Bonava AB (publ)

Good morning, everyone, and a warm welcome to the presentation of Bonava's third quarter 2024. Bonava is a residential developer that has operations throughout Northern Europe with the purpose of creating happy neighborhoods. My name is Fredrik Hammarback, and I'm a group at a prison public affairs and acting head of investor relations since my dear colleague Anna Falk-Fylund is on parental leave. With me here around the table at the headquarters in Stockholm this morning, I have Bonava's president and CEO, Peter Wallin, and CFO, Lars Ingman, who will take you through the highlights of the report in just a while. As always, we will open up the floor for questions at the end of this session, and you can ask them through the phone or in the chat online. And you can already now start up your questions online, and if you want to join us here in the call and ask your questions live, please join the phone conference and press star 5. Last but not least, this conference will be recorded and will be uploaded to our corporate website, bonava.com, together with a PowerPoint presentation later today. So let's get started, and I hand over the word to you, Peter.

Thank you very much, Fredrik. Great presentation. And a very warm welcome to all and everyone of you from a sunny Stockholm. And we are introducing this conference regarding the third quarter with the backdrop of a sunny day in Dusseldorf-Polshöfe. So if we start to hit the market highlights for the third quarter, we are continuing to see an improvement in the market. And this is something that we have talked about during the year, but more and more clear we can see the improvement in the market. Especially the consumer part of the market is improving compared to last year, which you can see in both sales and starts. And also the very important market for us, the business to business, the investor deals is on the rise as well. So far we have signed two investor deals, one in Germany and one in Finland, which we released yesterday. And we have a pipeline of more deals to come where we have actually notarized deals, contracts, and we are awaiting building permits. And then if we look at Bonava, we are reporting our sales figures, which is binding contracts. If we both combine sales and the reservations, we have actually seen a strong growth in both here during the year, and they are increasing in total 31% over a comparable period last year. So that's something which will do well for the binding agreement since we will convert the reservations to binding contracts. If we take a quick look into the third quarters, Lars will talk about them in details. As expected, since we're reporting completed contracts, we were expecting a low volume in third quarter. So we're reporting a net sales of 1.4 billion, which is half of the net sales reported similar period last year. We are seeing an improved gross margin up to 10%. And this is thanks to both the savings that we are implementing, but also a very good job out in the business, making sure that we conserve the margins. The cost reductions then, we are very close to the gross savings of 1 billion, which we initiated actually already two and a half years ago. And then we upped the plan to 1 billion gross back end of last year with the restructuring of the German operations. We are more or less done now. We have a little bit more to go in the fourth quarter, but we are a little bit ahead of the plans. And this impacts and reduces, as you can see from the numbers, both the S&A, which is reported on a one-liner in the P&L, but also the indirect cost, which is an integrated part of the gross profit. So that's why we are talking a little bit about underabsorption, hence the low volume that we have in the quarter. Despite that, we are actually reporting a very small EBIT loss on the operating EBIT. On the rolling 12-month basis, we are increasing the EBIT margin to 4.6%. So, albeit not at levels where we should be, we are heading in a better territory now. Very important for us is, of course, to make sure that we have a very good and lean balance sheet. And we have done quite a bit of job here, as you can see, and we are reporting a strong cash flow. also in the third quarter, which takes down the net debt to 3.5 billion. Last year, it was 6.3 billion. And of course, 1 billion of the reduction is thanks to the new issue of shares that was done. But the predominant part is done through the operations. Then, as we do in all third quarters, we have done an evaluation of our building rights portfolio through a DCF, a discounted cash flow. And that puts a surplus value of our land bank building rights, which is future profits to be reported in Bonava of 4.6 billion. So that's an increase by 900 million compared to last year. Then talking a little bit about the starts that we see in the third quarter, Polshöfe in Düsseldorf, very interesting investments where we are doing a lot of different phases, both for investors and consumers. And this is essentially, just as Fredrik alluded to, is building a new neighborhood in Düsseldorf. We are also starting a project outside Linköping in Sweden of single family housing for consumers, which is a very good and interesting area for us to develop over the coming years. And then we are also starting our first project in Finland for almost two years in Tampere. And this is interesting because this is a project which is started where we have developed a lot of other projects over the years. So we know the market very well. It attracted a huge interest. So we signed up a land lease in the second quarter, and we are starting the project in the third quarter. So hats off for the Finnish operations. I was also, we are talking about and have been talking about that we will see an increase in production starts during the second half. So we have reported in the third quarter an increase of starts. And so far during the fourth quarter, we have started a little bit more than 250 projects where we reported an investor project in Turku in Finland. Sorry for my pronunciation. 99 units to an investor and that's a forward funded deal. So that will also give us a very good and hefty cash flow. And then we have also started a consumer project in Riga. We have started a consumer project in Ayandi in Tallinn, an area where we have developed a lot of projects over the years. And then also in Stockholm we have started the first of many phases of single family housing for consumers outside Stockholm. So we are taking on the market head on with profitable and value adding product starts. With that I hand over to you Lars.

Thank you, Peter, and good morning, everyone. I will now try to take you through the two, three figures. So first, we have the slide showing the number of recognized units in the quarter. During the quarter, we have 192 units were completed, and of which 30 units remains unsold at the end of the period. And we also reduced the inventory with 125 units. In addition, 33 units were sold, but not recognized at the end of the quarter. So in total, 337 units recognized in the quarter. So we continue to aim at reducing our inventory of unsold completed units. And we were successful with that also in Q3. The starting balance in the quarter amounted to 442 units and with 192 completed during the quarter. Of the units completed, units in the quarter were 93% sold in the same quarter, along with 125 units sold from the inventory. So in total, the inventory decreased by 112 units or 25%. And year-to-date, the inventory value has decreased by approximately half a billion. Next slide. Based on the 337 units recognized plus the sale of land, we reached net sales of 1.4 billion compared to the last year, 2.8 billion. And the operating gross margin in the quarter increased to 10%. This is mainly driven by strong operation gross profit in two business units, Germany and Baltic. Selling and admin expenses also continued to build over versus last year and was down with 13 million kronor in the quarter and down year to date with 69 million kronor. This is due to the implementation of ongoing cost reduction program that started last year. The operating EBIT of 19 million versus last year, 30 million, is mainly explained by the lower business volume in the quarter that cannot fully cover the OPEX costs in the quarter. But in general terms, the outcome was in line with our forecast for the quarter. All in all, the EBIT outcome also includes impairment items of 239 million. So all in all, EBIT minus 258 for the quarter. The net financial items decrease with 30 million to 132 million. And these financial items also includes interest costs as well as FX items and bank costs and guaranteed fees. On this slide, here you can see the summary of the operating profit and the margin for the group per business unit for the quarter and the ruling 12 months. As you can see, the development over the last 12 months has been stable in Germany and Baltics, but are more challenging in Sweden and in Finland. So let's move to the business unit, starting with the biggest one. Here we recognize 153 units to the consumer and the net sales figures decreased in total to 813 million due to the lower number of recognized units, of course. During the quarter, the gross margin increased to 13.6% due to lower indirect cost and higher projects margins in the recognized units, recognized projects. Also here, the selling and admin costs were down to 66 million from 74 million. And this is due to the implemented cost reduction program. Despite the decrease in the net sales, the operating EBIT margin remained at a stable 5.5%. And in the quarter, we started 317 units, slightly below last year, and the number of sole units remaining close to the last year's figures. During the poor period, we saw a strong development in both started and sole units to consumers, and they increased above 30% versus last year. So the next slide is Sweden. Here the net sales amounted to 413 million. And with the sales to consumer totaling 224 million and the sale of land amounted to 186 million. The gross margin was 2.9 million. This is due to the low margin in the recognized units and the land sales. Selling and admin expenses continued to decrease and now at 26 million compared to last year, 36 million. So in summary, the operating EBIT was negative at minus 14 million and the result was not a surprise to us and was in line with our forecast. During the quarter, we also started 23 units compared to zero units last year, and they increased the number of sold units by 15%. Sweden also experienced a strong demand, selling 30 units from the inventory in the quarter, and year-to-date, the inventory of unsold units is down by 50%. Moving to Finland. In Finland, the market continues to be very challenging, with the net sales being low based on eight recognized units to consumer and zero to investors, resulting in a net sales of 27 million. And the gross margin and the operating margin for the quarter were negative, and mainly due to the under-absorption of costs caused by the low business volume during the quarter. Moving to Baltics, the number of recognized units increased to 119 from 80, and the net sales were up, and with the gross margin also increased to 14.9%. And due to the increase in net sales and the strong gross margin, the operating margin also rose to 8.7%. And the occupancy rate in the B2M project continues to increase month by month and is now above 80%. If you continue to the next slide, this slide, the graph summarizes the expected completion and the corresponding sales per quarter for the consumer units. The leftmost bars represent the number of units completed during the third quarter, while the other bars indicate expected completion and actual sales status per Q4. The expected completion is 600 units. And it was, yeah. The next one is the same graph, but have to do with the investors. So this graph summarized the expected completion for the investor business with zero completion in Q3 and an expected 250 completion during Q4. and currently invested the business in conducted in the business unit, Germany and Finland. Continue to the next slide. This is the updated valuation and the company conducts an annual valuation of the land portfolio in September. And this is based on both external and internal valuation. And the valuation are based on discounted future cash flow from project yet to be started. The total surplus value over the book value was estimated at 44.6 billion per end of September. Compared to last year, it was 3.7 billion. So this year's valuation has also resulted in a write-down of a total of 143 million from a couple of projects. So if you look on the graph on the right side, you can see the development of the surplus value from the reported last year 1.2 and the additional surplus from the internal valuation last year up to the 3.7 and this year's up to the 4.6 billion. continue to the optimizing the building portfolio. This is a summary of the current number of building rights, 27,500, where of 7,200 are off-balance. And you can see the distribution between the business units and the potential start per year, plus the forecast distribution of units between B2B projects and B2C projects. And of course, before any project starts, calculations are prepared to ensure that each individual project will be profitable. which in turn can affect the planned project start date and year. On this slide, you can see the operating cash flow statement. In summary, we had positive cash flow from the net investment with 431 million, where land sale and completed unsold unit contributed And this is combined with a positive change in working capital, mainly driven by increased customer advance compared with last year. So in total, the operating cash flow for the quarter amounted to 489 million compared to the 188 million last year. So let's continue to the next slide. And this which provides a summary of the reduction of the net debt from six point three billion mentioned last year to the current three point five billion. And this is close to 50 percent reduction. And since the start of. 2024, the net debt has decreased by 1.5 billion. And the decrease is of course mainly due to lower bank debt and reduction in housing and company debt. And this slide summarizes the external financing facilities as per end of September with a total facility amount of $5.5 billion with $900 million and around $700 million in cash. So in total $1.6 billion, $1.7 billion in available liquidity by the end of the quarter. So in addition to Bonava's financial target regarding operating modern and return on equity, We also, during the year, introduced a new financial framework with two key metrics, the net project asset to exceed net debt and the equity to asset ratio to be above 30%. As you can see, both of these metrics were met at the end of the quarter. So with that said, back to you, Peter.