Skanska AB (publ)

Good morning and welcome to the presentation of Skanska's second quarter report 2022. My name is Antonia Junelind, Senior Vice President, Investor Relations, and here with me today to present our second quarter results are our CEO Anders Danielsson and our CFO Magnus Persson. We will start the presentation today with an overview of the group and business stream performance and provide you with some business and market outlooks together with the second quarter financials. After that, we will move over to the Q&A session, and you can ask your questions either by using the text field on our webcast page, or you can dial in on the phone conference. Just follow the instructions by the operator. So with no further ado, I will hand over to you, Anders, to take us through the second quarter result.

Thank you, Antonia. And before we dig into the figures, I want you to look at the picture here on the first slide. It's Noworynek in Poznań, a commercial development project in Poland. Fantastic office building with very high standards when it comes to environmental and well-being certifications. And it has been developed, constructed and divested by Skanska. Very successful project. If you look at the overview of the second quarter, we have a good performance in the second quarter. Construction continues to deliver strong results, residential development maintaining the profitability level, commercial property development, high level of activity and also good margins on the divestment that we have done in the second quarter. And on the investment properties, we have establishing that business and the pipeline looks good. Operating margin in construction, 3.4% versus 4.7% in the last year. We'll come back to that. Return on capital employed in product development above our target of 10% on a rolling 12-month basis. Return on equity slightly shy of our target of 18%. And we continue to have a very strong financial position. We have 11 billion Swedish in net cash. and we have managed to reduce the carbon emission further and we are now at 51% reduction compared to our baseline year 2015. If I go into each stream, starting with construction, we increased the revenue to close to 40 billion Swedish in the quarter. We have order bookings of 37 billion. That is below our last year, but last year was also where the exceptional order intake in the US. So this is more on a normal five year average. Book-to-bill 95% on a rolling 12-month basis and we have a record high order backlog of 215 billion Swedish. Operating income 1.4 billion and gives us an operating margin of 3.4%. percent and if you compare to last year you should remember that we had the the one-off divestment gain in uk we divested infrastructure services which was a gain of 370 million swedish and if you take that out we had a margin of three and three point five percent last year same quarter So we are growing value revenue and we have a solid order backlog and we have been able to managing the supply chain disruptions and the cost increases in a good way. So we have been able to keep the margin of 3.4% the same as we have on a rolling 12 months basis. So overall strong performance. If we go into residential development, The revenue were down to 3 billion in the quarter. And you can see that the home sold was also reduced. Last year in the second quarter was an extremely good year for residential development. So we sold a lot of homes in the second quarter. And the slowdown that you usually see in the summertime didn't happen last year. So that was exceptionally good. we also had a rental residential divestment last year of 114 homes if you take those out the reduction is 30 percent we have been able to start more homes compared to last year so we started 957 homes in the quarter And the operating income 358 million, which corresponds to 12.1% operating margin, which is above our target. And we also are above our target when it comes to return on capital employed of 11%. So we have been able to bring new projects to the market. And since we have a very strong financial position, good pipeline, good land bank, we can start projects when we feel it's right. We are not dependent on the credit market in that sense. So we have been able to deliver in good profitability. Commercial property development, operating income of 800 million. which of gain of sale from divestment is slightly above 1 billion Swedish. And in those divestments, we have two large projects in Sweden that are sold before construction start. So it's of course natural for us to be a bit conservative when we recognize the profit in this quarter. Return on capital employed above the target 10.8% on a rolling 12. And we have 37 ongoing projects, which corresponds to 30 billion in investments upon completion. And we have an estimated market value of close to 38 billion. 33% occupancy rate versus 45% completion rate. That is a gap that we follow very carefully. The gap should not be too big. But right now we can see some higher activity in the leasing markets, especially here in the Nordic operation. But that is something we follow very carefully. Seven projects started in Q2 and we have continued to see a solid appetite from investors. So there's a lot of capital out there in the market and our portfolio, our projects, they are really attractive, high quality, high standards when it comes to environmental and other matters. Leasing market remains relatively slow. We have leased 47,000 square meters in the quarter. As I said, we saw some higher activity in Q2. So that's something we work hard with. And finally, the last dream here, investment properties is a new business dream this year, and we're targeting high quality, sustainable office and to build up a portfolio over the years coming years to 12 to 18 billion Swedish. and that will give us a strong stable cash flow and we also see potential to increase the value even further compared to when we divested the projects upon completion and the first project is transferred epic building in malmo that was transferred in q1 and we are preparing for more transactions into investment properties we have a good pipeline for that so i look forward to that If I go back to construction and looking more deeper into the order bookings, here you can see over the years, over the last five years, the development on the order backlog, as I said, record high right now. And you can see on a rolling 12-month basis, the development on the order bookings. You can also see the orange line order bookings per quarter and also revenue and book-to-build ratio. As I mentioned, record high and the order bookings in the quarter as you can see is on an average level if you look five years back. And if I go into each geography when it comes to order bookings, Strong overall, strong backlog. And we have 17 months of production. You can see Sweden slightly above 101% book to build. Overall, we have 95% book to build ratio. Somewhat lower in Europe. That is not a surprise for me since we have, especially in Central Europe, we have been more impacted by the war in Ukraine. So we have been very careful and selective when we bid for new projects there. But overall, a good position. You can see US 96% book to build, but a very healthy backlog, 19 months of production. So this is something I'm quite comfortable with. With that, I'll leave it to Magnus to go deeper into the figures.

Thank you Anders. We start with the construction business stream. We had revenues of close to 40 billion in the isolated quarter, which is then up from the comparable quarter last year. If you look at this in local currencies, it's up 14%. It's quite a large impact here of FX in particular the dollar exchange rate that has moved a lot and given that we have just shy of around 45% of the revenues in construction comes from the US market that has a pretty big impact on the revenue as we report in Swedish Kronos. Slightly lower gross margin, 7.4% compared to 8.9%. But again, as Anders has already pointed out, we divested the infrastructure services business in the UK in the comparison quarter. So if you strip that out, we're at 7.7% last year. Good S&A control. Nominally, we went up a couple of hundred million, but if you look on the S&A margin, 4% flat. I think that's a very respectable number here. Takes us down then to an EBIT of 1.4 billion, 3.4%. percent margin which is also where we're trading on a rolling 12 months sort of long term we are now up and basically performing at our target level shy on the basis point or so no material non-recurring items of any materiality that you should be aware of in the second quarter If we move to the geographies, in the Nordics, we basically delivered the same level of profit, 549 million compared to last year. In Sweden, 310 million compared to 308 last year. Slightly lower margins though, which I'd say it falls within sort of normal quarter variation here. And in Europe, profits were lower. But again, if you take out infrastructure services, we were actually growing profits in Europe. And margins are, of course, in the comparable quarter also heavily affected by this divestment. US continues to improve 3.3% margin in the quarter compared to 2.8%. So really sort of a strong performance here from the US construction businesses. If we move then into residential development, we had revenue in the quarter isolated 3 billion, down 30% approximately. Market really started to slow down, I would say mid-May and then into June. So this has an impact on sales levels, of course. And it's already been pointed out, we had an unusually active sales actually the second quarter last year. No rental divestments in the numbers here. We had one rental divestment in the second quarter of the last year. Strong margins, close to 20% on a gross level. Very good. Of course, S&A margin is a bit on the high side there, 7.7%, completely due to the fact that volumes are coming down then. Leaving us with a very respectable 12.1% margin, EBIT margin for the quarter, which is basically where we are trading also long term if you look at the rolling 12 months of 12.5%. So very strong performance from the residential development business. Looking at the different geographies, all geographies essentially performed well. Market has perhaps softened the quickest in Sweden here, but profitability has definitely kept up very well. In Europe, if you look at the margins, they are coming down, but this is also a very good performance in this business here. The margins here are in fact starting to get impacted by the newly established Boklok business in the UK, which we are ramping up. And of course, when you establish a business in a new market, you need to invest both in organization and you need to invest in a land bank and so on. And that is often before you really start to get sort of the positive benefits of a profit. So we have somewhat of a margin dilution due to that. But that's for a positive reason then, I should add. Home started and sold, we started roughly the same amount as we did last year, slightly up 957 units. Sales 680 units, then 140 units were a rental residential divestment in the comparison quarter. And overall, we continue to start around 4,000 units here on a rolling 12 months basis. It has increased a little bit up from say 3,500 up to now just north of 4,000 units on a rolling 12-month basis, which you can see in the graphics here if you look at the green line. So continue to build up the residential development portfolio. Homes in production, we have around 8,200 units in ongoing production, a very solid sales rate of 72% and basically no issue at all with unsold completed homes. So super stable position in this portfolio, which Essentially means that we can continue to start projects that are attractive to us and we are not in a position today where the level of risk in our residential portfolio is really a limiting factor for us starting new projects. So if we find commercially attractive projects, we definitely have the capacity to start them. If we go into commercial property development gains, one billion. We made sort of two larger divestments, I would say, in the quarter, one in Stockholm and one in Poland. And on top of that, a number of smaller transactions. I think it's important, as Anders pointed out earlier also, that in this quarter, it was a little bit special because we divested a couple of properties where we still sit with a full construction risk. And of course, in that situation, especially when you take into account the market context with the sort of cost escalations and commodity pricing we are being quite cautious in the profit recognition to make sure that with adequate reserves and provisions to cover those risks for the future which is the explanation to why the development margin looks a bit lower here If we look at the unrealized and realized gains, if you take the total investment value of the portfolio when all the ongoing projects are completed and you include land and you include all the completed properties, that's approximately 50 billion Swedish krona so it's a very large portfolio we have here then. Out of this we have sold but not yet handed over properties for 7 billion approximately so the remaining 43 billion that's what you sort of look at on this chart there the surplus value of the remaining 43 billion is approximately 10 billion and you can see the distribution here of course the majority of the surplus is in the ongoing projects 6.3 billion then. roughly unchanged since the first quarter despite the fact that we realized gains of one billion in the isolated quarter and as usually you can look at the orange line there rolling 12 months we're still realizing approximately four billion in gains on an annual basis out of this portfolio so we continue to generate strong values underlying here If you look at the completion profile, we have completed but yet unsold properties to a value of 6.2 billion end of the second quarter. These were leased to 73%. That's roughly the same number as we had in the last quarter, even if there is a sort of a churn of the properties We sell some and then we add some that are completed of course. If you then look at the blue bars, that represents the 24 ongoing budget unsold projects that we have in the portfolio. The bar shows the total investment value at completion for those properties in the quarter we expect them to be completed. green dots represent the current leasing rate of the different properties so what you can see here is that we expect very little completions in the third quarter this year and then towards the end of the year in the fourth quarter quite a lot more and overall we have sort of a forward heavy if you will completion profile of this portfolio as it looks now Leasing remains quite slow. We leased 47,000 square meters in the quarter isolated and clients are still a bit unclear about sort of their business need in terms of space here and flexibility remains key which It can be break options, expansion options, contraction options, all sorts of different parameters that you can introduce to give flexibility for tenants. In awaiting that clarity, we see more clients rolling existing leases or renegotiating them for shorter maturities in a way that makes them keep their flexibility but at the same time wait a little bit with making sort of a real decision to move into a new space. That's basically the market dynamics here now. We go into investment properties. We had an operating net of 8 million Swedish kronas in the quarter. Obviously the comparison quarter, we had nothing. Very slim organization. So the S&A costs are rounded here to zero. We have made no change in the value of the only property we have in the portfolio so far. Takes us down to an operating income here of 8 million kronas in the isolated quarter. If we look at the group, central items minus 1.55 looks a bit higher than last year. but in reality the underlying running costs are virtually unchanged and the changes you see here in the accounting is due to legacy and some accounting items. We have net financial items with the changes that we see in the financial markets and the rates going up we're of course coming in a better situation in terms of how we can handle our net cash position and we're starting to be able to make more money out of deposits and short-term placements that we have here so that's of course very positive taxes we taxed out the 21% which is higher than sort of what we're used to the reason for that is that we have a lesser degree of the profits in the quarter came from tax exempt property divestments and then we end up closer to our nominal tax rate of course In comparison quarter 16% tax we were successful in utilizing past losses for tax deductions in 2021 which contributes to the low tax rate we had in the last year. If we look at the cash flow, we had a small negative cash flow in the isolated quarter, 0.5 billion. On top of that, of course, the dividend distribution that took place during the second quarter takes us down to the total cash flow then of minus 4.8. So this essentially means that we are reinvesting all our cash profits into new land and new development projects, building up the portfolio for the future here. Free working capital in construction by and large unchanged compared to what we reported in the first quarter. We have approximately 29 billion in net working capital representing 19% of the revenue here. Cash flow from working capital in construction was slightly negative, minus 0.9. So there is somewhat of a currency effect in play here in the balance sheet items. If we look at investments, we are continuing to move deeper into net investment territory and building up portfolios for future divestments. This is true both for residential and commercial development and very much in line with what we have communicated as our ambitions for quite some time here now. You can see capital employed is growing in both business streams, RD and CD. And I think for investment properties, obviously it grows 800 million due to the single property we have in that portfolio yet as well. terms of funding we have 3.6 billion in external funding no maturities coming up this year next year we have one loan and one bond that will mature 16.4 billion of available funds so plenty of ammunition for us and very low level of reliance on the credit market in order to execute on our strategy and continue to build up our portfolio for creating the profits in the future quarters there Financial position, super strong. We had an equity position end of the quarter, 48 billion, adjusted net cash of 11 billion. And of course, as already said, with the balance sheet like this, low reliance on the credit markets puts us in a position where we can act on opportunities when they come. We don't have to sort of wait for others to agree on that opportunity, if you will, and we can start projects when we want to start projects. We can judge whatever comes our way purely on its commercial benefit for Skanska and then we have the ability to act on it. So I think given where we are in the market, we are in a very strong position to make the best out of that.

Okay I will continue with the market outlook and it's pretty much unchanged compared to the last quarter and if I start with construction we can see a stable non-residential market in Sweden, Norway and the US. And if I look at the rest of Europe, Finland and Central Europe, it's a bit weaker market on a non-residential market. Building a residential weaker market in the Nordics, more stable in Europe. And the civil market is overall stable in Europe and strong in the US. That was the same outlook as last year. Residential development, more softened markets. We have a weak market outlook in the Nordics, stable in Europe. And we can see that More uncertainty since the inflation and interest rates go up. Having said that, the low employment levels and structural shortage of homes in our market, we expect that to stabilize over time. But we see that cost escalation might lead to projects being postponed in the market. Commercial property development, the investor market remains strong and we can see that leasing volumes are still not back on pre-pandemic levels, but we can see some higher activity in the second quarter, especially in the Nordics. So to summarize this presentation, good performance in the second quarter, construction delivering strong results, residential development, maintaining the profitability level, commercial property development, high levels of activity and good profitability levels on the divestments. investment properties establishing business and we have a robust financial position so our strategic direction remains we will continue to improve profitability and grow responsibly in construction We shall be the leading residential developer in our markets and we have an ambition to continue to grow the commercial property development and the plan to build up investment properties portfolio is solid and we're following that plan. With that, I leave it back to Antonia to start up the Q&A.

Yes. Thank you, Anders and Magnus, for taking us through the second quarter result. And now it's time for the questions. And as I mentioned at the start of this call, you can either send in your questions on the webcast page or you can ask your questions on the phone conference. So I will now start with asking the operator to provide further instructions and to introduce the first caller.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 star and two. Participants are required to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. First question is from the line of Pam Lee from Morgan Stanley. Please go ahead.

Okay, thank you very much. I have three questions, please. The first one is that if I look at construction in terms of the EBIT margin, in the Nordics outside Sweden, that seems to have deteriorated more than the margin in Sweden. Could you please provide a bit more color on that? The second question is with regards to residential. Yes, the number of homes started has increased overall in the quarter, but I think that is driven by a decrease in the Nordics and an increase in Europe. Is that all to do with boat block? If that's the case, given that boat block is the more affordable housing unit's range, are we therefore expecting to see a lower margin anyway just because of the product mix? The final question is commercial development. Can I please understand a bit more about how the market appraisal value is estimated? So for this quarter, the market appraisal value for commercial is $62 billion. That is a 24% premium to the investment value upon completion of $50 billion. So that seems to be quite high to me in today's environment with the rising interest rate. And of course, you have negative outlook across geographies in commercial anyway. So am I missing something here? Thank you.

Thank you, Pam, for your question. I will start with the first one and then Magnus will answer the second and third one. When it comes to construction and the EBIT margin in the Nordics, I'm not satisfied with the margin we have. We can see now in Sweden, I expect them to... deliver more in the construction stream we have the action plan in place to continue to increase to increase the margin there and so that's that's that work is ongoing and i expect them to to come back in in in the future here so that was a comment if and the second one was on residential development europe

Yeah, hi Pam, Magnus here. Bit unsure if I fully understood your second question, but I think you were asking whether or not Boklok is the reason to why we are starting less units in Sweden, was that correct? No, in Europe.

No, so what I'm observing is you're starting less in the Nordics, which I could understand because of the interest rate environment, etc., And what I'm also noting that you are starting up significantly more in Europe. I'm just wondering that is to do with Bulbock. And if that's the case, does that have any margin impact? Because I assume that that is the more affordable housing options. And I just want to understand how that impact the margin. Thank you.

Okay, fully understood. Well, of course, part of the units that are started in the European segment is related to Boklok, definitely. And then it takes some time to move them from starts into sales, obviously. So as we grow this business, we will see an increasing share of the units that are started in the European RD segment actually come from Boklok in the UK. That's absolutely correct. And the business model as it is, is that... The Boklok business model is normally sort of a higher return, lower margin business model than what we have in our traditional residential development business. Depending on the pace of development, it should sort of alter the KPIs a little bit. But it's not big enough to make any firm conclusions on that. And then in Sweden, we reduced the starts a bit. I would say it's a bit premature to connect that to rising interest rates during this quarter. It's essentially during the quarter that we've seen biggest uptakes and the most sort of impact on the financial markets when it comes to the rates here and starch and the planning of starch is a little bit more long term than that. I hope that was a sufficient answer to your second question. In terms of your question regarding CD, how the appraisal is done, well essentially what we do is that when we start a project we have an assessment of what the market is both in terms of rents and in terms of yields to take sort of the most obvious parameters when we start a project. These are of course very cautious because we have a business case to protect always and we only start projects when we're quite comfortable that at the end of the day we can sort of lead that business case into fruition. And then we don't change these parameters until we have sort of a market sounding in place and we have completed a larger part of the property and start to talk to the market around that. So that's the way this is done. Then I'm not sure on your surplus values here. What you should look at is the surplus values and you need to relate that to the total value. So essentially the 10 billion in surplus value that we report or inform about, it is not in our books obviously, is to be related to the 43 billion of total investments, which makes a surplus of say roughly 25%. That is where we're running the portfolio at the moment. Does that make sense? Okay, cool. Thank you. Thank you.

Yes, it does. Thank you.

Thank you. Next question is from the line of Gregor Kugelitsch from UBS. Please go ahead.

Good morning. We have one question perhaps for both to apply to both the commercial and the residential business. Maybe starting residential, I think we're seeing some price erosion in Sweden if you look at the macro data. to understand how you deal with that and whether you're sort of following the market when it comes to sort of pricing and if we've seen that already in the quarter or if that's more ahead and then similarly on commercial um is there a point where you i appreciate that you're trying to lease first before you sell but is there a point also where you decide on perhaps taken a price cut to shift or are you more inclined to hold out for kind of the prices that you had in mind when you started a project? Thank you.

Thank you, Gregor. Residential development, the price erosion, we have seen now a more hesitant market. We can see that in the second-hand market, the buyers and sellers in Sweden, they're not really meeting each other. They have different expectations. We expect that to continue for some time. And that's due to, of course, the interest rate has gone up and the buyers are more hesitant. What we have seen in our portfolio is we have not reduced the prices. We have a good position since we have, out of the 8,200 homes in production, 72% is already sold. So we don't have any urgent need to reduce the prices. Having said that, of course, when we start new projects, we are very careful with the market analysis and the price level we can expect from those projects. And we price every project on individual level and look at the individual business case. So that remains to be seen. And Magnus, the second question.

Hi, Greg. On commercial, you asked, is there any point in time where we shift prices, etc.? And of course, there is if there's a need to it. I mean, as I explained to Pam a couple of minutes ago, what we do normally is that we have a business case that we feel very certain on. And that business case is normally what guides our sort of the valuation that we report or inform in the quarterly report about. Of course, if we see major market shifts, then we would have to address that as well. But otherwise, we do external valuations of all the properties once every year to sort of confirm that we are correct in that. But since our properties are completed and expected to be sold at very different points in time, which you can see also on the chart that illustrates the completion profile that I showed you earlier in the presentation here, for us it's very much to understand where is the market at that point in time and that is a very difficult game to play. So essentially we try to sort of be very long term in those assessments. So it's not like we go and shift yields every quarter unless there's a very sort of strong indication that the value would be wrong. That's not what we see at the moment. In terms of rents then, which is the other component, it's very important to understand we continuously lease and sort of track the market there. We have a good risk tolerance and a strong balance sheet so we don't have to do any fire sales or properties in order to recoup cash or anything like that. That is very important for us. We try to use our commercial financial strength to sort of get the most commercial benefit out of the portfolio we have as possible. So if that means waiting somewhat longer with leasing or with sales, if we think the market is coming back, then that is the right commercial decision for us. But of course, we evaluate these things constantly to make sure we are not sort of standing on our heels when the market shifts. That's not what we're doing.

Thank you. That was helpful.

Sure. Thank you.

Next question is from the line of Marcin Vojtau from Bank of America. Please go ahead.

Yes. Good morning. Thank you so much for taking my questions. Firstly, if I may, on the residential, can you remind us what percentage of your residential business is actually the book log concept? And do you believe it will be materially more resilient than the rest of the housing market, in particular in Sweden? And then perhaps on construction, can you comment in a bit more detail on your US construction business where you are improving margins? Would you say you are already fully satisfied with where you are, or can you improve even more? And also, how are you managing cost inflation in the U.S.? Because my understanding is that I think some of these projects in civil are at fixed prices, at least to some extent. Thank you.

Okay, the first question, the Bokluck portfolio is overall, if we compare it, the vast majority of the Bokluck is in the Swedish business.

Magnus, you are looking into the details. Obviously, we don't report Bo Klook separately externally, but it's somewhere 20-30% of the overall portfolio and that goes a little bit up and down. Obviously, in a market situation like this, we would expect Bo Klook to be sort of very resilient because they are in a market segment and are always in a market segment that's sort of more affordable being a bit cautious with terms here because the use of the term affordable varies a lot across different markets but they're aiming towards a different customer category that is also what we've seen historically that that's the way the market plays out

Okay, when it comes to the US construction margins, they are, as we reported earlier, they are back on track. They're performing on a high level. So that is good and we expect them to continue to deliver. When it comes to cost in escalation in the US, when it comes to the building part, we are not so hit by the increased cost because we have a lower risk and low margin business model. On the civil side, though, we have some part of the business with fixed prices. What we are doing there is that we are very careful when we go into projects to secure prices in the supply chain. We secure as much as possible when it comes to steel and other materials before we even bid for projects and we have a process and risk assessment for that in place. and we also discussing now we can see more contracts where we have inflation clauses in in the contract so we get compensated for for cost escalation in some cases we can take out some part of the material that has been very volatile in the in the past here so we have been able to mitigate the cost escalation in the construction stream overall including us

Thank you. As a reminder, if you'd like to ask any further questions, please press star and 1 on your telephone. Next question is from the line of Stefan Andersen from SEB. Please go ahead.

Thank you. First, also a question on the development side, I guess, or actually starting connected to that with your uh property management business um you mentioned early there in the presentation that you said that the pipeline looks good and in a way you control that pipeline so i'm a little bit curious on what you mean by that uh if you can indicate to us you know when when you think you will see further acquisitions uh between those two divisions

Hey Stefan, Magnus. Could you repeat the question? There's a question about pipeline and how we look upon that that we mentioned in the early parts of the presentation. But what part of the business are you referring to?

The property management division you newly started where you're managing your properties where you haven't bought that many yet. And you said that the pipeline looks good to grow that. If I didn't misunderstand you. So I was just curious on what your thinking are about moving over properties from CD to, you don't call it property management, you call it, sorry, you have another name. I hope you understand.

I fully understand your question. Sorry about that misunderstanding. You're talking about investment properties and the pipeline there is good. This is a business where we acquire properties from commercial development in the Nordics and we have said it pertains to Sweden. So what we're really referring to there is that we have a good pipeline of projects in commercial development Nordics. And then, of course, we don't decide if we're going to sell these properties externally or internally to investment properties then until they are ready to be sold. But of course, we see that there are plenty of opportunities given the strong portfolio we have in the Nordic development business. Does that make sense as a further explanation to...

Absolutely, but let me put it this way then. Do you expect any of those properties to be moved over or acquired already this year or should we expect it later than 2022?

I mean, we don't comment on future divestment plans, obviously. You have the completion profile that we show you, and you can also see that we have 6.2 billion in properties that are already completed, but yet unsold. That's fine, thank you.

Then on the CDs, on commercial development then, the transaction market for properties are holding up surprisingly well. I think you've seen the property management, the real estate companies have even increased the values of properties in this quarter. Very few write downs. While the stock market, of course, is focusing on raising financial costs and the bond market that's collapsing. So I'm very curious to hear what you see in your discussions. Are you still seeing a good interest for properties or are you seeing any hesitation or drop in interest.

We don't see any hesitations or have any difficult discussions around that actually. Our investors are sort of willing to pay a very good price for our properties. So we sort of from the 10 000 feet perspective can understand that it's on the market looks a bit different but that's in reality the discussions we have which also informs our view when we sort of look at new projects and also valuations.

Perfect. Thank you. And then on residential, looking at your pre-sale level, booking levels, they're rather high. So I guess, in a way, you could have started more than you've done. So there should be some kind of bottleneck here. So I'm just a little bit curious. And it differs in different markets. I fully understand that. Is it building permits that is the bottleneck at the moment or is the price cost per the project that you're looking at or is it the demand if you were to pick one of those three?

I would say I would pick permits. It takes a long time to get permits to construct residential now, especially in the market where we are operating. So that is definitely a bottleneck. And then we start projects because we have the ability, we believe in the market in the more long term and we see it as a competitive advantage since some actors in the market are more dependent on the credit market than we are not. So we can start projects with a lower sales rate and to be able to sell those in... closer to completion. Because today it's very hesitant and people are not willing to sign up for an apartment two years ahead of completion. That's why we can start more projects. But we need the permits, obviously.

And the final question really quickly on construction. We've seen some input costs, material costs coming down a little bit. How is your suppliers behaving here? Are you managing to follow down as well? It's always easier to push everyone up, I guess. But are you seeing the reversal as well to any extent?

We can see now, especially in the end of the second quarter, that it's easier for us to get fixed prices from the supply chain. And we see less pressure upwards on the cost. So that is encouraging. So it's easier for us to do what we should to secure as much as possible before we bid for product.

Okay, thank you. That's all my questions.

Next question is from the line, Marcus Hendrickson from ABG. Please go ahead.

Thank you very much. I just have a follow-up related to the transaction market, but instead for building rights and land bank, do you see any opportunities there already or is it too early?

Hi there, Magnus here. I think we see some opportunities, but I think it's a little bit early for us. And we sort of think that if the market continues to develop in the current direction, we're pretty convinced that there will be significant opportunities for us down the line here. So it might be a little bit early to get to the really, really good deals yet.

Very clear answer. Thank you very much.

For any further questions, please press star followed by one on your telephone.

Okay, so that means that we have no further questions now. So thank you for asking those questions and Magnus and Agnes, thank you for your answers. It's now time for us to close this earnings call. So thank you for listening and a recorded version of this audio cast will be available on our webpage afterwards. Thank you for now. See you back here for the third quarter report. Have a nice summer.