Skanska AB (publ)

Good morning and a warm welcome to the presentation of Skanska's first quarter report for 2025. I'm Antoni Gimdelind, I'm the senior vice president for investor relations here at Skanska and with me on stage here today I have our president and CEO Anders Danielsson and our CFO Jonas Rickberg. Shortly, they will take you through a presentation, walking through our first quarter performance, financial position, and the market outlook for the coming 12 months. And after their initial presentation, we will move over to questions. And if you are joining us online, then you can use the telephone conference number or the audio online call to join us here in the studio so that you can ask questions to us. But more instructions will follow later. So with that introduction, I will hand over to you Anders to start this presentation.

Thank you, Antonia. And welcome, everybody. And before we start to jump into the figures, I want you to look at the picture here on the slide. It's from the project Slussen in the middle of Stockholm. Fantastic project that has been ongoing for many years now. But it's starting to get close to completion and it will be a fantastic meeting place for all the inhabitants in Stockholm. But it's also a resilient project preventing Stockholm from being flooded in the event of major rain. Summarize the first quarter on a group level. It's growing revenue and solid performance, solid margin within the construction stream. We have increased macroeconomic uncertainty for residential, given that we have reduced the sold apartments somewhat. In commercial property development, we have started two new projects and we haven't seen any divestment in the single quarter. Investment properties is continuing to produce stable profit and cash flow. Operating margin in construction, 2.8% in the single quarter, and that's an increase compared to last year, 1.8 last year. So return on capital employed in the project development, including residential and commercial, 2.8% on a rolling 12-month basis, and the return on capital employed in investment properties, 4.5%, also rolling 12%. Return on equity rolling 12, 10.5%, and we remain a very solid financial position, which is really important for us. We also managed to reduce the carbon emission for the group for our own operation, meaning scope one and two with 62% compared to our base year, 2015. Now I will go into the different streams, starting with construction. Here we're increasing the revenue compared to last year and given the very record high order backlog we have. And the order bookings is down a bit, but we remain positive or booked to build a ratio of 115% on a rolling 12 for the group. And the order backlog is also on record, remains on record high level, 264 billion Swedish. Operating income increased a lot here to almost 1.2 billion and the operating margin again 2.8%. So revenue growth and good margin in all main geographies, which is really encouraging. And the rolling 12 months operating margin was 3.7%, well above our target of 3.5%. So we have a very high order backlog, and we also have a good quality in the backlog. I will come back to that. Residential development, we reduce, decrease our revenue here to 1.5 billion. And that's the reason, of course, that we have sold less apartment compared to last year in the same quarter. We also, as a consequence, started fewer homes in the quarter. and we have operating income of 63 million and return on capital employed 1.8 percent in the single in the single quarter or the in the rolling 12. so here there's a more has increased the uncertainties and the consumer confidence has decreased somewhat during the quarter and that is of course impacting the willingness to sign contract and there's more hesitation definitely In the Nordics. In Central Europe, on the other hand, we can see continuous stable market. And we see that our clients, our customers, they are signing contracts and we also see healthy profitability there. Overall, we have an operating margin of 4.2%. Commercial property development, we haven't seen any divestment during the quarter. We have started two new projects, as I said, one in Stockholm, one in Malmö. We have 16 ongoing projects and the total investment upon completion is close to 16 billion of those. We have 24 completed projects corresponding to 18 billion in total investment, and we have 71% leasing ratio in that portfolio. No divestment, as I said, but one project previously sold property was handed over in the quarter, generating cash. Investment properties, we have an operating income of 80 million compared to 50 last year. And the economic occupancy rate in that portfolio we have is 84%. Slightly lower than the year end. And we have some contracts that are under negotiations here. They haven't left the building, but they are under negotiation. Total property portfolio is 8.2 billion Swedish. Order bookings, very healthy level. The order backlog has decreased in Swedish crowns, but if you look at the local currency, the decrease is only 1%, so very high level continue. and here you can see over time how the order backlog has developed from 2020-21 and up until so you can see that this steady increase and we are on very good level you can also see the different rolling 12 development of the order bookings revenue and the book to build ratio And if I look into the different geographies, very healthy backlog, overall 19 months of production. So the order backlog is large. It also has a longer duration compared to if you look at the history. And it's also very high quality in the backlog. And that, of course, gives us a good foundation to produce a good profitability, which we have seen for a long time now, for many, many years, actually. An overall book-to-build ratio of 115%. Very confident in that. We are in a well position. We can continue to be selective and go for projects where we have a competitive advantage and where we can see that we have a good track record, a good history. And if you look at US, 132%, which is very good, and 23 months of production. So overall, we're very well positioned for us. With that, I hand over to Jonas.

Thank you, Anders. And welcome from my side as well here. We will go through a little bit more on the financial side and we start off here with the construction. And as you said, Anders, we are then increasing the revenue to 41.8 billion for the quarter. That is an increase in local currency with 14% and in 16% with Swedish SEK. Moving on then to the gross income, you can see that is on a 2.8 level and more stable here that we are looking in for, sorry, if you look in there for 7.5% in the gross margin, you can see that it's for the quarter, but please focus also here on the rolling 12 due to the fact that we are a seasonality company here. Also worth mentioning is that we have selling an admin in percent of revenue that is 4%. It's a healthy level. On a rolling 12, it's 3.8, actually then lower than we had for the full year. And that is also a sign that we are actually taking measures and looking over our cost situation, depending on how the market is developing and so on. Operating margin, 2.8 for the quarter, and as you were into, Anders, it's 3.7 for the rolling 12. That is then better than we had for the last full year of 3.5. So a very strong result, I would say, for construction here. Moving on to the geographies, you can see that it's strong deliveries all over the different regions. The Nordic is within natural variation, so to say. You can see that Sweden is flat on 2.3%. And the low... Normally low, I would say, in Europe here due to the seasonality effect, but we have quite high fixed cost and not doing asphalts and so on. You can see here we have a margin of 0.6 and that is a substantial increase from last year where we had a write-down actually in one of the projects connected there. Worth mentioning here is that we are very stable on the margin side on the US, 3.4, actually increasing a little bit. But please look into the left side here that you can see the economic contribution here of 770 million, which is a big increase here. So here you can also see that the big impact from US is coming through there once we are keeping the margin here. So overall, a very solid quarter for construction, how we are moving there. If we move on then to residential development side, as you said here, we are facing then a situation with uncertainty in the macroeconomic, of course, and that we foresee that the recovery that should have been coming here in quarter one, it has been slowing down a little bit. and in the later part here of quarter one. And of course, the revenue is down a little bit due to the fact that we are not selling so many units here. Also here, we are selling many from that we are produced earlier, so to say, and not from the new produced. And that is impacting a little bit here that we are coming up to the next slide here. SG&A is too high, and we have, over the years, taken it down, and we are right now in a situation that we can handle more volume than we are for the situation right now. Operating margin, as you were into, Anders, is 4.2, and delivering on 63 million here, and that is an improvement since last year. If we move on then to the different regions, you can see that it's improving them from 23 to 63 for the different geographies here. Worth mentioning here is that we in Boklok right now is separate as a business unit that's connected to the Swedish Residential Development Organization. And the small losses here that you can see on the left side here, the Nordic, that is mainly related to Finland and the situation we have there. And where we have quite much unsold complete in the inventory there. Also worth mentioning is that we have a good market as you were into also Anders when it comes to Europe. where we have really good profitability of 12.9 delivering a good result of 67 so good contribution here and that is the most stable market that we have here and and of course that is connected then to how we are starting things as well If we move on then to how we are starting projects, you can see that we are starting, we have sold 365 units and that is down then since last year of the corresponding period of 511. And that is, of course, impacting. Fewer homes started as well of 203 compared to 459. So that is a slight decline there as well. The one we have started is in the market area. We actually have good profitability right now, and that is in Central Europe and in Prague, and more in a specific location, I mean, Kolben district, where we also had 45% of the homes were already sold once we started the project, and that is a good sign here. We also started the project in Sweden. Also, I would say that we have a good pipeline here. And of course, we are really looking into our inventory and doing our utmost to really turning that into a good situation for us. We can see that we have a great demand for our housing, how we are producing things. And that is, of course, a strong sign for things when the market is picking up later on. If we move on then to homes in production, you can see that we right now, we have started, as I said, 203 and completed 507. That means that we are up to the number of 2,470 homes in production. That is then corresponding to 49% of which is sold then. And this is then reflecting a little bit of the un-security that we have in the market right now, that you as a private customer would like to buy and sell in the same market. That's why also you're hesitant to really sign up for things right now. That of course will gradually then develop in our favor going forward once the market is turning to a better situation. Unsold complete, we are totally here of 457 units, and that is then mainly rated to Finland and in Sweden, I would say. If we move on then to commercial property, and you can see that the income statement here is that we had the revenue from the leasing of 346, same level as last year. But then the fact that we had a gross income of 81 million, and then that which of 29 is coming from divestment of properties earlier and so on. And this is, you know, it's an on-off business, and it can vary quite much from quarter to quarter. Selling an admin was 181, and that is then giving an operating loss then at the moment of 100 million. If we move on here to the unrealized gains that we have, you can see that that is increasing of 300 million up to a total level of 3.4 billion. That is due to the fact that we have two new started projects in Solna Link in Stockholm following the huge success that we have in Solna United that we divested then in 2020. and in Regndroppen, where we build next to the station in Hylje in Malmö. These two are then affecting and increasing then the gain of 300 million. Comparing then this value of unrealized gain here of 3.4, corresponding to the market value, then we have 9% of the surplus value in the portfolio, so to say. Substantial variation of the portfolio that we can see, and of course, this is then corresponding a little bit where we have the weakest and the hottest markets, and of course, it's continued to be a little bit weaker here in the US, and that is affecting here as well. Rolling 12, we are hovering around 2 billion here, as you can see on the line. If we move on then to the completion profile, and as you were into here, Anders, earlier, we have 18 billion right now, and that is up with a few billions from 15.6 in quarter four, and we have then increased the leasing ratio from 65 to 71%, which is then generating a lot of money, and that's, of course, to prepare for the market of selling later on. Also, you can see here in the light blue, and blue is the ones that are completed, and we are looking forward here to go on with these. Still, on the commercial property development... Here is the right one, yes. You can see that it's going down a little bit, and that is mainly then through the fact that we have started two new projects with no pre-let. That is then impacting the economic operating rate and the degree of completion here as well. The market has been quite stable, and it's good activity, I would say, also when it comes to releasing, even if you can see that it's a little bit of a downturn there in the quarter one stable. And this is mainly driven by the fact that there is a slow recovery to come back to office, and that is, you can see that is both in Europe and in the US, a little bit less in the US, I would say. So this is commercial property development. If we move on then to the investment properties, it's a very good quarter, I would say, there. It's no acquisition here. and we are then having an operating income of 80 million and that is due to the fact that and it has increased due to the fact that we have acquired a building then in in 2004 which is right now then contributing a lot here Solid operating income of 80 million, as I said. Earlier here, you can see that we have negative net leasing of 60 million, and that is then corresponding to the fact that we have a fact of 84% occupancy rate versus then that we have 87 earlier and so on. Moving on here to the income statement, as we were into, we have 1.2 billion that is coming from the operating income. We have a central cost here that is 104, and that is a little bit increased due to the fact that we have a temporary effect of IT. That is due to the fact that we are outsourcing global infrastructure, and that will then gradually take down the cost going forward. Also, we can see some periodization and a little bit related then to our legacy operations. Also, our PPP portfolio will gradually go down, so revenue streams from this will also impact here the central stream. Also, Bokluck is now included in this line, and that is totally impacting here of 15 million. Group operating is coming then in 1.1 billion, and the tax rates are similar on 26-27% here versus last quarter. And the fact that it's high is due to the fact that we have higher share in high tax countries and no divestments that is then tax exempt. And that is giving this level at the moment we have right now. Bottom line, 991 for the period and then is then an earning per share of 2.4 Swedish krona. Moving on to the cash flow, it's very good that we have delivered them from the business operation of 1.5 billion, that is higher than last quarter. and that is positively impacted by the net divestments in project development with the handover that we had. I also will come back here when it comes to the working capital and so on. As you all know, we have taken the decision that we have dividend of 8 krona per share, and that is not impacting here, that is then coming here in quarter two. If we move on to the other part that is driving the cash flow, and here is a construction here. And here I would say it's a positive sign, even if it's negative contribution of 0.5 billion. It's in a better situation versus last year of 2.6. So it's actually then following other seasonality pattern that we have right now. And it's still in the mobilization effect that we are actually then getting prepayment from from big produce that we have and so on. And also worth mentioning here is that we had a very strong inflow from second half of the year and that is of course giving a good position right now and we can see how that will impact going forward. Last one here is actually you can see that the bar from Q4 is 34.5 billion and that is then coming down to a level of 31.9 and the majority there actually 2 billion is coming from currency. and how that is impacting the free working capital. If we look into the investments and divestment phase, you can see that we are in a divestment phase, and that is according to plan, of course. We have reduced the investment pace and are focusing to really churn our portfolio when it comes to residential and commercial development right now. First quarter, we handed over one previously divested property in commercial development. This then translates, as you can see here bottom, to a lower capital employed right now, 62.8 billion, and that is lower both compared to last quarter, one, but also since the year end. And that is then following what we are focusing on here right now. Moving on, we are looking into our available funds. That is right now of 29.8 billion, where we have 9.6 that is related to RCF, so to say. Worth mentioning here as well is that we, since 1 January, have available funds included in short-term investments, which is 3.6 billion. That was before then, including the current financial assets. The borrowing side or the funding side here is that we hold a balanced debt of portfolio of 9.7 billion, which 58 is secured to the bond market and 42 is then to bilateral loans. And that is, as you can see here also, when it comes to the maturity of the portfolio, it is very balanced, I would say. Closing by looking into our financial situation, you can see that we had 61.8 billion here in equity, and that is impacted then by currency of 2.2 billion, and a net cash position here, as you can see on the line, of 11.6 billion, which is very, very strong and correct then corresponding to the level that we have in quarter four. The equity to asset ratio stands for 37.7%. And that is, of course, very strong as well. So in summary, we can see that we are remaining on a very strong financial position. And that is, of course, very good for the company. We are here for the customers, regarding what is happening. We can actually be here to deliver. Secondly, of course, we can really impact and be part of selling or bidding for and win large projects here that we are trying to do all the time. And that's required in a financial situation that is strong. And of course, we can be long-term when it comes to doing the investments in commercial development as well as in residential development. And this is very important then for Skanska going forward. So by that, I hand over to you again.