NCC Group plc

Good morning, everybody, and welcome to this presentation of the first quarter for 2026 for the NCC Group. I'm Thomas Karlsson, CEO of NCC, and with me here I have Susanne Litton, the CFO of the NCC Group. And Susanne will come back and give you all the details of this quarter. I will start with something I have never done before. I will start with the reader's manual of the Q1 report because there are some things that may confuse in understanding what's going on. And what is important to understand is this. You need to separate the different business areas that we have or business models that we have. And I like to talk about contracting industry and property development in particular because contracting business we have an operating profit earnings that is good it's 177 million and that despite the fact that revenues are down heavily and that's because we have managed to get rid of a number of large projects with zero margins so what happens is this Earnings is the same, net sales is down, and margins goes up and continued good market demand. And since contracting represents roughly 90% of the revenue in the first quarter, industry, as you know, we always have low earnings in the industry in the first quarter. We have slightly more in this quarter, and that is important. for all practical purposes, related to stone sales in January and February. In March, it came back to normal patterns. We don't see that that will have an impact on the full year, but it has an impact on the earnings in the first quarter. So industry always had strongly negative earnings in the first quarter, a little bit more now, but we know the source of that. What I like to point out is this. We have really strong orders received. We have that for the group, but particularly for industry with 17% higher orders received compared to last year. Really well positioned for the rest of the season and a really strong demand in the market. And then property development, stable on a very low level, just like we've seen it for a long time now. We have no profit recognition from sale of projects. What we have now is the lease. The result we have now is from the lease of the properties that we have. So that's the reader's manual. Understand that that's contracting connected to revenue, industry connected to winter. It's a pretty normal and stable start. So that brings me to the key takeaways. High levels of order succeed, 14.8 billion SEC, up 5% compared to last year. And if you compare it over a very long period of time, it's the strongest order succeed we've had in a very long time. Overall solid demand, particularly in our prioritized segments and in industry. So overall solid demand in all our countries. We had stable earnings in contracting on the same level compared to last year. And then the group operational earnings EBIT reflects a cold winter, particularly driven by the stone sales in industry in January and February. And that brings me to my second additional slide. Industry, we have a really positive outlook for the year. earnings reflects the cold winter and the normal seasonal pattern we have a really high demand for state investments in roads and a positive expectation of the general building demand driven by infrastructure and that is evidence from the orders received that we have 4.6 billion SEC in orders received and We have now a high level of operational discipline in the organization compared to 2022 when we saw the same type of volatility in the market as we see now. We are... way better prepared, we have a better operational discipline in the organization, we have well invested assets, and we are using a long list of activities to make sure that we mitigate the price volatility in energy and transportation that we see. So overall positive outlook for the year. Now back to the group earnings. Q1 reflecting seasonality and the cold winter, and I think I've been very clear on the reasons why we always have this type of pattern in the group, so pretty normal and stable. High levels of orders received, 14.8 billion in orders received, which brings us to a book to build of more than one for the group. And then we have a high order backlog with better quality than we've seen in a long period of time. And you have to remember that we reversed one billion for the project Korsvägen towards the end of last year, which means that we have better quality of the order backlog for the group. Some examples of projects that we have won and that are part of the orders received for the quarter. We have a framework agreement for the national authorities for a paving in Sweden. We've won a project of renovating a historic city block in Copenhagen. We have a new office space for Hägglund in Öresund part of the development of the defense industry. And we have new waterworks in Östersund in Sweden. So some examples of the type of projects that we have. Net sales is lower on the back of facing out zero recognized mega projects. Lower sales but earnings on the same level means that we have better margins in the contracting business. Financial targets, earnings per share still remains at 16 sec but we need to have Some kind of contribution from property sales, like we've said before, but we expect that the remaining or the other business areas will contribute more. Right now, on the rolling 12 basis, we are at 13.4. Net debt still very low at 0.8 compared to our target. And then the dividend policy of roughly 60%. of profit after tax. The board suggests nine plus two, which is the same we had in 2025. And nine in ordinary dividend is approximately 65% in line with our policy. Health and safety targets, LTIF4, have been stable for some time now at 3.6 for the year. We continue or we maintain the target of 2.0. One business area has actually achieved that or are below 2.0, but the other business areas will have to continue to work with that. We have the climate and energy update. We have now a net zero emissions target for 2045. And the target for 2045 is minus 42, both for scope 1, 2, and 3. And for those of you who remember our targets since before, The only change that we made is to change the base year to 2024 to be compliant with the sustainability reporting requirements. The ambitions have not changed at all and the actual reductions has not changed or has not gone back. So we are now for scope one and two at minus 39%. which is very close to the minus 42, and for scope 3 we are at minus 10%. Conflict in the Middle East. I guess everybody is thinking about this, you know, what kind of impact will it have for industry in general and the macroeconomic situations. We do as well. What we see and expect to see going forward is increased energy prices and a high volatility. And the high volatility is actually the most complicated to handle. This may have or will probably have some kind of impact on transportation and material costs. Initially at material costs where you have a high degree of energy use like cement and steel and things like that. But it had potential and implications for the broader economic environment in general. We monitor this, but more important than that, we do things. We are super proactive in terms of what we can do in terms of procurement, in terms of what kind of tenders we issue, and the way that we use our general infrastructure for handling prices and procurement. So we are very active on handling this situation. Before I hand over to Susanne, I have a really good positive market outlook. In general, good market demand. Particularly strong demand for infrastructure in general. Not only railway and roads, but also energy generation, energy transmission, water treatment, water distribution, etc. We see a strong demand for asphalt and stone in all markets. But commercial properties and the housing remains slow, and I think it will remain slow for some time going forward. And with that, I hand over to Susanne.

Thank you, Thomas. Let's start with the contracting units. And Building Sweden show really good improvements when it comes to earnings and margins. we see a very stable development in both building Nordics and infrastructure. Green industry transformation has started project work with both our customers, LKAB and SSAB. This slide shows the backlog and the rolling 12 net sales. And we have a book to build for the contracting units of 1.2 for the quarter. Both our building units have a backlog that is above our 12 months of sales. Infrastructure, slightly below, mainly due to the fact that we had to remove the megaproject in Gothenburg last year. They still have a lot of early phases projects in their pipeline that they are working hard to convert into orders. When it comes to net sales and margin, it looks like this. Infrastructure has lower sales. That is impacted by the fact that we last year at the same time had really high production in our megaprojects in Göteborg, but at no margin. Our margin, on the other hand, for infrastructure is very stable, seasonally stable, I should say. Building Nordics, sales volumes are down, driven by currency, Norway and to some extent also Finland. Denmark, on the other hand, are showing solid growth. Earnings are on par with last year, but the margin is improving, and that's also driven by Denmark. Building Sweden's volume is down due to the fact that they have had a very disciplined approach towards project selection. So they have picked the right projects, and we see the effect in a better portfolio reflected in the margin. Industry. This will be a repetition of what you've heard from Tomas, but nevertheless. As always, they are negative in the first quarter as the asphalt business is basically at a standstill. This is, however, this year been amplified by the cold winter and impacted stone material much more than normal. They have a very high demand and the good orders received in the quarter was really good. And we see that the increased funding from public investments support the asphalt business moving forward. And also the expected construction activity increases, we think will support the stone material business. Here are the volumes in tons for industry. And as you see, the asphalt tons are insignificant as always in the quarter. Stone material, as you see, is clearly impacted by the cold weather. Earnings are down compared to last year, and as we have explained, it's due to the cold water, not water, but winter, cold winter. For the stone material it also had an impact for assault in Denmark that impacts the lower earnings The margin however is on a good level six point seven percent above target level and return on capital employed twenty one percent really good in despite the fact that they have increased capital employed driven by investments in operations and The portfolio for property development has not changed. We still have six completed projects and three ongoing projects in the portfolio. And as Thomas said, the commercial market remains really slow, and the letting for the quarter is unchanged. NCC, however, has decided to relocate the headquarters to our own premises in Bromma Block. that will make the left-wing ratio go up to 90% for blomma blocks. And the left-wing ratio, we actually signed contracts of about slightly above 1,000 square meters in the quarter. However, that was offset by these terminations by Brault, so we actually had a net letting of negative 350 square meters in the quarter. Our letting ratio is 82% for the total portfolio, and that's before increasing the ratio in Bromavlok with our move, and we have a completion ratio in our portfolio of 69%. And we didn't have any profit recognitions of projects in the quarter, so our earnings come from the property management that we have in our completed projects. And it is at the same level as last year. The capital in Florida is down to 7.3 billion, even though we are building more on our three ongoing projects. but that is due to the fact that we had to write down or we did write down three or some projects in the end of last year. And the last segment, other end elimination, slightly lower EBIT than last year. That is driven by the elimination of internal gains, where we eliminate the profits, the construction profits when we build in our property projects. And since we have more production of the three ongoing projects, that is more negative this year. And in pension and other adjustments and elimination, we have slightly higher adjustments and eliminations in this quarter. So the segments add up to minus 237 in EBIT. Our financial net is higher than last year due to the fact that we have a higher average net debt. Our tax ratio is high. It's 26%. And that is due to the limitation of deductions for interest. And we have earnings per share of 13.4 on rolling 12 when we exclude the items affecting comparability in the quarter. And an earning profit for the period of minus 186. And our cash flow is seasonally low, and it's extra low this year due to the lower earnings, but also due to higher paid taxes. That is what is impact or explains the difference from previous year. Corporate net debt has increased to 1.1 billion, still on a very low level. The reason we had such a low net debt last year was that we sold three properties in the end of 24. So we entered 25 with really low net debt. And our net debt to EBITDA ratio is 0.81, which is really way below our limitation of two and a half times. So with that, Thomas, I hand back to you. Thank you, Susanne.

I have only two slides to wrap this up. We have an annual general meeting coming up on May 5th. That's next week. We will be in space in the center of Stockholm. Please join us if you are shareholders in the space on May 5th. And my main message for this quarter is this. The important thing is high levels of orders received, 14.8 billion. Generally good demand situation in all our prioritized segments and in industry. Stable earnings actually increasing margins in contracting markets. And the operating profit reflects the normal seasonality and then that additional touch of the cold winter in southern Sweden and Denmark impacting industry. We don't see an effect of that going forward. So with that, operator, I open up for questions.

The industry market came down in the quarter because of the cold weather, but I had a question. Could you please quantify how much is because of the weather and how much is because of underlying pricing or cost inflation or is it purely on the weather? And a follow-up is how should you think about the Q2 recovery? Is the volumes lost or is there a catch-up effect?

First of all, the impact on the industry is the normal seasonality, which varies a little bit depending on how much maintenance we have to do, and particularly after a a strong season like last year, we have a little bit more maintenance to do, but that's a normal variation and the rest is weather 100%. And the catch-up for Q2, we don't expect that these lost volumes will have any impact on the rest of the year.

Okay, perfect. Thank you. And then on kind of the residential market for building, do you see any early signals or anything turning around? I think we have seen some early signs in the Swedish market, but is this something you see in 26 or is it further out?

Not really. You can see increases, but, you know, an increase from almost zero becomes a lot of percentage points. But I have a very cautious outlook on residential going forward.

Okay, okay, perfect. And then just on the occasion, and you have talked earlier about M&A, any comments about the pipeline or anything going forward, or is it stable?

No, not really. We're continuously interested, but there are a lot of stars that need to be aligned before you do M&A. You need to find a buyer and a seller. You need to find a culture fit. You need to find a business fit. There are many stars to be aligned, and we will be very careful when we do that. But we're equally interested as before.

Yeah, and is it the same segments that you talked about before? I know you have mentioned industry and maybe some energy. Is that still?

Yeah, and also in general contracting if we find the right target.

Okay, perfect. That was all from me. I will jump back into Q.

We now have a question from the line of Grunstrom, Eric, with Carnegie. Please go ahead.

Good morning. I can't really hear the operator. Was it? It's you. Was it Eric Grunstrom?

Good morning, Eric. It's you. Okay.

It's me. So it's me. It's not you, then.

No, it's you. Your time is not up yet.

Okay, I'll try to keep my questions short. Could you perhaps quantify a little bit on the volumes? You mentioned volumes coming down in contracting because of large projects leaving the order backlog. Is this only related to infrastructure, or is this related to building as well? And if so, how much on a year-over-year basis was affected within infrastructure?

It's primarily infrastructure, and I would say it's more than a billion on the infrastructure.

Okay, and obviously this will, I assume, then slowly become smaller as we move throughout the year.

That's the expectation, and my estimate is that sometimes during the second half of this year, we will see that the revenue is coming back.

Okay, that's clear. Thank you. And then on... Increasing energy prices. Thomas, could you explain to us what you expect in terms of the effect both for volumes but also cost, and how do you actually handle it in your contracting? I assume this is mainly within industry.

The most immediate and largest impact is within the industry, and it has normally two types of tools. General types of impact. One is for bitumen that we use a lot for the asphalt business. And the other one is general energy that we use for asphalt production, but also transportation. So that's the impact. What we are doing now is that for bitumen and also for transportation costs and energy costs, We are trying to make sure that we have index clauses in our contracts. Or if we can't do that, we try to hedge energy to the best of our abilities, both energy and bitumen. Our proposals to our customers have a very short duration, so we will limit the risk exposure during that time. We are determining the energy prices in our offers only minutes before we send them. So that's sort of the big thing that we do. Right now, we don't see any impact at all. And fundamentally, we think that we will be able to handle this better. this situation quite well over the year but there's an increased risk that we will have an impact from increased prices that we cannot cover towards our customers of course and there's also a risk that demand will go down but we don't see any sign of that so far

Okay, and in terms of demand, do you mean that, for example, municipalities have a fixed budget in terms of something like paving, and that budget will be affected?

Exactly, and they have a minimum area that they want to have paved during the year, but they also have a fixed budget, and if they have, you know, remaining budget room in their budget towards the end of the year, they will have additional orders added.

and and there's of course an increased risk that that will impact demand towards the end of the year but we don't know okay thank you and then I have two more questions the first one is on property development now that Brahma blocks is 90% fully lit. Do you see an opportunity to sell anything during this year? Do you have a selling process ongoing, or do you wait until the market improves?

We have continuous dialogues, and we have had that for a long time, but we think that the probability or the opportunities to sell it has improved.

Okay, good. And then my final question is on the tax ratio, the deduction limitations. I assume that that will be affecting you throughout this year and going forward. Could you give us a little bit of a guidance, what you internally, what you expect in terms of effective tax ratio?

26% is what we expect for the year with no profit recognitions for our property basically because that's what it's the local tax we have to pay in our Sweden and Finland where we have property fully that we have lots of loans for but that changes if we sell anything changes if we sell anything yes that's understood thank you very much thanks for taking my questions

Thank you.

We now have a question from the line of Sandberg Albin with CB1. Please go ahead.

Hi, guys. Sorry. I didn't know how to disconnect from my line. I have a question about the taxes . Thank you.

Operator, do we have any more questions?

Operator, do we have any more questions online?

We now have a question from the line of with CEB. Please go ahead.

Yeah, good morning. I just have a couple of questions, and the first is related to the falling let's say it's in your contracting division so you mentioned that it was most affected in the infrastructure division but could you maybe say something about the trend onwards for building Sweden and Nordic given that the backlog is at the same levels as it was last year? Do you expect a similar type of year-on-year decline onwards for net sales from these divisions as well?

We expect to have a slightly lower but still decline in the second quarter and maybe into the third, and then we expect it to come back towards the second half, sometime during the second half of the year. And that is, you know, partly projects that have ended, but it's also... an effect of the prudent tangerine that we've been working with for a long time. But we expect it to go up sometime during the second half of this year.

Okay and you also mentioned that this could maybe also positively affect the margins in these divisions since you have some lower margin projects that are now gone. What could you maybe say about the margin from onwards to expect a similar type of improvement as in Q1 or to what extent?

We expect the margins to improve on the exact margin that we will have for an individual quarter. That depends on a lot of things, but we expect them to increase going forward.

Okay, and then my last question on industry. You mentioned that higher energy prices have had a quite limited impact on the Q1. But based on what you know with your current orders and the hedging and so on, do you expect a significantly lower margin in upcoming quarters due to the effect that you can't really offset to the end client? Do you expect like it's more of a... minor impact in the coming quarter as well, or is it expected that it could maybe be material?

Given what we know now, we expect that we will be able to handle this. The most important part for the total earnings in the quarter is whether we have a dry and warm November month.

Okay, thanks. That's all for me.

As a reminder, if you wish to register for a question, please press star and one on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Thomas Carlson for any closing remarks.

Thank you for listening in to this presentation of the first quarter of 2026 for the NCC Group. I hope to talk to you later on today. I hope to see you at the annual general meeting next week. And if nothing else, I hope to talk to you again for the second quarter report in July. Thank you all.