Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (October 2019)
40 slides from Veidekke Asa's investor presentation, Oct 30, 2019
Slide 1: Market update Q3 2019
Market update Q3 2019 30 October 2019 Kristoffer Eide Hoen and Anders Wettre
Slide 2: Agenda
Agenda 01 Introduction 02 Market drivers 03 The contracting markets 04 Summary 2 © Veidekke
Slide 3: Veidekke's market data
Veidekke’s market data • Quarterly update on veidekke.com • Can be filtered by geographical region and sector in Scandinavia • Forecasts for 2019 and 2020 available; 2021 to be added in Q4 • Preparation of historical market data for the contracting markets • Automated data collection and quality ass
Slide 4: Scandinavian contracting markets: Dominated by civil engineering and apartment blocks
Scandinavian contracting markets Dominated by civil engineering and apartment blocks Not included: + Detached houses and holiday homes: NOK 140 billion The contracting markets 2018 Building construction* and infrastructure in NOK billion + Primary industry: NOK 20–30 billion + Residential refurbishm
Slide 5: Forecasts for the contracting markets 2019–2020
Forecasts for the contracting markets 2019–2020 Market drivers Investment decisions Contracting markets 5 © Veidekke
Slide 6: Forecasts for the contracting markets 2019–2020
Forecasts for the contracting markets 2019–2020 Indicators: GDP, interest rates, Construction starts, Production/revenue labour market, etc. sales, orders 6 © Veidekke
Slide 7: Forecasts for the contracting markets 2019–2020
Forecasts for the contracting markets 2019–2020 Indicators: GDP, interest rates, Construction starts, 2019 2020 labour market, etc. sales, orders Degree of visibility/predictability as at October 2019 7 © Veidekke
Slide 8: Market drivers
02 Market drivers 8 © Veidekke
Slide 9: Macroeconomic overview
Macroeconomic overview International growth and construction and civil engineering Production index, GDP growth construction and civil engineering Comments Percentages Seasonally adjusted index, 2015=100 160 • Lower trade growth and reduced Percentages 2016 2017 2018 2019 2020 150 150 investment are
Slide 10: Macroeconomic overview Scandinavia
Macroeconomic overview Scandinavia Economic activity Interest rates Comments Purchasing Managers’ Index (PMI)* Five-year government bonds, percentages 70 3,0 • Downturns among international trade 2,5 partners have a knock-on effect 65 2,0 • Interest rate rises are no longer expected, 60 1,5 with lon
Slide 11: Demographics: Net immigration
Demographics Net immigration Net immigration Norway Net immigration Sweden Comments: Percentage of population Percentage of population 2,0% 2,0% • Immigration is generally high in most metropolitan regions 1,6 % 1,5% 1,5% • New development: Improvement in 1,1 % several Norwegian metropolitan regions
Slide 12: The contracting markets
03 The contracting markets 12 © Veidekke
Slide 13: Scandinavian contracting markets: Stable, high activity levels until the end of 2020
Scandinavian contracting markets Stable, high activity levels until the end of 2020 Market level Market change Comments Annual production, NOK billion Contribution to change, NOK billion 800 140 14% • Activity levels remain high, but the period 3% 4% 10% 9% 12% 6% 0% 2% 700 of strong growth has ende
Slide 14: Scandinavian contracting markets: Overview of relevant markets and growth
Scandinavian contracting markets Overview of relevant markets and growth Production in the building construction sector in 2018 and growth rate 2019 and 2020 (CAGR) Positive CAGR 2018-2020 Neutral CAGR 2018-2020 (-5% to +5%) Market by region, NOK billion Negative CAGR 2018-2020 Source: Veidekke’s ma
Slide 15: Building construction
Building construction 15 © Veidekke
Slide 16: Norwegian residential market: Prices and building starts
Norwegian residential market Prices and building starts Residential property prices Building starts, in the largest markets apartments and small houses Comments Price per m2, NOK ‘000 m2, quarterly 80 000 350 CAGR 2018-2020 • Stable, positive trends in the secondhand +3% +0% housing market are expec
Slide 17: Norwegian residential market: Number of units
Norwegian residential market Number of units Building starts, apartments and small houses Comments 12-month rolling quarterly total, number of units 35 000 Apartments and small houses 2018 level 2018 2019P 2020P • Apartment and small house building starts have remained Number of building starts 22,0
Slide 18: Swedish residential market: Prices and building starts
Swedish residential market Prices and building starts Residential property prices Building starts, in the largest markets apartments and small houses Comments Price per m2, SEK ‘000 m2, quarterly 70 000 450 CAGR 2018-2020 • Large drop in building starts in Stockholm; Price growth September–September
Slide 19: Swedish residential market
Swedish residential market Supply of unsold new apartment blocks Comments Number of units. All phases* 4000 14000 • Symptom of «supply shock» in 2016 and 2017 3500 12000 3000 • Stabilisation and some decline in unsold units in 2019 10000 2500 8000 2000 S&U down 30 % 6000 1500 4000 1000 500 2000 0 0
Slide 20: Swedish residential market: Number of units
Swedish residential market Number of units Building starts, apartments and small houses Comments 12-month rolling quarterly total, number of units 60 000 Apartments and small houses 2018 level 2018 2019P 2020P • The number of new apartment and small house building starts Number of building starts 41
Slide 21: Right-to-rent vs. owner occupancy
Right-to-rent vs. owner occupancy Form of ownership, started apartment blocks Greater Stockholm Västra Götaland Skåne Number of units Number of units Number of units Right-to-rent Owner-occupied Right-to-rent Owner-occupied Right-to-rent Owner-occupied 18 000 8 000 9 000 16 000 7 000 8 000 14 000 7
Slide 22: Commercial buildings in Norway and Sweden: Production
Commercial buildings in Norway and Sweden Production Building construction sector production, Building construction sector production, Norway Sweden Comments 12-month rolling quarterly total, NOK billion 12-month rolling quarterly total, NOK billion 70 Multi-storey car parks 70 Office buildings • St
Slide 23: Public buildings in Norway and Sweden: Production
Public buildings in Norway and Sweden Production Building construction sector production, Building construction sector production, Norway Sweden Comments 12-month rolling quarterly total, NOK billion 12-month rolling quarterly total, NOK billion 40 Other buildings 40 Other buildings • Activity in bo
Slide 24: Health and care service buildings
Health and care service buildings Scandinavia Hospital projects Started in the period 2018–2025 Building construction sector production health and care services (including hospitals) NOK billion Project cost 50 45 Greater than 5,000 million Trondheim 40 1,500–5,000 million 35 Less than 1,500 million
Slide 25: Commercial buildings in Denmark: Production
Commercial buildings in Denmark Production Building construction sector production, Vacancy rate in Denmark Denmark Comments Percentage of total number of buildings 12-month rolling quarterly total, NOK billion 12 Office Retail Industrial and logistics 50 Copenhagen Zealand • The decline in the vaca
Slide 26: Civil engineering
Civil engineering 26 © Veidekke
Slide 27: The civil engineering market in Norway and Sweden: Activity tapering off
The civil engineering market in Norway and Sweden Activity tapering off at a high level Production in different civ. eng. segments Production in different civ. eng. segments Comments Norway, NOK billion Sverige, NOK billion • The forecasts have been adjusted 4% 17% 14% 2% 9% 8% 2% 3% -3% 10% 0% -3%
Slide 28: The civil engineering market in Norway: Broad range of project scope and type
The civil engineering market in Norway Broad range of project scope and type Civil engineering production 2018 Comments By segment, NOK billion Transport infrastructure • Major public clients • Trend towards larger contracts Energy • National and regional stakeholders • Great variation in contract s
Slide 29: A crowded mid-range: Distribution of projects by size
A crowded mid-range Distribution of projects by size Norway, by contract value (NOK million) Sweden, by contract value (NOK million) Percentage shares Percentage shares Strong public- 25% 40% sector 35% 45% customers 10% 20% 10% 20% 20% 10% 15% 5% 5% 10% 15% 10% 30% 25% 20% 20% 2016 2017 2018 2019 2
Slide 30: Water, sanitation and waste management: High demand and strong growth
Water, sanitation and waste management High demand and strong growth Investment in water and sanitation facilities NOK billion 14 CAGR 10-18 Norway: 8% Sweden:12% 13 12 12 12 11 10 10 10 8 8 8 8 8 7 7 6 7 7 6 6 5 4 4 2 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 Norway Sweden Sources: Statistics
Slide 31: Water, sanitation and waste management: Trend towards more and larger contracts
Water, sanitation and waste management Trend towards more and larger contracts Reported projects, Norwegian water and sanitation segment Distribution by size 100% 90% 80% 70% Veidekke has secured a new tunnelling contract 60% with Stockholm Vatten och Avfall 50% 40% 30% 20% 10% 0% Veidekke will refu
Slide 32: The energy sector: Higher activity for several years
The energy sector Higher activity for several years Investment in energy facilities NOK billion 25 CAGR 10-18 Norway: 8% Sweden: 3% 23 20 21 20 20 18 18 18 17 15 16 Veidekke is building av new 4.5 kilometre cable tunnel for Statnett in Oslo 14 14 10 11 11 10 10 8 8 5 6 7 6 6 6 - Veidekke is building
Slide 33: The railways market in Norway and Sweden: Major projects being executed
The railways market in Norway and Sweden Major projects being executed Norway, production Sweden, production Comments NOK billion NOK billion 18 30% 55% 13% -15% -1% -2% 12% 16% 18 -14% 7% 17% -11% 4% 11% 6% 10% Norway 16 16 • Higher investment 14 14 • Escalation in accordance with the National Tran
Slide 34: The Scandinavian railways market: Priority area going forward
The Scandinavian railways market Priority area going forward Railway projects Production in the period 2018–2025 • High ambitions for railway development North Bothnia Line in the years ahead • Large public-sector clients • Trend towards contracts with early Dovre Line involvement Bergen Light Rail
Slide 35: Operation and maintenance in Norway: Lower activity than forecast
Operation and maintenance in Norway Lower activity than forecast Road operation and maintenance Railways operation and maintenance Comments NOK billion NOK billion 30 10 • Not keeping pace with the ambitions 11% 8% 9% 4% 9% 1% 3% 1% -2% 21% 3% 20% -12% 10% 8% 3% set out in the National Transport Pla
Slide 36: The roads market in Norway and Sweden: Growth has peaked
The roads market in Norway and Sweden Growth has peaked Norway, production Sweden, production Comments NOK billion NOK billion 40 10% 8% 4% 7% 14% 9% -1% 4% -10% -3% 3% 13% 16% 12% -3% -3% • Municipal roads investment has increased 25 substantially in recent years 35 • Linked to residential construc
Slide 37: Transport infrastructure in Norway: National Transport Plan
Transport infrastructure in Norway National Transport Plan Planning periods, National Transport Plan Implementation of National Transport Plan NOK billion NOK billion NOK 295 billion 2018-2021 42,5 68% implementation rate after year 3 of 4 NOK 21 billion behind budget plan 40,0 40,6 39,5 2014-2017 2
Slide 38: Summary
04 Summary 38 © Veidekke
Slide 39: Summary
Summary Veidekke’s market overview Highlights Assessment of current market situation • Improved interest rate outlook, poorer cyclical outlook • The contracting and residential markets appear more stable than for a long time; construction activity remains high • New market forces will feature in the
Slide 40: Contracting markets Scandinavia
Contracting markets Scandinavia Norway Sweden Denmark By sector, NOK billion By sector, NOK billion By sector, NOK billion 100 100 100 CAGR 2018-2020 +2 % CAGR 2018-2020 CAGR 2018-2020 90 90 +4 % 90 80 80 -8 % 80 +1 % 70 -6 % 70 70 +13 % 60 60 60 50 +2 % 50 50 +0 % 40 40 +4 % 40 -6 % +10 % 30 30 30