Bonava AB (publ)

Good morning, everyone, and a very warm welcome to the presentation of Bonava's Q2 report, an eventful quarter with improved profitability, and we did a refinancing in the beginning of July. My name is Anna-Falk Silund, and I'm head of investor relations here at Bonava, and with me here today, we have our CEO, Peter Wallin, and our CFO, John Johnson. They will take you through the highlight of this report, and we will end with a Q&A session. And you can start already now to type in your questions, and I will read them out at the end. And with that, I leave the word over to you, Peter.

Thank you very much, Anna. And good morning on this fantastic, beautiful summer day. We also have a very beautiful project in front of you, which is Klockaren in Uppsala. which we started in the second quarter. So, let me start by walking you through the market development. We have the quite boring title, perhaps, stable market development as a headline here, but underneath that is sort of a threshold hidden in terms of continued strong market in the Baltics and an improved market in Sweden. where we see both increases in activity levels as well as prices. And overall, in all our markets, this is of course thanks to the support that we get from high disposable income and a pent-up demand for housing. But then in Germany, we have a little bit of hard to analyze the market right now, and it's partially because it's impacted by higher long-term interest rates. And this is because the inflationary impulses has increased the long-term interest rates in the wake of the Iran conflict. And for the German investors, which are consumers, which are normally, they are borrowing less money and they are borrowing much longer durations than what is typically done in the Nordic markets. And that means that the long-term interest rate is very important for the consumers when they buy and invest in new homes. So, it's been weeks with strong sales and weeks with softer sales. So, all in all, it's a little bit of a mixed picture. And as before, Berlin market and the Northern Westfalen with Dortmund, Düsseldorf and Cologne are the strongest markets in our German portfolio. And after the close of the second quarter, the German government also presented a stimulus package for the market. over time this will support the segment that we are active in. Then finally also the Finnish market is continued with quite slow development of the market with softer prices and not so much activity level. One underscoring thing in a very important segment for Monava is the investor market, the rental projects, and we are seeing an increased activity in all the markets we are active in this segment in. And you also saw us publish a bigger deal in the period, but we have not started a project yet, but it's 500 B2B projects in Stockholm. If we take a look at the construction cost, it remains to be stable at the high level, of course, but it doesn't grow as much despite that we have the Iran conflict. But we're keeping a sort of a close check on that. So leaving the market and moving over to Bonava. As Anna said, we have an improved profitability, and this is because the controlled growth part that we are into now. And we more than doubled the EBIT 166 million. And you can clearly see the turnaround of the business in Sweden. And this will be more profound as we go along in the quarters in this year. We posted an EBIT margin of 7.9% in the quarter and 7.6% for the role in 12 months. This should be compared to the guidance we are given of 8 to 9%.

We grew the net sales by 14%.

and we now have 4,455 homes under production, so an increase there as well. And this portfolio is then sold by 59% and in addition to that we also have the bookings and reservations. And as Anna also said, we finally closed the refinancing in the beginning of July, and John will walk us through all the nitty-gritty details of that, but that's really important for us. We have more and more great projects to show you, and let's walk you through four of those projects. So we started up a consumer project in Helsinki in Finland, Isla, in a very interesting area. And also, we are saying that the market in Sweden is developing very favorably right now. And of course, the bigger cities have been the engine. But talking about the engine, we also have a project called Moton engine in Swedish in Umeå. So also the regional cities is starting to pick up now. And then when we talked about the Baltic markets, which is really strong where the Riga market is really really strong and we would have loved we could have started up even more products here so there is a huge demand and growth in that market so with that as a background John please thank you Peter and good morning everyone and

We start as usual with the slide showing ongoing production and sales rate. And what we can conclude is that the ongoing production is continuing to increase. Now it's plus 35% versus the same quarter last year. Notable is also that the B2B deals, which Peter talked about, the investor deals, are still on a relatively low level, but due to the activity, we see that portion increase in the next coming quarters. We have a lot of interesting projects waiting to be signed on that. If we talk a little bit about the sales rate, it's 59%, and that's excluding reservations, including reservations that would be around 63%. And a word to point out is also that Germany and Sweden remains well above 60% on this metric, while Baltics, as I've mentioned before, are tracking around 40-45%, which is more due to the consumer pattern than anything else.

a strong sales rate and growing ongoing production.

We can also mention that the completed unsold is now down to 189, so it's a further reduction of that one. We have gradually decreased that over many quarters now, and we expect that to continue. If we look at the P&L, the income statement, the most important trend line which we highlight all the time is the rolling 12 EBIT, which is now, as Peter mentioned, up on 7.6%. And that should then be where you are following us in our guidance, 8% to 9% for the full year. We have improved gross margin, 15.5% in the quarter, and as Peter mentioned, we had 14% organic growth in the quarter. Costs are kept under control, and margins are developing favorably. So, good result, good quarter. jump into the different segments. We can conclude that Germany, Sweden, and the Baltics are all above 10% EBIT in the quarter. We still have Finland on a lower level, and I will come back to our expectations for Finland as well, but it's cost and cash neutral in a tougher market situation. But the other three segments are then on strong levels and contributing well to the group profitability and EBIT on that side. Deep dive to Germany. Germany is flat compared to the full year 2025 in almost all in both absolute and relative metrics, as you can see on this picture. We have some hesitation on the market, some weeks with very strong reservations, some weeks with lower, depending on what happens in the external environment. I think that our outlook is still growth for Germany, definitely, given not the least the investor deals which we aim to close in the second half of this year. Work to point out is also that this quarter in specific was impacted by a price reduction in the Baltic Sea vacation homes. It's homes with a low turnover. took the chance to allocate capital elsewhere where we needed and had the price reduction. They are still sold with profit in the quarter, but the impact on the gross profit specifically was 42 million. We have also somewhat lower sold and started in the first, which has to do with the reservations I talked about. But more positive outlook for the second half still from Bonanno's side. If we move over to Sweden, I think that's a super good development and we see a lot of interest on the market for new homes. We have improved our margins and of course, a very high sales rate, as I talked about, well, about 60%. The 10% EBIT was supported by sales loss of 36 million SEK, but even without that, we see a very strong development, not only in the quarter, but also in the coming quarter. It's a lot of positive energy in the market right now and that's what we can expect. I think that also this sale of land has a strategic value for us moving different pieces of the land bank to earlier production time and so it's a lot of ongoing business which is happening. Finland, I talked about, and we keep it on the low level and profit neutral. We have small negative EBIT, but we do still expect to close the year on breakeven in EBIT, and we have it very capital efficient. And we started one consumer project, as Peter mentioned, in Helsinki called Isla. We hardly have any completed unsold left. It's around 10 units in total. So very low numbers and cost and capital efficient. Voltex continue to grow fantastic and it's driven by Regen Vilnius, whereas Tallinn is a little bit more in the market development. We still have a good occupancy rate in the B2M projects, and we have increased sold and started units in the quarter and continue good development. If we look at the land bank, we talk a lot about resilience in Bonava in the controlled growth phase. And with resilience, we mean how we can act in both in a good business cycle, in a good environment and in a tougher market climate. And one important piece of this is our land bank and the building rights portfolio, to have both on-balance and off-balance and optionality in our land bank in terms of timing, when they should be produced and when we can wait with a specific project until the market is there. So we have in the quarter added a lot of off-balance units, and that's a deliberate strategy for us to have a more balanced portfolio in building rights with good optionality in development times. I think that between the markets, it's quite consistent. We had one bigger in Sweden, but again, in Sweden, we work more with the potential start period where we need more units earlier in the start period and less so later on to balance the growth we have also in Sweden. But super important from a resilience point of view. The next very important part was the refinancing of UNAVA also for the resilience to have a much more flexible financing closer to the active project assets and working with the banks which really wants to support us in this growth journey we are on. and we managed to successfully close that refinancing 2nd of July. We initiated it in Q2 and that's why we talk about it now. It will give us much more agility in the local markets and with different project types we are aiming to achieve. Not to least the growth in Germany expected in the next couple of years. years and the financing consists of a new green bond of 1.5 billion SEK and that has a tenor of 3.5 years and then that is then linked together with a syndicated loan facility of 200 million euro with a tenor of two years but with optionality to increase that and given the discussions with the banks. We should also mention that this new financing has reduced cost, increased flexibility, and also the restrictions on dividends has been removed, meaning that we are much more normalized as a business and we have the optionality also there. Of course, it's pending a board decision, But still, if the financials are showing what we plan, then we have a big chance to give out dividends in years to come. Net financial items is in the quarter temporarily increased with non-recurring items related to the refinancing of 38.5 but without that we are lower than last year despite that we have a higher net debt and the reason for that is that the interest rates have are lower than last year we expect that with the refinancing to reduce even further with around 1%, you could say, for the coming 12 months. And we have an improved net profit in the quarter and also on the rolling 12. So we continue again the journey we are on and expected to have a strong development on this metric, not only from improved EBIT, but also from lower net financial items after these non-recurring items are out. Next step, that has increased in the quarter and that is very logical because we have grown our ongoing production as you saw on the first slide significantly. So we have a lot of active project assets which needs funding. Parts of that is in Germany where advanced payments, but the growth, the massive growth in Sweden we have in ongoing production requires project financing, and project financing is a life-threatening part, which we expect to grow further and will peak now in Q2, Q3 until the units are handed over in the late part of this year from the start one and a half, two years ago. We expect a little bit peak now, but then it will be reduced further until year end when we have the recognized units. So available liquidity close to 1 billion SEK, very strong financial position we are in, and that is very good for the coming quarters. Cash flow is, of course, related to the same topic. We have a lot of ongoing production, which requires a lot of working capital in the build-up phase until we have reached the level 3,500, 4,000, our designated area. And that will require continuous investments in working capital. But it's super important that that is done in conjunction with the project and not as a separate part. So death is closely following the project. And on that note, if we look at the balance sheet, We have that metric in the lower bottom right corner, net project asset value, net debt, and we are well above the financial framework, 1.4 on the quarter, and expect this to continue to be stable and even growing that metric somewhat further. Equity ratio is temporarily down on 38% because we had a cut over of the refinancing and the bond where we had an amount in an escrow account over the month end. and that resulted in a slightly lower equity ratio in Q2 specifically but it's already up on 40% again as per July so that is the levels you can expect. Another comment on the balance sheet is that we continue to have equity well above the properties held for future development for land bank and that is also part of our strategy to match these ones and then to make sure that we have solid, healthy financing for our projects from advanced payments and from external debt as previously mentioned. So all in all, a very strong quarter and we expect more.

Thank you very much, John. Excellent. So let me summarize the second quarter for Bonava. We have a very strong project pipeline ahead, and we are looking into a very active second half of 2026 as well. This will be supported, of course, by all the work we have done and the attractive building rights that we have in the portfolio. So we are growing net sales on the back of the controlled growth strategy that we have right now, which also means making sure that we have the sales intact, so maintaining a prudent view on the risk level and then also combined with what Jonas talked about as a prudent indebtedness for the company. We're continuously improving the operating performance, and this is something which will be even more clear when we are growing the business volume, the net sales, because that means also that we will cover costs in a better way, which will improve profitability. The turnaround in Sweden is visible in the second quarter and the turnaround will be building even more momentum as we go along in the year. I'm really happy to see that. There's a lot of hard work going in and I'm really pleased with the development here and a shout out to the Swedish operations. The new financing is in place. This will support us. John has spoken very clearly about it and we feel that we mean that we can focus 100% of the business. And all in all, with an increased volume and ongoing production and a very strong pipeline, we repeat our outlook for 2026 in terms of growth and in terms of margin. So with that, Anna.

Thank you. Thank you both. Very good presentation and interesting to dig in. And we have a few questions. And we will start with Fredrik Druterhelt from SCB as a couple of questions. In Q2 2025, you said Bonava would reach 3,500 to 4,000 production starts, but aim to get there in 2026. On a rolling 12 basis, you are now at 2,734 starts. But the second half coming in and the 500 units Swedish investors will sign post the quarter and the growing B2B pipeline, do you expect to enter that range on a run rate basis before year end?

It's a long question. It's a short answer, yes. And if you're going to paint a little bit more meat to the bone there, it's of course a combination of the fact that one part of improving the operating performance is the fact that we have really worked with de-risking the way we start projects. So getting the sales right, getting the cost right, and having the right team in place. And that's super important for us as well. So and much better have quality in the starts than just hitting the 3,500 mark. But again, I think the way that our pipeline looks like, and given that we can achieve the sales we're looking for, it's clearly within the realistic expectation.

And to nuance it even further, it really depends on the exact timing of the investor.

Yeah, and that was his follow-up. If we have no recorded... I mean, for the total volume of about 3,500, yes, we are depending on them.

And that also adds to the whole turnover of Bonava. somewhat lower gross margins but contributing to EBIT margin and EBIT and covering our overhead costs and that is what we are in.

Absolutely, which means it's an important part of the business so of course we depend on them.

And the consumer sales fell by 33% and production start dropped by 63% year-on-year in Germany. How much of that is macro sentiment versus project timing? and when the expectancy starts to recover towards historical levels.

I think it's a really good question and it's a question we are struggling actually to answer because that is why we are saying that sometimes it's really strong sales and sometimes it's a little bit weaker. We did not anticipate to start a lot of new projects in the second quarter and I would say we have also seen that the market is, we don't start until we see really clear on the sales side. So it's a combination of both, actually, the started and the sold. I believe that Germany always, of traditional reason, have had a very much stronger second half of the year. So again, I think you will see us sort of improving again on that level. When we stood here and talked about the first quarter, We all talked about the cold winter, which feels strange now with the weather outside, but that impacted the production. The second quarter has seen us pick up the volume in terms of that production slack that was left predominantly, some parts of which will leak into the third quarter. But on the sales side, the sales was in the beginning of the second quarter much weaker, which then produced a lower sales situation for the quarter as such. Now when we look at Germany, it's very clear that the reservation balance is at the decent level, and we know that with a very limited cancellation rate and then with the normal process of signing those legalized, those contracts, it's a very clear view on the sales situation, and it seems like it's picking up now in the third quarter.

Yes. And Sweden's 10.1 EBIT margin was partly supported by the 36 million in land sales. Stripping that out, underlying EBIT was roughly 9 million SEK. How should we think about the normalized Swedish margin in the second half? And is the turnaround self-sustaining on consumer projects alone without investor transactions?

I think that, I mean, without investor transactions and without the sale of land, we have a fundamental improvement also in the B2C deals for Sweden. It won't go as fast as it will with the critical volume to reach the levels of full absorption in Sweden. So investor deals again is a super important complement to the consumer business and together and they will bring Sweden faster back on above 10% also excluding sale of land and those items.

And again, the B2B deals make sense from a business point in all senses. And that's also why we have sort of turned into the strategy of growing more in that segment as well. So it's an important part of our business. So, again, having the combination of a strong market-based B2B market combined with a good commercial one, that makes perfect sense.

Yeah, according to plan. And that was all from Fredrik, but we have a few questions from Mattias Karlsson at D&D Carnegie. Your rolling 12-month EBIT margin is now at 7.6. What are the most important operational drivers required to reach the 8-9 full-year margin guidance?

Volume. No, but really, it is the kicker we will get from net sales. And as you can conclude yourself, we have a guidance of 20-25% net sales. And what proportion of the expected second half earnings improvement is already secured in the ongoing production, and how much depends on the new starts and investor transactions?

That's a really good question, but I would say that the growth in the ongoing portfolio that we have still stands for the biggest part. But if you don't come back to Jon's answer on the previous question, to spice it up with a higher volume and growth in essays of the new projects that we intend to start in the second half of the year, then it depends on when we start. within that second half of the year and the type of revenue that we get. So we talk about the margin, which means that the marginal impact of the new volume is very important to reach that scale. But the major part, if you look on the absolute part of the profit that we will report in the second, most of it is already projects that we have ongoing.

And as you explained in the presentation, we have 36 million of Swedish land sale gains, but we also have the 42 million of German price adjustments. So what would we consider the clean underlying gross margin in the quarter?

Yeah, I mean, the easy task would be to have the nest of those ones and then just calculate it out. and we decide not to book these as items affecting comparability because in essence this is part of normal business of sale and purchase of land and also sometimes price increases which is the general trend right now in all markets and sometimes price reductions when it's a specific micro locations with no interest. So that's a little bit vague answer, but...

I completely agree with your answer there. The sale of land is a normal part of business, which we do from time to time. And unfortunately, sometimes we also need to do price adjustments. We have not talked about all the price adjustments upwards either. So that's also part of the 15.5% gross margin that we have in the quarter.

Yeah, and Peter, you already alluded to this, but Germany remains your largest earning contributor, but demand comes down during Q2. Have the sales condition weakened further, and have this affected your planned production starts?

Not really. I would say that we are looking at an improvement towards the back end of the second quarter and into the third quarter. So no, not really. But what would be really the dependent part of the volume in Germany will be the investor sales. That's going to be a pretty sizable chunk this year as well. And we already have agreed some death row intents on those sales and are talking with investors. So I feel that we have a good chance of starting a lot of very interesting projects in the second half.

Yeah. And a follow-up question here on Sweden from Mattias. Sweden delivered EBITDA of SEK 65 million versus minus 24 last year. How much of this improvement is structural and what margin level should investor view as sustainable as volume increase? And this is also dependent on the B2B, right?

Yeah, I mean, the long-term target is definitely that all our segments should be well above 10% in EBIT. What will change in Sweden is that in the B2C projects are all above 17% in project margin, but if you then add that you are growing as a company and also the investor deals that will be diluted somewhat for Sweden but on the other hand the volume will contribute a lot to EDIT so I think that kind of answers the exact level of gross margin is difficult because it depends on the timing but

Yeah and I think what we alluded to also in the presentation is that momentum will build as we go along in the year as a combination of building and invoicing volume from the ongoing projects and then also starting more projects in combination with having done the work the homework when it comes to the cost so the costs are fully under control.

And a similar question Mattias has here to Fredrik about the starts. We have 636 in the quarter and the ongoing of 4,455. What is realistic starts range for the second half?

Yeah, I think we've talked about that. I mean, we are, we haven't, we have defined the optimum of 3,500 to 4,000. I would be, I think it's realistic to hit it, but again, we'll only start projects under the right circumstances.

And a real financing question for you then. What is the expected quarterly run rate for the financial expenses, excluding the remaining 29 of Q3?

That will come in Q3 as one of... Yeah, so in essence, I think that we can expect 1% lower interest cost.

And when you say 1%, you said 100 basis points, so 1 percentage point.

Yes, 1 percentage point. So... roughly on that level in reduced costing in general because it goes for both the bonds and with the new financing. And also we see new project financing is much easier to get now for projects. It's much more competition and favorable interest rates. So we see positive.

And for those who have looked very closely at our net debt, we have some no-clones in the quarter. How will that develop, and have we seen anything during July that has impacted that?

So no no-clones anymore in Q3. That was closed within the refinancing. that the small part we have with the divestment of Norwegian business is handled in not through a debt. So no, no, it's only Euro 6, which reflects our current portfolio and markets we are in.

And a final question here from Mattias. The refinancing removed the dividend restriction. What profitability, leverage, and cash flow conditions would be needed to be met before the board consider reinstating a dividend?

Ultimately, this is the board decision, of course, and I think it has to do with how we develop as a company and also what investments we need to do and so on and so forth. So there's a lot of different parameters but generally financial health is of course a precondition and we won't give out dividends unless that is fulfilled. But still this is a major milestone that we have taken out the restrictions.

And I think that was all the questions we had. Very good questions and a very good presentation from you guys. So with that, we would like to wish you all a good summer.