Bonava AB (publ)

And welcome to Bonava's presentation for the third quarter 2022. My name is Anna Falk Filund, and I am the head of investor here at Bonava. And with me here today, I have our CEO, Peter Wallin, and our CFO, Lars Granlöf. But before they will start the presentation, I would like to take the opportunity to remind you of our Capital Markets Day in Berlin on the 10th of November. So if you haven't registered yet, please do. And with that short, I would leave the word over to Peter to start the presentation.

Thank you very much, Anna. And good morning to you all. So let's start with what's happening around us on the market. we are seeing a gradually slowdown of the sales in our markets. And I would say that the most serious effect is on the Swedish market, where sales have dropped significantly. Whereas on the other markets, and the German markets being our key markets, sales are still ongoing. Overall prices are unchanged, of course. We are trying to make our offering in the marketplace being as good as possible, given the uncertainty. So we are trying to make it as attractive as possible for the buyers and potential buyers. On the cost level, we are seeing the signs that the peak has been hit. So we are seeing some of the input material dropping in price. Whereas the increasing cost of energy, of course, is going the other way. And I also see that it's much easier now to find good construction works ongoing. And we also believe that that will be visible in further easing on the construction part going ahead. So if we take a look on our numbers and look into our profitability, if we start with the volume in the third quarter, as expected and as guided for, we are at quite few handovers in the third quarter compared to last year. The prices are higher. So in SEC million, the reduction is not as visible. More importantly, our profitability is growing tremendously, up to 15.9% in gross margin on handed over units. And this is despite the fact that we have had challenges as increase in cost levels and shortages of material. So I'm very pleased with how the organization have responded to those challenges. So that improvement is partially offset by the fact that we are taking a 155 million charge in the Swedish business in the third quarter. And this charge is related to us... writing down projects not being able to be started given the current market context. And in addition to that, with the lower volumes near term, we are also making an impairment of tangible assets as one of the production units. So this will mean that we will stand stronger in the Swedish business going ahead. If you take a look at our financial position, which Lars will talk about in detail, we are posting a solid balance sheet with an equity to asset ratio of 31.4%. And when it comes to financial position, we are very selective on the starts and investments. And we are selective and really driving home the prerequisites of starting projects. And I will come back to that later on. After the close of the third quarter, we entered into an agreement of selling the St. Petersburg operations. And the tough decision was made, of course, already in March of exiting St. Petersburg. And I now think it's a good opportunity for us to focus on the rest of the business going ahead. So... coming into then the starts and the sold units. We have started 860 units in the third quarter. And we are also lowering our guidance from 4,200 starts to 3,000 starts for the year, which implicitly indicates 750 starts in the fourth quarter. So, of course, it's due to the fact that the market has slowed down But also the fact that we are still waiting for building permits in the German market. So we are still talking about that because that's a fact. And the building permitting processes are not moving up in speed. So that is why it's a bit hazy for us to know when we will be able to start projects in the German context. Now, let me talk about some of the projects that we have been able to start. Starting on the left-hand side with Årsta Park, a built-to-manage project in the university city of Uppsala in Sweden with 231 units. And then on the right hand side, the second larger projects starting in Lithuania, in Vilnius, Lake Town. And I'm really looking forward to follow these projects going ahead. With that said, I'm going to hand over the word over to you, Lars.

Thank you, Peter. Good morning, everyone. Let's start down with the bridge over the number of units that we estimate to complete when we release the second quarter report compared to what we actually have completed now. And you see that we have 158 units less than we were guiding for. The investor deal of 97 units is in Germany and it was actually due to that the notary got COVID and could not then complete the process of these units. So that is slipping now into the fourth quarter. So if we're moving over down to our income statement, you see that we have fewer units recognized than we had in the prior year. And as Peter mentioned, we have taken charges in Sweden of 155 million. That is significantly impacting our income statement for the quarter. And you can also see that if you're starting from the bottom, we have actually then separated out St. Petersburg business, as we said in the release that we made on the 7th of October. So that's the operations to be discontinued, the net result from that. Looking from the start here, the continuing operations, lower sales based on less number of units recognized, as I said, our profitability measure as gross margin is lower than the prior year. But if we are factoring out the charges in Sweden, we have a significant improvement of the gross margin, close to 16% actually. With low volumes in the quarter, we cannot then handle the selling and admin expenses in the way that we are improving operating margins. Operating margin is down to 4.7% compared to 8.3%. But again, factoring out the sweet charges, we would have seen an improvement. Net financials higher than the prior year. Not surprising given the market situation with increasing interest rates, of course, which you will see in coming slides, a higher net debt in the quarter than we were starting the quarter with. We have a higher tax charge. We had some one-off tax adjustments in Norway affecting the tax rate for the quarter. So moving from the full group over to the business units, starting with Germany. Also here we have less units recognized than in the prior year, but at a better profitability, higher gross margin. But as I said, we have lower volume and thereby we cannot absorb the selling and admin expenses to that extent. So the operating margin is slightly less than we had in the prior year. And if you look at the right-hand side, we see that we are starting and we are selling units in Germany. This starts in line basically with the prior year, but the sales is slower than we saw in the prior year. Sweden, also here, less units recognized, but a significant increase in profitability. If you're factoring out to 155, you will end up in a gross margin in the region of 21%. which is a significant improvement, of course, compared to the prior year. Also here, Dan, with a low volume, we cannot leverage the selling admin expenses that is impacting our EBIT margin. The Åstra Park project is the one that we have started, the 231 units, so it's almost up to the level that we had in the prior year. But here you see that we are not selling in line, not close to in line with the prior year, only 18 units sold in the Swedish segment. Finland also here, less units recognized, but an improved gross margin in the one that we are recognizing. But again, with a low volume, we are not absorbing the selling admin expenses affecting the operating results and operating margin. But we made a large investor deal in the quarter, some 300 units we made a deal of. And we are seeing that the Finnish business is stabilizing as we are targeting, as we have been talking about in the past. And here, both in terms of starts and the number of sold units, we are basically in line with the level that we were one year ago. Norway, more units recognized and it's hard to have less units with one unit recognized in the prior year. We have a decent gross margin, improved gross margin in the Norwegian business then, but affecting of course the operating margin with still relatively low volumes. And here you see we haven't started anything and the sale of units is very low both this year as well as in the prior year. The final segment then, Baltics, delivering less units than in the prior year, but at higher average prices. So that is the impact net sales positively. Good gross margins, keeping up also the operating profit, but still we have it with low volumes, significant negative impact on the operating margin. We are keeping up the starts in line with the prior year, sales a bit lower, but it's also due to that we had less object to sell in the Baltic segment. Then moving over to the discontinued business. You've all seen that we signed the agreement on the 7th of October, where we have then agreed to sell our business at the price of 98 million euros, close to or around 1.1 billion Swedish kronor. We are expecting a net financial impact of this of about 0.1 to 0.3 billion Swedish kronor negatively. And that will be realized then when we are closing the deal, which we are estimating in the first half of next year. The whole transaction is pending the approval from the Russian authorities, of course. And you saw that we have a small net profit reported from the St. Petersburg operations in the third quarter. Going to the balance sheet, a significant increase in assets. There is one big foreign currency impact, of course, with a very weak Swedish krona that is impacting us significantly compared to the prior year. But if you look into the different parts of the balance sheet, the main increase is coming from land. We have increased our investment, as you know, in the first half and slightly also in the third quarter of this year. And the assets in St. Petersburg have increased with about 1 billion as we are producing more and more for the handovers to come now in the fourth quarter. Cash flow wise, it has been a negative quarter, mainly driven out of some delays in handovers, not being able to cash in, but also that we made investments, as I said, that is impacting the cash flow. And if we compare to the prior year, we were in the strategy review process, so we were actually deferring investments in land and also starting projects to some extent, giving a positive cash flow in that period. And if you then move over to net debt with a negative cash flow, of course, our net debt has increased with about 1.1 billion. We are, as we have said before, we are then consolidating the debt for the tenant owners and the housing companies. And that is approximately 1.6, 1.7 billion of it. So underlying, we have increased our debt debt with about 0.9 significant portion is investments. But we still are maintaining a good equity asset ratio in line with the prior year. The third quarter is normally the weakest quarter in terms of equity asset ratio. And talking about our facilities, even though we have increased our net debt in a quarter, we are still sitting on unutilized facilities in the region of 2.8 billion in total, including the the project financing as you can see here. The main facility, our evolving credit facility, is maturing by the end of next year so we are right now in the renegotiation and renewal of that credit facility and we hope that, estimating that, that will be renewed within the coming weeks. Moving over to building rights. We have increased billing rights with about 1,300 compared to how it was one year ago, but a slight reduction in the quarter due to that we have a number of starts that have been reducing the balance. The book value is now up to 9 billion. We started the year on a 6 billion level, so almost 3 billion. The book value has been increased with almost 3 billion. And if we look at the 32,300 building rights that we have in the portfolio, about 56% of those have been acquired now in the last three years, 2020 up to 2022. We're estimating that 28% of those will be used for starts for the remainder of this year and 2023 and 2024. And as you see, as we have had in the past, the 14,400 that we are estimating them to start at 22 to 24, almost 90% in multifamily houses and 75% that in the customer segment. Just looking at the graphs for how we are expecting completions for the coming quarters, you see that we are expecting 1,270 units in the consumer area to be completed now during the fourth quarter. And in the investor area, we are estimating 570 units to be completed And of course, in 97, as you see here, the German project that I was mentioning is included in the Q4. So the Q4 has increased with those 97, everything else equal. So with that, I hand the word over to you again, Peter.