NCC AB (publ)

Good morning everybody and welcome to this presentation of the first quarter 2025 for the NCC Group. I'm Tomas Karlsson, the CEO of the company and with me here today I have Susanne Litander, our CFO. And first some key figures for the group but the way to think about the quarter is this. It's the stable performance, seasonally slow as always and good overall demand. Sales and EBIT very stable, good orders received, high orders received in building Sweden. In industry we have a very clear pronounced seasonality but we have a strong demand in the industry business. Infrastructure solid with good demand and continued profit development in building Nordics. Property development has not recognized any sales of properties this quarter and we will point that out to guide you through that presentation going forward. Orders received, booked to be one on a rolling 12 basis and one almost one billion higher than last year so good orders received for the NCC Group. Solid order backlog however and I think this is important because it's very pronounced this quarter. The strengthening Swedish krona has a negative impact on the overall order backlog. In reality this doesn't matter because it's order backlog in local currency that will be generate revenues in local currencies with cost in local currencies but when we translate it to Swedish krona it has an effect of a quite significant effect in the quarter and it has had that both positive and negative earlier quarters as well. In the quarter we received a number of large projects. Here are three projects from different business areas all 600 million SEK, Reinforcement European Road E10 in Sweden, expansion of district heating in Copenhagen and a new school and sports facility in Stockholm in the Stockholm area. Net sales are seasonally slow as every year in line with 2024. Now the way we recognize revenue in the group we do percentage of completion for most of the business but for property development we do a completed project, property revenue recognition so we've highlighted the proportion of revenue each quarter that belongs to property development and when we do that you can see that it's very stable over the first quarter the last couple of years. EBIT seasonally low again as always we have a certain impact of earnings recognitions from property development so to make it easier for you we've made this slide highlighting the contracting and industry earnings quarter by quarter and you can clearly see the seasonal pattern in earnings for the contracting in an industry business where we have the percentage of completion profit recognition. Our financial targets we reiterate the 16 SEK earnings per share target short and medium term we are at 15.63 the difference from the full year is the absence of a sold property that we did last year first quarter we have a very low net debt compared to our target and as we reported in the report for the for the full year in the fourth quarter the board suggests a dividend increase to nine SEK and an extraordinary dividend of two to be distributed 4.5 in the spring and 4.5 in the autumn and the extraordinary to be distributed together with the first tranche of the dividend. Sustainability targets some news we actually reached our 2030 target of 60% CO2 reduction scope 1-2 already last year so we have a new target for CO2 reductions going to 75% reduction by 2030 and then we have we reiterate the target of scope 3 of 50% health and safety we have a target to reduce all types of accidents but with an increased focus on eliminating serious accidents and fatal accidents. We have met the CO2 reduction target quite well and we are now have a revised target of 1.3 kilo per SEC. Target for scope 3 we are progressing quite well for ready mix concrete asphalt and steel reinforcement steel actually already reaching the target and not so much for transportation services and the increase in in emissions from transportation is driven by the removal of the emission reduction obligation in Sweden totally and for health and safety we are developing well towards our goal of 2.0 2026 we are now at 2.8 that's actually the lowest accident frequency rate that we've recorded since we started measuring in a very systematic way and finally before I hand over to Susanne we have a continued positive market outlook good market demand and positive outlook for key contracting segments that's for example water treatment of all sorts water distribution energy generation energy distribution but also health care schools security buildings a particularly strong demand for infrastructure of all sorts and public buildings solid demand for asphalt and stone and we see that several of the administrations in the nordic region are communicating that they will have an increased effort of maintenance of the road systems commercial property and residential markets remain slow and with that I hand over to some thank

you and this is the short term short update for our four contracting units we have a solid solid infrastructure performance and the demand situation is good building nordics continue to improve and develop positively when it comes to profits we have very strong orders received in building sweden and in green industry transformation we've signed a new long-term cooperation contract with lkab regarding their sorting plant we have a solid order backlog has too much just said and the book to be in the quarter was 1.3 both building units have a backlog well above 12 months of sales infrastructure a bit below 12 months sales but that's pretty much very normal variation in their business sales and earnings are on par with last year and infrastructure shows increased sales net sales earnings and margin are on the same level as previous year building nordics increase in net sales earnings and margin and all three countries contribute with earnings improvements building sweden slightly lower sales but in spite of that they keep their margin level and earnings on the same level so the summary of industry is that a seasonally slow quarter means that they're always a negative quarter the first quarter the good order intake was very good and as thomas mentioned we see increased funding for road maintenance that can drive additional demand for asphalt when it comes to volumes the first quarter was very normal insignificant volumes for asphalt as usual a slight increase when it comes to stone material the earnings the ebit level for industry was pretty much exact the same as last year in the quarter capital employed improved however down with almost 400 million that's due to lower property plant and equipment and also lower short-term liabilities the return on the capital employing was 14.2 percent and well above the target of 12 percent the summary for property development is that we have no projects profit recognized in the quarter we have started one new project in finland cleantech all in all we have nine projects in the portfolio and the letting in the quarter was high and as we've mentioned before we had last year we had a recognition in earnings of one property in g utterborg albatross this year we have 10 million in earnings which is a positive result thanks to the fact that we have property management of our completed projects that we have still the capital employed is down 1.8 billion thanks to the divestment of the properties towards the end of last year and the return is 7.1 percent letting in the quarter was high primarily driven or or mainly driven by the clean the start of the cleantech project in finland which is 95 percent left already at start we have a completion ratio of 60 percent and a letting ratio of 79 percent and this is the whole portfolio and you can clearly see the timeline where we have the expected timing of the profit recognition of the three ongoing projects all in all nine properties six are completed and unsold down to the right in the corner and the three ongoing that are sold to the left in segment other and elimination the earnings level is pretty much on the same level as last year the first item there and the third when it comes to group cost and pension and accounting adjustments is pretty much in line with last year the difference here and the negative difference is from elimination of internal gains and this row here is where we eliminate the profits for in property development during the building phase so it's the the the profit for the building unit and since we haven't so divested any properties this quarter it's negative compared to last year when we did divest a property and that's when we reverse that provision or the elimination and get a positive effect so that explains the difference so in our income statement the segments contribute with negative minus or minus 170 million our financial net is five million lower than last year and that's due to our much lower net debt corporate net debt our calculated tax rate is 22 percent and earnings per share is 1.39 in the quarter and 15.63 on rolling 12 cash flow is seasonally low and the cash flow from operating activity is significantly down from last year and that's explained completely by the fact that we did divest a property or we profit recognized the property in the first quarter of last year which didn't do this year we also have low investing activities and that's explained by lower capex in machinery basically all of it in industry and that is more of a timing issue and our corporate net debt is much lower it is 377 million compared with two and a half billion last year and our target as we know is to be below two and a half times when it comes to net debt tbda and we are at 0.14 as tomas already pointed out and with that i will hand it back to you thank you very

much thank you and before i talk about the regular stuff that i talk about at this point i will introduce a little piece of news we've had some discussions about capital allocation since we have a really strong balance sheet which means that we are now ready to announce that we are ready to do selective mna for the ncc group we are financially strong we have a strong balance sheet we have been working for several years now on a scalable operational model for the group we have a robust organization and we will be targeting companies in contracting that that would complement our current operations we are primarily looking for companies above a certain size ie organizations that are used to work in a larger structure with common working methods systems and processes however we anticipate that this will take a little bit of time because finding the right acquisition target takes some time there are many stars that needs to be aligned to do it right but we want to be clear on this is where we we see that we're looking for a new company that can do that and with that i want to remind everybody that we have an agm coming up on may 7th and that will take place at hotel at six in the center of stockholm and before we open up for questions in summary a solid quarter with seasonal patterns good orders received strong demand in contracting and industry operational and financial readiness for mna and a very positive development in health and safety and with that operator i open up for questions

we will now begin the question and answer session anyone who wishes to ask a question may press star and one on the telephone you will hear a tone to confirm that you have entered the queue if you wish to remove yourself from the question queue you may press stop and two questioners on the phone are requested to disable the loudspeaker mode while asking a question anyone who has a question may press star and one at this time the first question comes from kivan shirvanpour from seb please go ahead

yes thanks and good morning i have a couple of questions i could maybe start with this mna that you talked about roughly how how large investment volumes would you be able to make given your balance sheet

well you know what our balance sheet is we we are really not letting that limit our thinking at this moment but it has to be we we have to find a you know a national acquisition target so i i really don't think think that that's our primary primary focus right now but we have quite a lot of of space

okay and also regarding the financials you have this very large cash position of two billion which means that you also have quite high financial income in the quarter could you maybe give any type of guidance on how you will put this cash position into use near term are you making any type of debt amortization or investments or how would this change going forward short

term we are not going to amortize any debts we have amortized or will amortize also a billion of our uh bonds sorry and but otherwise we are following our we have a very clear policy how we are allowed to invest our liquidity so that's that's driven by that basically we have to have very highly we have very high levels of liquidity demand a short notice we have to have so we don't invest it in any any type of long term very short term and according to our treasury policy

and and maybe it's also worthwhile pointing out that the second quarter is the most cash negative quarter that we have for as a seasonal pattern when the business increases yeah

we're going to use a lot of it both for for starting up industry in the second quarter and also the the dividend payout

okay good and also uh as a question regarding building nordics and sweden with that margins are improving somewhat but they remain a bit under pressure could you maybe elaborate uh how the facing out of older project is impacting profitability and how will this uh the facing out of this older project impact profitability it's

actually going quite well but even for for building there's a clear seasonality pattern where where the first quarter is weaker than than other quarters so you know this is pretty much on a normal level where we we should expect it to be so we see a clear improvement in in margins for both building business areas

okay so there's some type of minor gradual positive impact absolutely

and several of the projects that we had issues with last year have already been finalized

okay and just one final question if you maybe could give an update on this completed unsold property projects now six completed projects that are sold

okay well i mean the the property transaction market remains slow you shouldn't see the you know we were quite successful in selling a number of of projects last year but that was i don't think it was a sign of a changed market we happened to be very successful and we worked hard to do that we continue to work hard to sell further or more of the finalized projects but you never know you have to wait until the the right buyer is there and so so we really don't know but we will sell them as as soon as we find the right buyer

do you have any ongoing dialogues with buyers we

still always have ongoing dialogues okay

good those are my questions thank you

thank you john okay the next question comes from stephen henderson from nanske bank please go ahead

thank you a few questions from me then first on the industry division and your the progress there when it comes to your evaluation of potentially diverting that to that business

well hi stephan well it's it's it's proceeding according to plan we have quite a lot of interest in the in the business but i think it's important to recognize first of all we have estimated that this will take most of the year or maybe the full year second is that we will have a very diligent review to make sure that we understand where there's someone else out there that puts a higher value to the industry business than we do if not then we will keep it so it's still a you know both both solutions are are still possible but we have no new tangible news at this point

and and if you look at the operation i mean with that kind of change coming i would imagine that the employees and management would you know concerned if any any any do you see any impact of that in the operation no

i think we have a very good reaction in the in the business area people are you know it's business pretty much business as usual it's a small team involved and i think people are are are confident in that we will find you know either the the solution that we have now where we operate the industry or a better one so okay

good and yep and and my final question on that is is i mean looking at the last three quarters of last year you had a phenomenal development especially from the asphalt business and i know finland helped with some extra contributions there given that weather was very favorable in q1 and and that positive trend last year i had expected a little bit of a smaller loss i must say do you have any comments on that is it is it just that nothing really well i'm trying to to to fish for is was it a one-off the very positive development you had during the the the q2 to q4 last year

no i see i see your question the question the way i would put it did why didn't we start production earlier since it was warm and dry the the thing is this it's very hard to plan for good weather you never know that that will happen in the winter it happens that we had a warm and dry winter but the the winter season is planned for maintenance of all the equipment that that requires a certain time if we with a very high degree of certainty would know that you know the spring would come three weeks earlier so we could plan for that but but you know the seasonal pattern tends to be the same year after year so we we plan for a certain start of of production so a favorable weather situation in the winter doesn't really impact what has more impact in how long did we actually operate the equipment last year because then if we operate them for a long time they require more maintenance than if we we ended earlier so spring is very hard to to actually get the benefit from a warm and and dry season that's the total opposite compared to the the fall because then the operations are full swing and if you know a little bit simplified if november is warm and dry that has a very positive marginal effect for the for the business that's the way it was last year and the way it has been as long as i can remember perfect

thanks great uh then just follow up on the mna there could you maybe indicate what's i mean you talk about larger entities but what kind of size are we talking about ballpark in billions in revenues that you would look for

at least a couple

a couple yeah okay um and do you have targets already identified we

have an id

okay good then my my uh two last questions on on pricing in general i mean we see a little bit of a mixed market in sweden where quite a few of the smaller players are are suffering uh probably because of their dependence on on on residential construction and the bigger ones seem to be doing fairly okay like you guys but but you know if you look at pricing do you see competition coming from the smaller guys trying to move up a little bit to catch more of of that that part or or how do you see the pricing in in tenders at the moment

we see that i mean demand is or the the market situation is the toughest in sweden and finland so so let's talk about sweden and finland because that's where you actually are alluding to and we see for certain types of projects with a higher degree of complexity and size and and expertise knowledge no we don't see that on you know smaller and not that complex project we see a certain degree of desperation from smaller and mid-sized competitions and pricing very low we try very hard to stay away from that because that's uh in the long in the long term that that that would be good for our business so we try to maintain a high degree of discipline in the business

good and then my last question is actually material uh the cost there and the strengthening of the swedish crown now in general do you see that you could benefit any of of of actually a little bit of lower price on the inputs

that could be a case that's one of the possible scenarios we have we have an abundance of scenarios of what could happen with you know everything from tariffs to uncertainty in the in the global economy to strengthening krona and whatnot and we can see both positive and negative scenarios and the one that you mentioned is one we'll see what happens thank you thank you

as a reminder if you wish to register for a question please press that and one on your telephone the next question comes from eric from canagi please go ahead

thank you uh good morning i had two questions um one relates to property development do you think that you have enough uh for sale within property development to contribute enough to

the market well what we've said is that we require to reach the eps target this year in the same way as we did last year we need to have you know a more normalized property transaction contributing and the market is is still very muted so so that's not the uncertainty but we're trying very hard to to sell a couple of the the finalized projects but we don't know if that is going to happen

okay but it it is still the fact that your portfolio in itself is ready to contribute enough it's more whether or not you're successful enough in investing it absolutely okay thank you and then finally and that's probably a follow-up as well on this m&a activity when you're talking about the size of these companies that you're looking at i get the impression that these are more companies that you consider to be sort of smaller competitors rather than than pure bolt-on acquisitions is is that the way to look at it that's

not the way that i look at it

could you perhaps explain the way that you look at it

then i was waiting for that follow-up eric no and the way i look at it we we try to find ways that we can strengthen our current business that we're looking at businesses that you know operates in a similar way that we do and that's why we talk about the certain size and where the organization is used to working with processes and systems but we would of course you know prefer to see where they are to to our know-how on on everything from water treatment to defense installations or hospitals or schools or or whatnot where we have our strength so we would like it to complement our business

okay and usually this this means that you have some sort of relationship with a majority of these potential acquisitions meaning that they could perhaps be subcontractors in larger projects and and the fact that you already have some sort of relationship with these companies is that the correct way to look at it or you're simply looking at something that might be out there for all that just happens to be within the right segment

first the first part of your reasoning i think that's taking the the speculation a bit too far it could be the case but it could also be other solutions and then we'll try to stay away from things that just happens to come by we need we need to be clearer on the fit and and you know how we how we will be strengthened by it

okay thank you those were my questions today

very good thank you eric

ladies and gentlemen there are no more questions from the phone

okay if we have no more questions thank you for listening in from them to this presentation of the first quarter for the ncc group and have a continued good day thank you