, in addition to regaining a lot of money. The annual income for energy and the environment was 436 million, while the annual reserve is about 1.2 billion. If we look at offshore, the turnover has been reduced by 261 million. This is the quarter with a operating profit of 2 million, which gives a operating margin of 0.9%. Aeron has a high level of activity and delivers good profitability. Offshore Decom has low activity and a weak result in the first quarter. It is happy that Aeron has been granted a contract from steel producer Stegra to deliver green steel north of Sweden, which is a relatively new area for Aeron. The agreement has a value of about 200 million. The annual reserve for offshore is about 1.8 billion. Let's look at the order reserve. So far, Anlegg has 20.6 billion, and Bygg has about 10 billion, while Sverige has 5.3 billion, and Betongmast has 5 billion, which is the largest contribution to the total order reserve, which is 44.2 billion. This is our next best ever, and thus we mean that the total for the business is good. Then we move on to today's theme part, which today is strategy. We are going to look up and forward towards 2028, and we in the AF group are going to prioritize in the future to lift AF for the next four years. The strategy is completely simplified in terms of choosing, and in terms of choosing away. For us, when we get started, we take the starting point in our internal conditions and identity, but also the views we see in important market forces that affect us and the world around us. If we take the last step first, there are four market forces that we think will be affected in the future. Today's world view is restless, and we have also experienced unrest in the last four years, and how that can affect our markets. But whether it will be calmer in the future, or whether we will be on the verge of new extreme outbursts and disruptions in the world economy, the future will tell. But for us and AF, it means that we must become even better and smarter in the project selection, in the contract management, and we must have a clear strategy on seeking risks that we can influence, and then we must dampen what we cannot influence. We expect that the development in economic conjunctions will put a strong pressure on the margins in the value chain, and that there will be an even tougher fight for the projects in the future. We must therefore be smart in our positioning and follow our customers, as well as increase our productivity in order to have control over our own costs and, preferably, drive them down. The trend of fighting for qualified resources is becoming less and less. For us at AFS, this means that we must continue to ensure that we are attractive for leadership and leadership roles, and that we manage to ensure that we have the capacity to carry out our projects. Then it is pressed on from the EU and from the authorities and the environment on the green shift, and here we must be part of it. So we have to add that there is now uncertainty in what the contractors and investors are able to calculate at home and green initiatives. But nevertheless, we will be affected by a steadily tighter EU regulations and regime. We have to adapt to the environment and try to play after it, but the most important thing in the future for AF is to focus on our own performance, and that is central for us in the future. In the strategy period we have put behind us, we have learned an incredible amount about what works and what doesn't work. There has been a strategy period with big swings, and the wind has temporarily stopped from many sides. But if we look over the last ten years, the AF Group has delivered an annual growth of 12% and an average operating margin of 6%, with high exchanges and strong security performance and good health. Thanks to the helicopter view of the last four-year period, Until 2024, it is natural to bring about security and profitability that we should prioritize. And in terms of growth and profitability, we have not delivered as we or the rest of the world should expect. However, we have We have put back a period where we have had a unique opportunity to experience what works, what doesn't work, what will work and what will not work. Therefore, we are sure in our case of what will happen in the future. If we look forward towards 2028, we have a fundamental belief in our long-term direction. At AF, we reach our goals, and we will continue to be ambitious in safe and profitable implementation of our projects. The goal for security is zero, and we are at a goal of 7% EBIT margin. Over the past four years, we have experienced that several units, including all business areas in the AF, have shown that this is possible, even under very demanding market conditions. We will continue to manage our capital effectively with at least 20% discount, and we will seek to have a healthy and even growth of 7% per year. Income comes first, but even growth is important to create income over time. And the future will require change to meet the common social challenges we have. Our contractors will have a great need for competence and the ability to carry out their projects and at the same time carry out their project costs. At AF, we will focus on the competence and solutions to solve customers' challenges and be the leading partner in our markets. Therefore, we set ourselves a goal of halving the footprint within the climate and the environment. And to get there, our ownership strategy is at stake. The management model is our own strategy. It is Grundfjellet AF that should be strengthened further. AF's vision, values and management model is a decisive thread for our performance and our entrepreneurs. The market conditions will continue to be demanding for many, but we must first and foremost look at ourselves and our own performance for learning and improvement. And in the possibilities, but also in the challenges we face, we see many similarities. And we think it will be important to strengthen the common values and take advantage of the great breadth and competence and experience in AF in the future. Management plus structure gives results, and management plus structure is culture. With Grundfjellet at the heart of our business, we will prioritize even more to reach our goals. To achieve our goals in safety, footprint and profitability, we will prioritize development and improvement within two key strategic initiatives, leadership and innovation, and they have two ambitions that stand out for each of these initiatives. I thank the leadership first. At AF, we have many strong teams that take on the most demanding tasks and create great values. Our leading competitive power lies in putting together and developing the best teams, with the most competent people, who work hard, are proud of their profession and enjoy their jobs. It is absolutely crucial for us to develop and maintain the sharpest cuts and the most flexible necks. Therefore, we will continue to develop and strengthen ourselves within recruitment, subsequent planning, nutrition, diversity inclusion, employee follow-up and these parameters. At the same time, we will be clear about the fact that at AF we learn to and before our projects, and our ability to manage them profitably and safely. And we see that our projects are becoming increasingly complex across several dimensions. And we run the project industry. And then project management is a subject that we must be best at. And that is why we have a goal of exercising the industry's highest standard for project management. And as part of that, we will have an increased focus on basic skills in project management. And we will set even higher requirements for ourselves in learning, education and, at the very least, survival of our eight basic principles for good project management. So this strategy will be clear around a prioritized level of competence in managing AF, both in operations and professional roles, and in project management. If we move on to innovation, then one of our main social and industry challenges in our time is the transition to low emissions and falling productivity growth. These solutions will require both innovation, rethinking and technology, and therefore the ability to transition and productivity will be central for us from now on. And to get a stronger focus on productivity, we will be even better at measuring and being more efficient, while we are ahead of the game in using new technology, using the data we have, and using artificial intelligence. At the same time, we will be even better at planning and designing, so that we can optimize our performance. We also have to be better at material knowledge and use the materials that go into production. There are several things here as well, but the central thing is to be a leading organization by evaluating and measuring ourselves. If we go over to the ability to change, it should be simplified to help us reach our goal by halving the footprint. If we start with climate gas emissions, we set ourselves a goal of halving the total climate gas emissions from our business, which includes emissions from all factors that go into the project. The road to that goal will require that the industry works in harmony with gathered strength, but to preserve our competitiveness, we must also rely on the competence that is involved in making the solutions possible. And then we have a goal for Scope 1 and 2, which I showed the status of earlier in the presentation, and that is to focus on building on our own door. This is equipment that comes from our own machines, from equipment and buildings and things that we ourselves control. These are not the most important measures, as they only account for 7% of our total emissions, but this is obviously where we have the most impact to do more. The goal is to halve absolute emissions by 2028, with the base year in 2020. Per 2024, emissions from scope 1 and 2 will be reduced by 4%. We also set a goal for the circular economy. The goal of the AF, which is also a EU taxonomy criterion, is that 70% of non-dangerous waste should be used for reuse or for material use. This goal means that waste should be handled as far up in the waste hierarchy as possible. In 2024, we produced over 270,000 tons of waste, and we had a material recycling rate of about 63%. If you look at the dotted line, we will also work to prevent waste from emerging, but we will also halve the amount that goes to energy recycling and storage. And why do we see this ambitious level of transformation now? On the one hand, it is set up with the challenges that the world is facing in the long run. And on the other hand, it is set up. And in the same way that society, our customers, our suppliers, have to adapt to increasingly stricter regulations and regulations on this, we at AF have to. And when we first do something, we have to do it properly and offensively, so that we own it, and that it gives us competitiveness, and that it becomes motivating to work with. But the direction of this work should be clear. Our work on footprint should be characterized by the fact that it gives us competitiveness, it should create new business, and it should create profitability. We will continue to win jobs in our markets, and we will demonstrate the power of trade by having the best knowledge and competence. It is exciting times we are in. We believe that we are well positioned for organic growth with leading positions and competence environments within our core business. We have set ourselves a goal of growing by 7% annually for the entire company. We will differentiate orders in different business areas based on expected strength in the market and the position that the units have. We will use our strengths in strong and robust units in good markets. Here, single units will have the prerequisites to contribute even more than what we have set up. For other parts of the business, it will be important to find the way back to achieving margin demands, but perhaps with a more stable turnover. But in order to achieve these overarching goals, we will also seek structural growth. Markedene rundt oss er potensielle muligheter for oss og nye forretningsmuligheter, og vi skal være framoverlente, der vi ser at vi kan benytte vår kompetanse og konkurransekraft inn mot ny type prosjektvirksomhet, segmenter eller geografi. Men vi skal være lojale til vår filosofi rundt oppkjøp og vårt industrielle eierskap, og ikke minst etter hvert vår brede erfaring med oppkjøp. In addition to providing high value creation over time, structural growth has historically contributed to differentiating our risk exposure and developing the combined competence and competitiveness. Therefore, we will continue with that. To sum up, back to an overview of the strategy map. The long lines, our long-term goals and strategy stand firm. The next four years will be about profitability, security and footprint. We have two strategic initiatives. Both are known to us from before, but we will prioritize even tougher in what they mean to us in the future. And the mountain range in AF is supported and safe at the bottom of our business. We will focus on what we ourselves can influence and control. We have the best and strongest teams that take on the most demanding tasks. By constantly seeking new challenges, grow and develop, we create competitive power for the future. We rely on project management, productivity and the ability to change. It is about leadership and structure, and about putting together the best teams. And we will promise that we will look forward to the next four years and continue to clean up from the past and build for the future. If we then go back and summarize the quarter, we had a turnover of about 7.1 billion, a operating result of 223 million, which gives a operating margin of 3.1%. This is a result improvement from the same quarter last year, when we had a strong cash flow of 330 million, and we mean, among other things, that we have a strong financial position. The order entry is at about 11 billion, and we have a solid order reserve of about 44 billion. We would like to thank you for your attention, and for those who still wish to follow us, there will be opportunities for questions. Then I ask Anni Øen to come forward.

Jørgen, do you see any signs of improvement in the construction industry in Norway?

We see at least that there is a very sharp competition about the jobs. And we think it's difficult to track far ahead, because it varies from big impulses like, for example, the unrest that Toll caused, made that suddenly things slowed down, even though you may have experienced that it was A little light before that. So I think it is more expected that there will be tough competition and challenges in building, both in Norway and Sweden in the future. At the start of the strategy period, at least. We expect it to get better.

Simen Mortensen, DNB, Carnegie. When it comes to this contract that was cancelled in Sweden, it quantifies to hundreds of millions in costs for moving and exporting. One, has there been any turnover on this contract in Q1? How will this also affect the run rate on construction operations, the number we see now, for the rest of the year? And how does it look when you take out the 100 million, that it is going very well in the store, and can you comment on where the margin is running, possibly at a level around the second quarter?

I will take the last first, we are guided forward, and then it is so that in all quarters we have projects that end, and projects that start up, and it is also in this quarter. the costs have been linked to a shutdown, and we have no contract to have a turnover against.

To be very specific, you had a customer contract until the 19th of February, and then we had turnover.

If you have any comments, there are several investors in the room and other analysts who have received the report on this cancellation in their inbox. and probably read it, and there is a difference in what has been registered in TimeGate at 25% and what has been invoiced from the EU. Do you have any comments on the relationship that is presented in this report that you can share with us?

No, it is understandable that we cannot go deeper into this process than what we have shared, but I would be very clear in saying that we are strongly disagreeing with the claims made by Trafektverket against us.

Thank you for listening.

Bengt Jonasson, ABG. Back to the strategy plan and focus on the financial. With 7% annual growth, how much help do you need in the market? That was the first. If you were to divide up your own growth versus structural growth, how do you think about that? And then I think I hear that you should move a little in supporting businesses, business areas, the development of the AF group, maybe some comments around that, and maybe give some examples of what that actually means, if I heard correctly.

I'll start at the very end of the questions and answers. It is very clear that we will continue to look for structural opportunities. It can be in the nuclear industry, but it will also be in the emergency zone of existing nuclear industry. We can't win on that, so it's not just about increasing the great value creation that has brought about historically, and that we think that structural growth contributes to, but it's also about differentiating ourselves and strengthening the competition and our competencies, and being able to make ourselves relevant for the future. So it's like this, that building and establishing is dependent on growth in a market, because the market must grow as well. We are open to a certain uncertainty in how the markets will develop, at least at the start of this strategy period. But that is why we are also clear that there will be a second structural growth that will occur, because we are going to be here and there. We have not thought about which part we are looking at.

This is a strategy presentation, and you also repeat the EBIT margin goal of 7%. It's been a while since we've seen that level. What criteria should be added so that you succeed in getting up to that level? How realistic is this in terms of the strategy period given the outlook you set for the market?

We have some really ambitious goals that we are fully open to. We are going to grow 7% on the size we are. Not to mention that no one is going to get hurt every day. There are between 12,000 and 16,000 people who work on our projects every day. We set a goal that no one is going to get hurt, and everyone is going to come home safely on our last day. Because that is a good goal, and the only goal we can have for the organization. When it comes to profitability, we see that so many units are now up and delivering on that goal, already in the four pre-launched, in close-knit business areas. So we believe that this is the right goal that we set for our business, and this is what we will strive for.

I don't know how to ask a question, but I'm trying. I register that Betonmast has a higher order volume than ByggNorge in the quarter. Is ByggNorge ready to be a bit of a competitor to an AF Group owned company?

The good thing about AF Group is that The different companies are competing, so we see that as a strength. That there can be several companies competing on the same job. We register that Betogmast succeeds with their order and are very happy about it. In these times, we need all jobs. That's positive.

We have a digital question. From Christian T. Nygaard from Pareto Asset Management. This is probably for Anni. What will you do to reduce CO2 emissions by about 20% per year until 2028? How will this affect profitability? That's the question.

That's a big question. To reduce our climate footprint, we have to work closely with the value chain, especially with our customers. They also want to reduce emissions and at the same time realize the project they want to get through. That's what we have to help them with. And a basic requirement for us is to save CO2 and that we can do it with profitability for us.

Well, then we thank you for the meeting and for those who follow us digitally. And we wish you a good day. that you will meet at the presentation of Q2 on the 29th of August at Construction City.