Skanska AB (publ)

Good morning and welcome to the presentation of Skanska's second quarter report for 2023. I'm Antonija Ljuvnerlind, Senior Vice President, Investor Relations. Shortly, we will listen to a business, market and financial update from our CEO Anders Danielsson and our CFO Magnus Persson. Having gone through the Q2 performance and results, we will then open up for questions. Today, you can ask your questions using either the telephone conference number, then just please follow the instructions by the operator, or you can send us your question using the text field on the webcast page. Should there be a lot of questions, we will, however, prioritize, as usual, the people calling in. But with that, let's start with a Q2 update. I will now hand over to you, Anders.

Thank you, Antonia. And I want you to look at the picture here to the right. It's one of the completed projects on the west coast in Norway, Nordöveien. Very successful and beautiful projects. Let's start with the highlights of the second quarter. We have a record high order backlog in the quarter. And if you go comment on the streams, construction is delivering strong results. On the project development, both on residential development and commercial property development, we have low sales volume due to the market condition. We'll go into that later on. On the other hand, on the commercial property development, we have a solid leasing in the quarter, which, of course, creating value for the future. And investment properties, we have no acquisition in the second quarter. Operating margin in construction, 3.4%, same level as last year. Isolated quarter. Return on capital employed in project development overall. at low 2.3% on a rolling 12. That's, of course, due to the low volume. Return on capital employed in the investment properties, 5.5% on a rolling 12-month basis, slightly below our target of 6%. Return on equity down to 11.1% on a rolling 12 months. We continue to have a strong financial position and we have managed to reduce our carbon emission by 57% since the base year 2015. uh i will move on to the construction stream where we have revenue is pretty much flat we have record high order bookings more than 63 billion in the quarter so we're ending up with a book to build ratio of 115% on a rolling 12. So the order backlog is on record high level, 250 billion Swedish, and we have an operating income in line with last year in SEC, and we have an operating margin again of 3.4%. So the record strong order intake is general, but also boosted by large civil contracts in Norway and in the USA. Order backlog is really strong. And on the rolling 12 months operating margin, we're ending up at 3.8%, well above our long-term group target of 3.5%. So the strong performance continue in construction, which is really encouraging and important. Moving on to residential development. The revenue here is down to 1.6 billion. We also saw that the number of homes sold is also down with around 50% compared to last year, the same period. and the home started is also down accordingly. Operating income is 49 million SEK and the operating margin 2.9%. And we have a low return on capital employed due to the low volume here of 0.2%. so the sales volume slightly up but remain low due to the market activity and the measures we have taking in book look to adapt to the market situation also impacting the result in the quarter with 100 128 million Move on to commercial property development. The operating income is minus 15 million. We have a gain on sale of 171 million, so quite a few transactions in the quarter. We have 33 ongoing projects. That corresponds to almost 33 billion upon completion in total investments. And we have two projects pre-sold and started in Q2. The positive thing in commercial property development is the leasing activity during the quarter. We have leased 78,000 square meters in the second quarter compared to 47,000 square meters last year. And that of course creates value for the future. Transaction volume remains low overall in the market and we can see that the investors are hesitant. And investment properties, no transaction in the second quarter. Here, as you know, we're targeting high quality, sustainable office portfolio, building up to between 12 to 18 billion over time. to generate the stable cash flow. And we can see we have a stable operational performance and we also have a good interest from potential tenants for the very few remaining vacant premises. If we go back to the construction stream and here you can see the order backlog and the development over time for the last few years. So here you can see clearly that we are on the record high order backlog. You can also see that the book to build ratio is up in the quarter. The same for order bookings, of course, and the revenue is flat. and if we go in to look at the order bookings in the different geographies strong order intake in the nordics large civil projects in in norway and but overall healthy healthy backlog here Slightly lower in the book to build in Europe, which is due to the market conditions. So I'm not surprised over that. And very, very strong order intake in US. So overall, we have 18 months of production, which is on a high level. And again, book to build of ratio of 115%. With that, I hand over to Magnus. Thank you, Anders.

And we go into the income statement for construction. That's where we usually start. Also this time, it's already been said we grow revenues a couple of percent. If you take out the FX effect from that, we are down a couple of percent. So roughly flat in terms of development there. Gross margin goes up a little bit. up to 7.5%, so very much in line with the comparable quarter. Same thing with S&A, ended the quarter then with an operating margin of 3.4%. So in a way, very stable performance and we have, as we have said many quarter by now, a very strong portfolio in construction that we are working out of. which creates the possibility to have this stable performance and so of course the strong bookings that you can see is really sort of comfortable to have as a good volume for the future here as we know that we are still keeping to the strict bidding requirements and the risk controls we have in the bidding. If we look at the different geographies that we have, we have a stable delivery in all geographies. You can see Swedish margin is coming down a bit from 3.3 to 3.0%, which characterizes a very normal sort of intra-quarter type of deviation in terms of performance. Europe, 2.6%, a little bit lower than, and underlying to that, you can say that we had a really good the second quarter last year in the central European operations, which is more normal this year. And in the UK, it's a bit more sluggish this quarter actually. We've had sort of some issues with some commercial projects in London here that contributes to a bit weaker margin. Then US, 3.5%, very strong performance. So overall, all geographies are performing really well. Go to residential development. Here we have a continued weak market. Revenues were down about 45%, down to 1.6 billion in the isolated quarter. Sales remain slow. I mean, we still have the customer uncertainty that is lingering around. It's a bit unclear how how the central banks will continue to act and how inflation will develop of course and then we can see that banks are having tighter lending requirements in terms of issuing mortgages to clients especially in Sweden, Finland and Norway that is impacting sales also here. We had an EBIT of 49 million Swedish kronor, which obviously is not a stellar result. The main impact there is volume impact, you can say. We've had a one-off cost in the UK affordable part of the Boklok operation. If we take that out, you can say that the actual project performance is quite stable in the operation still. But as we said, we are hurt here by the low volumes where the volume really makes us unable to cover the organizational costs that we have here at the time. If we look at different geographies. Nordics are clearly performing sort of at the worst and in the European part it's quite clear here that the central European part of the residential development operation is performing really well actually. Perhaps a bit surprising, but that's the way it is. And as I said, in the UK, the book-look operations have had to take one-off cost in the quarter that have been recognized. And all our units, because the volume is what it is right now, and we foresee a continued weak residential development market here for the coming 12 months, All parts of the residential development business are undertaking cost adjustment activities here to adjust for the future sort of expected volumes in the business. If we look at home started and sold, we sold 340 units, down 50% approximately from last year. We started 240 units then, and the situation is by and large the same as in the first quarter here. We have a lot of units to sell, so we don't need to start at the moment, and it's also harder today to find and underwrite strong and sort of credible business cases due to the market and the difficulty in getting the right event horizon in terms of future sales prices. That's more of an issue today than the cost side is, which is stabilizing. If we look at the homes in production, we had 6,400 units under production, slightly lower than the last quarter, as you can see in the bar chart. Of this, we had sold end of the second quarter 58%, somewhat up from last quarter then, which was at 57%. This means that 2,700 units was unsold and potential to be sold out into the future. In addition to this, we had 306 units that were unsold but completed, up from 210 units then. And as we have said also here many times, this is not an issue as long as we can see that these units are churning and not getting old in our balance sheet. We are tracking this closely and we don't have an issue with this and we do expect that this number will increase the coming quarters because the sales pace is slower than the pace at which we are completing units now. So that's the way it will look. Move over to commercial property development. A very uneventful second quarter in terms of the P&L. We recognized two divestments during the isolated quarter. Both were smaller public buildings in the southern parts of Sweden and in total then we booked a loss of 15 million Swedish kronor in the isolated quarter. If we look at the unrealized and realized gains, we had unrealized gains, which is represented by the bars on the slide you see here on the screen, of 7.4 billion at the end of the quarter. It's a slight increase in value mainly due to currency effects and also that rents are developing in a positive way here. We completed four projects which were sort of moved from ongoing to completed in the bar chart here during the second quarter. Then you have the completion profile of the commercial property development portfolio, and we now have 10 billion invested capital in completed unsold projects. It's in total 20 properties that are completed and not sold. These are leased on the average then to 73%, up slightly from the first quarter, which was at 71%, so it's developing in the right direction. We have for quite a few quarters said that we are not in the business or not in a situation where we have to put properties to the market that are not leased well enough because it will inevitably force us into discussions around price with buyers. Where we are now, we have several properties that are leased to an adequate level to put them on the market. So we are in several transaction processes and working on this. But it is very clear that it is still a very hesitant transaction market here. So we have leads, we are working on it, but it just takes time to get the deals to be signed. If we look out into the future, then you see the dark blue bars. We will complete properties for approximately another six billion during the third quarter, according to plan, and then another three and a half billion in the fourth quarter, according to plan. And the green dots represents, as they do every quarter, I show this slide, the average leasing rates for the properties that are to be completed in the respective quarter. So the shape of the curve of the green dots are just fine. But we would, of course, Ideally, we would have liked to parallel shift it upwards a bit to have a bit higher leasing overall, but that's where we are now. If we look at leasing, we had a completion rate in the portfolio of 58% at the end of the quarter and then a leasing rate of 43%. The leasing market continues to improve. As Anders said, we have leased 78,000 square meters in the isolated quarter. This is actually by all comparisons a very strong quarter in terms of leasing. 205,000 square meters on a rolling 12-month basis and you can see visually now on the chart that the bars are starting to move in a trend in a better direction than what we have seen for quite some time. the shift in the leasing market is most clear in central europe we can also see improvements in in the nordics characterized by small leases and but they are moving here there's still a lot of requests from potential tenants in terms of flexibility arrangements in the lease agreements and that can be resizing the size of the lease and various options in the lease agreements to give them flexibility to account for their own uncertainty about their commercial future, so to speak. We are working very productively in those negotiations to meet these requests and demands. On a very positive note is that rents are developing in the right direction. Of course, part of this is CPI adjustments that are built into the agreements, but also in terms of new leases, we can see it's moving in the right way. So that is very positive for the value creation of the commercial property business for us. If you look at investment properties, it's already been said we didn't make any transactions in the quarter. We have increased the average portfolio yield there by 15 basis points, taking down or affecting the property value with around 130 million Swedish kronas in a negative way. This is by and large compensated by higher rents in the portfolio. So the net effect you can see in the P&L is a mere 25 million Swedish kronas negative way then. All properties are continuing to perform well and according to expectations. If we look at the group, we had an operating income from all the business streams of 1.4 billion. Central Coast stands out a little bit as being low, 73 million compared to the 155 in the comparable quarter. In this, we have a positive one-off effect from the legacy businesses that we have and cater for at the central level here. This should not be accounted for out into the future, but the underlying costs here are essentially stable in the quarter. Net financials, 133 million, a lot up then from the comparable quarter. And the main difference here is that interest rates have gone up, which also means that when we capitalize costs in our product development business, those capitalizations become higher. That's the main impact we have here. And then taxes, we taxed out at a decent tax rate of 16%, quite a lot lower than at 21% last year due to business mix, but also due to the possibility to use past tax losses in some of our legacy operations. Cash flow. We had a negative cash flow in the quarter of minus 5 billion, slightly down from the comparable quarter of 4.8. You can see the two items in here. Dividend was slightly lower this year than last year, paid out in April this year. And then the operating cash flow from operations of 1.8 billion. And the major shift to the comparable quarter is that we had a lower cash flow or a more negative cash flow from working capital this quarter than we had in the comparable quarter. I'll come back to that in a slide or two. And as you know, and we have pointed out many times, we are having today a very high investment pace into the product development business when we are working on and successfully completing the ongoing projects that we have started over say the last two years or so. We looked in at the working capital you can see the bars here represent the nominal values as we see them in the balance sheet and there's essentially no change to the first quarter and we remain at around 18% of revenue in terms of negative working capital. The position has changed a little bit than if you back up a full year as you can see since the second quarter and third quarter last year where it seems to be sort of topping out this level. But any changes to this balance will be very gradual and go very slow as it is tied to the several thousands of projects that we have ongoing. Look at investments then. I alluded to this a couple of slides back. The dark blue bars represent investments we make in each isolated quarter. And you can see that we are now averaging a quarterly investment base around 6 billion. On a rolling 12-month basis, the net investments are quite significant at minus 7.5 billion. That's represented by the green line in the chart there. And the reason to that is sort of the sluggish transaction market where it takes more time today to monetize on the previous investments we have done by selling the project development units here. Total capital employed in RD, CD and IP end of the second quarter was close to 66 billion. If we look at funding, we continue to have a very robust financial position and low levels of external funding is needed and we also have a significant amount of available liquidity should this be needed. During the quarter, we also secured actually two new credit facilities and took up a small loan, nominated in euros and dollars here to further bolster the sort of liquid capacity of the company, but a very stable position here. Financial position, we closed the quarter with 57 billion in equity and adjusted net debt of 4.4 billion in cash. So there's a lot of staying power in this balance sheet to make sure that we don't have to be sort of forced out on the racetrack and selling properties too early here. But we do have the staying power we need to manage the transition to a better transaction market in a very responsible way for our shareholders. Anders, I'll hand back to you.

I will go into the market outlook. Starting with construction, and here we can see a mixed picture. We have a strong market outlook in the US, and also a stable market in most of the civil operations in Europe. Swedish building market is expected to weaken if we look at the coming 12 months. And we have the active sector, civil infrastructure and social infrastructure is strong in the US. We can see a lot of large pipeline when it comes to civil infrastructure, but also in the other segment where we are operating. building schools, universities, hospitals, airports and so on. So that's positive. Material availability has improved, so we can see less bottlenecks and we can also see that material prices have levelled out in the last few quarters. Residential development, low activity in the housing market will remain in the Nordics. We can see a more stable outlook in Europe, driven by Central Europe and the increase in sales we have seen there. so the cost of living pressure including interest rates increases cost of living that remains and also impacting the the market in a negative way but the underlying need for homes is there definitely in the market where we are operating Commercial property development, low transaction volumes and hesitant investor market remains in our outlook, but we can see that the leasing market is gradually improving, which is great in value. Investment property is stable. We can see a polarization in both the tenant market and the investor market. So we are confident that we have high quality, high sustainability standards in the good places. So there's definitely a stronger demand for that. So to summarize this Presentation, we have a group performance in the second quarter with a strong delivery from construction, residential development, low sales volume, same as commercial property development. Encouraging though with a solid leasing in the quarter and the investment properties, we haven't seen any acquisition in the second quarter. Record strong order intake and order backlog for the construction stream. And we continue to have a robust financial position. So the strategic direction remains. We will continue to focus on strong profitability and grow in a responsible way the construction stream. And we're definitely aiming for being a leading residential developer in the market where we operate. and we also are increasing our commercial property development in line with the market allows us to do so and we are determined to continue to build up the investment property portfolio as planned with that i hand over to antonia to start the q a

Yes, thank you Anders. So now we will open up for your questions. And as mentioned before, you can either use the conference phone number and call us and ask your question, or you can send us a text using the text field on the webcast page. If we have a lot of questions, we will, however, prioritize people calling in. So with that, I will turn to the operator and ask you to please introduce the first caller.

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 requested to use only handsets while asking a question. Anyone who has a question may press star N1 at this time. Our first question comes from the line of Graham Hunt from Jefferies. Please go ahead.

Thanks very much. Just two questions from me. First one is on the Book Look business. You recorded a 128 million loss this quarter, an improvement from the 331 million last quarter. Is it possible to give any color on what drove that improvement? And then maybe just on your expectations for the rest of the year, are you expecting that business to be profitable again by 2024? Or could it be later than that? Or are you thinking earlier than that? And then the second question on commercial property. I just wondered if you could give a bit more color on your interest in increasing exposure to the life sciences. properties. You've made an investment in Boston this quarter. How much of the portfolio are these projects today and where would you like it to get to? And historically, I think you've primarily developed office space, particularly in the US. How do you feel that compares to the skill set required for these life sciences projects? Is it similar or do you have to bring in new skills? Thanks.

Okay, thank you, Graham, for the question. I will start with the Bukluk question. You're right, we're taking a charge here of 128 million in the quarter, and that is driven by volume, mainly volume, low volume. We are working here in a segment with more low-cost affordable housing, and that is a segment that has been... most hit by the increased cost of living, increased interest rates. So it's definitely impacting that segment more than other segments. But we also have seen cost increases in some of the very few projects in the UK for Boklok. That is also impacting the quarter. And of course, we don't give any forecast how long it will take. I can say that we have a plan and we're following the plan and we are taking measures in all markets when it comes to Boklok to reduce cost and make sure that we're starting new fresh projects in a profitable way. But the market is not helping us right now in that segment, definitely. and for the commercial development, Magnus.

Hi Graham, Magnus here. In terms of the CD question to life sciences, I mean, you're absolutely correct. Traditionally, we have developed mainly offices. We have the last few years started to develop a bit more multifamily residential as well. And we've always had a little bit of the life sciences over the last few years, but we are looking more and more at that sector. We have secured some very interesting pieces of land in very good sort of the right places especially in Boston to cater for this market and we see there's a strong demand in the market and it is a sort of outlook also in that space that seems very attractive for us to position ourselves in for a long run here. So we are doing some of it today, but our intentions is to explore this market segment more out in the future. In terms of skill sets, I say we have all the development skill sets to go after this. Of course, there can be certain speciality type contractors in terms of design when it comes to installations in such buildings that differs a little bit from a traditional office building, but that is more in terms of what subs we are buying in there.

The next question comes from the line of Marcus Hendrickson from ABG. Please go ahead.

Thank you very much. Good morning, everyone. Three questions from me. First off, looking at the rest of Europe RD, you have started zero units now, two quarters in a row. This is also the market where you managed to sell. You are at 65% sold in production and the outlook was also raised somewhat here. How should we view the outlook for housing starts going forward? Should we just look at the market outlook or could you help us a bit on the potential bottlenecks on land, etc.? ?

Hi Marcus, this is Magnus. I take your first question and then you will have to come back with the second and third. In terms of order, Europe is correct. We have a very good market down there at the moment. It's been strong for quite some time and it has not followed the sort of development in the Nordics in terms of demand trailing off. But the demand is still there. We get good prices. Now, as you note, we haven't started anything there in the first or second quarter, but this is always a mix of what you have available to start and when you want to do it, right? So we don't have any ambition to not start things there. We have things to sell, but we need, of course, to balance our exposure against the need to increase our inventory to sell from, so to speak. So our ambition is to continue to ensure that we have a good inventory to sell from in that market.

Thank you. And then could you also describe the difference in consumer behavior between Poland that you highlight and the Nordics in RD? And also, if you get any signals of distressed sellers in your markets, and if so, where? And do you see more opportunities in RD or CD?

Yeah, I will go after this one as well. In terms of the difference in consumer behaviour, I can't say we see any major difference in consumer behaviour except that it's a lot easier, it's a much bigger demand to actually sign sort of the sales agreements in Europe and the price development there is something completely different. So it's very clear that the consumers in Poland is stronger here than Czech Republic. But the consumers here, they have a financial situation that makes it possible for them to buy. And banks are not as restrictive there as they are here also, for whatever reason that is then. Then other things you can point out is that in the Nordics, when you develop and sell residential units, you fit them out to 100%. I mean, you sell them with the bathroom, with the kitchen and so on. The traditional residential development model in Central Europe is not to do that, but you sell either shell or core, which means essentially that you hand over something that is not, you don't have the fit-outs inside the apartment. You have no kitchen, et cetera, right? This is shifting a little bit, but it's still the very dominant part of it. But apart from that, there's no major differences, I would say, in terms of consumer behavior. And then you had a follow-up question on CD, but I'm sorry, can you repeat that, please?

Yes, if you see any signals of distressed sellers in your markets, and if so, where in your markets, and if you see any opportunities in RD or CD where they pop up, if anything.

That's a good question. I think we don't see yet any strong signals of pure distressed sellers. We see some structures, of course, that are in need to sell, but there's a difference to want to sell and need to sell versus actually selling in distress, which means that you need to secure a cash flow very immediately or something very bad will happen. We don't really see that except in some very few select cases. But, of course, there is sort of more available on the sell side than it would have been like two years back.

Thank you. Those were my questions.

The next question comes from Arnold Lehman from Bank of America. Please go ahead.

Thank you very much. I have three questions, if I may. Starting with construction, as you mentioned, you had very large orders in the second quarter, in particular in the US and Norway. Could you maybe elaborate on the margin outlook for these large orders? I appreciate that's not easy to forecast, but how do you balance this step up in orders with your traditionally selective strategy? That's my first question. My second question is just coming back on residential development. More generally, we see a bit of a sequential improvement in sales, I think, in the second quarter compared to the first quarter. Do you think we have, let's say, turned the corner or seen the low point in residential sales and things could be improving a little bit from here? Is Q2 the new normal heading into the third quarter? That's my second question. And lastly, on commercial development, if I remember well, in the first quarter you did mark down your portfolio by 4%. I don't believe you have done any markdown this quarter. Is it because you are more confident that you have the right valuation in the books or the right gains coming up? And related to that, you mentioned in your introduction that you had many leads. for potential transactions. What are the sticking points? Is it valuation? Is it issues with the financing for the buyer or anything else? Thank you.

Okay, thank you. I will start with the construction order intake. As you noted, we have seen large orders in the US, civil projects in the US and Norway, but we overall have a high order intake of over 60 billion Swedish in the quarter. And of course, I will not comment marginally on the single projects, but we're definitely sticking. We have the discipline to be selective in the market. We're going for projects where we can see that we have a competitive advantage. We're going for projects in the core geographies. We're going for projects where we can see that we have the team in place, the right team with the right competence in place so we can execute so that we are comfortable that we can execute a project in a profitable way. And I don't see any other target for this project that we have won during this quarter. So, Magnus, if we can continue with the audience.

We'll do that. Your question on RD is, have we sort of turned past the bottom yet of the RD development market? That's a very difficult question to answer because each market is a little bit different in timing here. We can see some very, very early signs of a slight improvement in Sweden, for instance, on the second-hand market and also in price development. I say Norway and Finland is a bit after in terms of this. And of course, then in Central Europe, we have a very good market still. So it varies a lot. It's hard to say, but we think that we are not through the period of a weaker market in the sense that we can now expect these transaction volumes going out into the future. We think that this market will bounce back to some extent, but that it will take some time before we understand what is actually the true underlying demand for new developments here. So that we believe will come up, but it will take some time then. In terms of question for commercial development, it's true in the first quarter we adjusted the communicated assessed market value for the ongoing development projects that are not completed yet in the commercial development portfolio. And here it's important to be a little bit precise that for those projects, we are not keeping them to their market value in our balance sheet. This is only a communication we make. What do we think these properties will be worth once they are completed and sold out into the future? Which means that this is our assessment of what will the rent levels be? What will the transaction yields be, say, one and a half to three years out in time? And that is the assessment that we changed in the first quarter. And of course, since this is a very forward-looking thing, it's associated with fairly large uncertainties. And we made a step change to that then in the first quarter, and we have not made any changes to the communicated assessed market values at the time of transaction for the ongoing produce in this quarter now. We have only made changes to the current market values of our investment properties, which follows then a different valuation logic, obviously. I hope that was an answer to your question.

Yeah, I just had a follow-up. Thank you very much. I just had a follow-up on the potential upcoming transactions. You said you had many leads. And I was after the speaking points, you know, is it discussions around the valuation or was it issues with the financing for the buyers?

It varies across the different discussions, obviously. It's hard to find one common theme, but of course the status of the financial markets is part of that in the background for the buyers. Then in terms of how that translates into our discussions, it varies definitely. I think in many cases it's a bit of uncertainty and it's a bit of a waiting game involved there.

Understood. Thank you very much.

Our last question over the phone comes from Gregor Kuklic from UBS. Please go ahead.

Gregor Kuklic Hi. Good morning. I've got a few questions as well, please. I wanted to go back to the slide where you talked about the net investment and divestment. And I guess I want to sort of explore, in effect, if you can't sell anything, let's assume no disposals. what would that continue to look like? In other words, will you continue to kind of burn cash? And if so, at what pace? Because I'm guessing you still have to continue construction on the ongoing projects. First question. The second question is, it sounded, I don't know, maybe I'm misinterpreting, but it sounded like you're a little bit more optimistic, let's say, on putting stuff on CD in the market, onto the market, because your pre-sale rates are now meeting your thresholds. So is that the right interpretation, that there's more properties that meet the criteria to be disposed? In other words, I think it's like 70% or 75% pre-sale rate. And if so, should we be expecting a bit more activity? And then maybe a small question on RD. That loss in Boklok, is that a restructuring charge, or is it sort of a markdown, or is it just sort of the lack of overhead absorption that means you're making an overhead loss? I guess I want to understand how much of it is potentially just a one-off, or how much is sort of recurring, I guess. Thank you.

Thank you Greg. I will take the first two questions and Anders can deal with the Boklok question then. Your question is sort of a bit speculative but I think it's fair. What happens if the transaction market continues to struggle and we are then theoretically unable to sell anything and what will happen with our cash flow? And it is true that in this line of business, where you start large development projects, when you do that, you commit to complete the construction contract, because if you stop in the middle, you will have essentially destroyed a lot of value. So we are fully committed, of course, to see these constructions to the end, which also is a key component in all of our capital planning, and it's a key component in why our balance sheet looks the way it looks. So we continuously all the time make sure that we have the financial means and capacity to complete the ongoing development projects without having to fire sell anything or what we have in the balance sheet because that would put us in a very awkward situation if the market becomes a bit weaker on the transaction side as it is now. So yes, we have a lot of capital committed to complete these projects, and you can actually find that number in the commercial development section in the Q2 report. If you flip over to that, you will see a table in the left bottom side where you can see these numbers as well. And you should relate those numbers then to our available liquidity and the limits we have in terms of net debt, where we have now an additional 14 billion available capacity before we would hit our communicated limit. Your second question then, is it correct to say that we are a bit more positive in the sense that we have more to sell in CED now than what we've had? And that is correct because we are continuing to lease these projects as we complete them. And for more and more projects, we are reaching a leasing level. It's not a presale level, it's a leasing level that are adequate for us to take them to the market without risking having the wrong type of discussions with buyers. And with these properties then, as I said, we have many ongoing divestment dialogues and are actively working to complete these transactions. But we are from a financial position, so to speak, not in any rush, so we don't need to secure the cash inflow from these properties, because we have the staying power that our balance sheet allows us. I hope this will answer for the two first questions, and Anders, you can take it.

Yeah, on the RD Boklok charge we take in the quarter here, it's mainly due to the low volume we can see in that segment. And that's the low volume giving us income that we cannot cover our cost completely. And we have taken measures, we are reducing the cost in all markets when it comes to Boklok. and we're also adjusting ourselves to our judgment of the future volume. But the quarter is also impacted by cost increases in a few, very few projects in the UK that is ongoing and coming close to completion now.

Thank you. Maybe a small follow-up on the cash flow. How much cash is due to come in on assets or... CD properties that you've already agreed to sell in the past. I don't know, I think you disclosed this number somewhere, but if you just remind me how much cash is due effectively from assets that, you know, you still need to complete them, but you have signed a contract and you should receive the cash at some point.

But you're looking for 7.9 billion?

The cash in.

Cash in, secured cash in, yes. And that is then from the CD transactions I'm mentioning now.

You will... The CD, yeah, yeah. Exactly.

Okay, thanks. Ladies and gentlemen, this was the last question.

Okay, very good. Thank you. We will now then turn to the questions that we've received by text. So I will read them out loud. And the first question comes from Peter at One Investment. He asks, can you please explain how the incentive terms are changing in your letting of commercial property comparing this period to last year? That's the first question.

It's a little bit hard to understand. Peter's question has to meet the incentive terms.

Perhaps he's referring to rent-free periods or things like that.

Just clarifying the question. Good clarification. Thank you, Antonia. I say since one year back this hasn't changed materially but if you compare it over a three-year period I would say that there's been an increase maybe in particular in Central Europe in terms of rent fees and cash contributions for fit out and what have you not all of these incentives to sign. the lease agreements, which also means that you sort of have to sign a lease agreement on a headline price, but underneath that you have to toss in certain incentives. So that has definitely increased, but that has been an ongoing thing since the start of the pandemic. It hasn't been a material significant change over the last year, I would argue.

Second question from Peter refers to the rental yield in our portfolio of completed properties. Since we do not communicate that, I will skip that question and move to the third question, which is, with the strong construction order intake, would you expect that the working capital of the construction division become more favorable in the coming quarters, positive for cash flow?

I'll take that question. I think the strong order bookings that we see now will not impact the net working capital in the coming quarters because it will take time to get these new bookings up into production and that is when we have the impact on the working capital.

Thank you. So that was all questions from Peter. And then I will move over to questions from Nicholas Mora at Morgan Stanley. So two questions. First being the trend in... Sorry, the question just moved here on the iPod. Sorry. The first is the trend in Swedish construction margin considering weakening building outlook. Is there a risk of continued softer margins?

No, I don't think so. We have the margin itself is somewhat impacted by a settlement we have made in Sweden, but the underlying margin, I don't expect anything else that they should be on the normal level going forward.

Then we have the second question refers to US construction. Order inflow has been impressive in Q2 in mid and large size orders, but we also saw an order cancellation on failure to secure credit. Is this point something that you're monitoring, particularly in the US non-residential market?

I would say that there is not a trend we can see as a problem for us. We are very conservative before we book any orders. We should have a binding agreement, binding contract with the client. And this is very unusual that we see cancellation. And in this specific case, the client couldn't get the financing in place. So the order was canceled. But again, it's very few examples of that in the large portfolio that we have.

So that was all questions from Nicolas, and we will then move over to questions from Kevin Sherampore at SEB. His first question refers to commercial property development, and he asked, in terms of ongoing discussions, generally, what is the current discrepancies between Skanska and buyers in terms of pricing expectations?

I can take that. It's become sort of a very boring answer but I'm not going to answer that question but of course specifically because it's a part of the negotiations that we have but of course any negotiation between a buyer and a seller will always start with a bigger or smaller deviation in price expectations and then over time and depending on how long that takes, you reach an agreement. So that's where we are. It's no change in that sense now compared to otherwise.

So next question here from Kevin is due to the weak residential markets, some more diversified builders are allocating resources towards, for instance, public segments. Have you noticed any form of pricing undercutting due to increased number of bidders? And do you see this as something that can impact margins?

I can take that question. No, we do not see that.

Yes. Okay. And that was actually the final question for today. So that means that we have now answered all questions that you've had. Should there be anything left unattended at this stage or any questions come to mind afterwards, please do not hesitate to reach out to either myself or the IR function. So now I would just want to thank you, Anders and Magnus, for your presentation and answers here today. We will be back with the comments on our Q3 report on the 1st of November. And then we're also pleased to invite you to our Capital Markets Day on the 21st of November that we will be hosting in one of the buildings that we built in the City of London. So looking forward to seeing you at those upcoming events in the fall. And now I will just conclude this press conference. A recorded version of this audio cast will be available on our webpage shortly. And with that, thank you very much for listening and enjoy the rest of the summer.