Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Day (March 2018)
72 slides from Veidekke Asa's investor day presentation, Mar 12, 2018
Slide 1: Veidekke's Economic Activity Report
VEIDEKKE'S ECONOMIC ACTIVITY REPORT 12 March 2018
Slide 2: Welcome to tougher times
WELCOME TO TOUGHER TIMES A few headlines from the past five years: So far, accurate 2 Veidekke's Economic Activity Report March 2018
Slide 3: Agenda
AGENDA 1230: Welcome and introduction 1235: The world around us – positive surprises? Nejra Macic, macroeconomist at Prognosesenteret 1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019 Kristoffer Eide Hoen, Director of Analysis at Veidekke 1315: Transport market – big plans
Slide 4: The world around us – positive surprises?
THE WORLD AROUND US – POSITIVE SURPRISES? Nejra Macic
Slide 5: Veidekke's Economic Activity Report March 2018
5 Veidekke's Economic Activity Report March 2018
Slide 6: GDP growth
GDP GROWTH 5.0% 4.9% 4.7% 3.9% 3.9% 3.7% 2.3% 2.3% 2.2% 2017 2018 2019 2017 2018 2019 2017 2018 2019 Global economy Advanced economies Emerging economies 6 Veidekke's Economic Activity Report March 2018
Slide 7: Higher interest rates, tax reform, oil prices
Higher interest rates Surprisingly positive 5 interest rate increases since 2015, and further increases ahead development in the EU, particularly in Germany Accounts for more than half of the growth Tax reform Oil prices in the global economy increased 20%, expected to gradually Higher commodity pri
Slide 8: Veidekke's Economic Activity Report March 2018
8 Veidekke's Economic Activity Report March 2018
Slide 9: Level of economic activity in 2017
LEVEL OF ECONOMIC + Positive GDP growth is expected in all European countries in 2018–19 ACTIVITY IN 2017 + The forecast has been adjusted upwards for most countries, especially Germany, which will be in strong economic expansion throughout the period + Spain is the only country that has been adjust
Slide 10: Veidekke's Economic Activity Report March 2018
10 Veidekke's Economic Activity Report March 2018
Slide 11: GDP growth (Norway)
+ Higher growth this year, but no strong economic expansion until 2019 + First interest rate increase towards the end of 2018 or early 2019 + Residential housing investments are declining, while the oil investments are starting to recover 2.5% + Fiscal policy is being tightened 2.4% + Improvement in
Slide 12: Veidekke's Economic Activity Report March 2018
12 Veidekke's Economic Activity Report March 2018
Slide 13: GDP growth (Sweden)
+ The strong economic expansion will continue throughout the forecast period, despite declining growth + Improvement internationally and a continuing weak krone gives stronger export growth 2.9% + Residential housing prices down 6% during 2.5% last autumn, but prices have still more than doubled in
Slide 14: Veidekke's Economic Activity Report March 2018
14 Veidekke's Economic Activity Report March 2018
Slide 15: GDP growth (Denmark)
+ Strong economic expansion last year 2.0% will continue throughout the period 1.9% despite declining growth 1.7% + Gradual tightening of fiscal policy and declining productivity growth + GDP growth will not reach old heights, 2017 2018 2019 but it may last longer GDP growth + Continued decline in u
Slide 16: Agenda
AGENDA 1230: Welcome and introduction 1235: The world around us – positive surprises? Nejra Macic, macroeconomist at Prognosesenteret 1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019 Kristoffer Eide Hoen, Director of Analysis at Veidekke 1315: Transport market – big plans
Slide 17: Construction and civil engineering market forecasts 2018–2019
CONSTRUCTION AND CIVIL ENGINEERING MARKET FORECASTS 2018–2019 Kristoffer Eide Hoen
Slide 18: Veidekke's Economic Activity Report
VEIDEKKE'S ECONOMIC ACTIVITY REPORT Provide forecasts for investments/revenue in construction and civil engineering through to the end of 2019 • Thoughts concerning driving forces and uncertainties Consensus economic forecasts based on data from recognised economic analysis institutions: • The IMF,
Slide 19: Different phases in a market cycle
DIFFERENT PHASES IN A MARKET CYCLE Year 1–2 Year 3–5 Drivers Sales Start Production Handover 19 Veidekke's Economic Activity Report March 2018
Slide 20: From growth to decline in 2019
CONSTRUCTION & CIVIL ENGINEERING FROM GROWTH TO DECLINE IN 2019 Scandinavian construction and civil engineering market*, NOK billion -2% Residential sector dominates, but will make a negative contribution from 2019 Downward adjustment of forecasts for +5% 2018 and 2019 +5% +4% *Veidekke’s forecasts
Slide 21: From growth to decline in 2019
CONSTRUCTION & CIVIL ENGINEERING FROM GROWTH TO DECLINE IN 2019 Scandinavian construction and civil engineering market*, NOK billion Residential sector dominates, but will make a negative contribution from 2019 Downward adjustment of forecasts for 2018 and 2019 *Veidekke’s forecasts for 2018 og 2019
Slide 22: Market sizes, Norway and Sweden
CONSTRUCTION & CIVIL ENGINEERING MARKET SIZES, NORWAY AND SWEDEN Construction market in Norway and Sweden by segment,% of production value in 2017 (NOK 415 billion) Small houses & apartments Detached houses etc. Industrial & Schools Health Office 38% 22% warehouses 5% and care buildings 9% services
Slide 23: Scandinavian residential housing market has peaked
RESIDENTIAL SCANDINAVIAN RESIDENTIAL HOUSING MARKET HAS PEAKED Residential production*, NOK billion Common denominators: -5% • Good macroeconomy -7% • High production level in Sweden and Norway +10% • Measures regarding credit to households • Improvement in resale market, worsening for new residenti
Slide 24: Scandinavian residential housing market has peaked
RESIDENTIAL SCANDINAVIAN RESIDENTIAL HOUSING MARKET HAS PEAKED Production in various residential segments in Norway, NOK billion per quarter Common denominators: • Good macroeconomy • High production level in Sweden and Norway • Measures regarding credit to households • Improvement in resale market,
Slide 25: Residential market in Norway – recent observations
RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – RECENT OBSERVATIONS Resale prices, per square metre Improvement in residential resale prices, as expected Volume of unsold residential units has declined somewhat Sale of new residential units has declined a lot, but the prices have not softened Last 3 mont
Slide 26: Residential market in Norway – recent observations
RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – RECENT OBSERVATIONS Improvement in residential resale prices, as expected Volume of unsold residential units has declined somewhat Sale of new residential units has declined a lot, but the prices have not softened 26 Veidekke's Economic Activity Report Marc
Slide 27: Residential market in Norway – expectations for 2018 and 2019
RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – EXPECTATIONS FOR 2018 AND 2019 Apartment and small house starts, on a revolving 12-month basis, total number of units Adjusted downwards from the previous Economic Activity Report 30–40% decline in starts in 2018 Decline in production from the second half o
Slide 28: Residential market in Norway – geographical differences
RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – GEOGRAPHICAL DIFFERENCES Production of apartments and small houses, NOK billion Forecast based on the current sales situation Strongest correction in the Oslo region, but from an abnormally high level Forecast for 2018 and 2019 Source: Veidekke’s market dat
Slide 29: Residential market in Sweden – recent observations
RESIDENTIAL RESIDENTIAL MARKET IN SWEDEN – RECENT OBSERVATIONS Prices for multi-family residential units, per square meter Stabilisation in the residential resale market, but too early to make a conclusion Volume of new and used residential units is still high Sale of new residential units significa
Slide 30: Residential market in Sweden – expectations for 2018 and 2019
RESIDENTIAL RESIDENTIAL MARKET IN SWEDEN – EXPECTATIONS FOR 2018 AND 2019 Start and production of apartments and small houses, number of units Strong downward adjustment of forecasts for starts 30% decline in starts during 2018 Broader geographical decline than previously estimated 2017 (units) 2017
Slide 31: Solving strong capacity challenges
RESIDENTIAL SOLVING STRONG CAPACITY CHALLENGES Contract costs for multi-family residential units*, SEK per square metre Strong increase in construction contract costs • In Stockholm and Gothenburg, both the construction contract costs and land costs have increased significantly in recent years Incre
Slide 32: Non-residential buildings – total shows steady progress
NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS – TOTAL SHOWS STEADY PROGRESS Production of non-residential buildings*, NOK billion +6% Common denominators: • Growth in employment and economy +1% • Low interest rates and high demand for commercial property +7% • The totals conceal strong fluctua
Slide 33: Non-residential buildings, Norway: geographic opposites
NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, NORWAY MAIN FEATURES: GEOGRAPHIC OPPOSITES Production of office and commercial buildings, NOK million Oslo market was up sharply last year after a low new construction volume over several years Oil-heavy in Western Norway – growth potential Steady
Slide 34: Non-residential buildings, Sweden: effects of an industrial upswing
NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, SWEDEN MAIN FEATURES: EFFECTS OF AN INDUSTRIAL UPSWING Production of new buildings* in Stockholm, Uppsala, Gothenburg, and Skåne, SEK billion per year Good export markets provide a boost for industrial and warehouses Growth in employment and consu
Slide 35: Non-residential buildings, Sweden: positive estimates for 2018 also
NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, SWEDEN MAIN FEATURES: POSITIVE ESTIMATES FOR 2018 ALSO Investment estimates for 2018 versus 2017 Good export markets provide a boost for industrial and warehouses Growth in employment and consumption will eventually have a positive impact on offic
Slide 36: Non-residential buildings, Denmark: vacancy rate remains down
NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, DENMARK MAIN FEATURES: VACANCY RATE REMAINS DOWN IN COPENHAGEN Vacancy rate for offices, selected Danish urban regions Good economic conditions support a positive development for private non-residential buildings Vacancy rate for private non-resid
Slide 37: The Scandinavian civil engineering market
CIVIL ENGINEERING THE SCANDINAVIAN CIVIL ENGINEERING MARKET Production of civil engineering*, NOK billion Strong growth in Norway and Sweden +5% • Very high levels per capita in Norway +6% • Investment peak is approaching +2% Steady in Denmark, potential growth from 2019 and beyond *Veidekke’s forec
Slide 38: Transport: big plans, what is the reality?
TRANSPORT: BIG PLANS, WHAT IS THE REALITY? Anders Wettre
Slide 39: Big plans, what is the reality?
BIG PLANS, WHAT IS THE REALITY? NATIONAL TRANSPORT PLAN ACTION PROGRAMME STATE BUDGET NOK 1,064 billion SEK 622.5 billion Specification of the input for the coming plan period Final framework and concrete actions 39 Veidekke's Economic Activity Report March 2018
Slide 40: Big plans, what is the reality?
BIG PLANS, WHAT IS THE REALITY? Source: Aftenposten 40 Veidekke's Economic Activity Report March 2018
Slide 41: Norway: historically good follow-up
TRANSPORT NORWAY: HISTORICALLY GOOD FOLLOW-UP Plan periods for the National Transport plan 2017 kroner, NOK billion Historically, the follow-up ratio has been good 2018–2023 NOK 412 billion 90% follow-up ratio Less leeway in public budgets will limit the follow-up rate going forward • Impacts our fo
Slide 42: Parallel investment
E69 Skarvbergtunnelen TRANSPORT PARALLEL INVESTMENT E10/Rv 85 Evenes-Sortland Projects with a construction start in 2018/2019 encompass more than NOK 100 billion for Norway and Sweden combined* Swedish Transport Administration (Road) International competition E39 Betna-Stormyra E6 Kvithammar-Åsen Tr
Slide 43: Roads Norway: new market structure
TRANSPORT ROADS NORWAY: NEW MARKET STRUCTURE Road production by customer, NOK billion 2017 “Year of rest” Road production is increasing further: • Investment peak will probably be reached in 2018 Increased percentage managed by Nye Veier High level throughout the forecast period Source: Veidekke, St
Slide 44: Roads Norway: more turnkey contracts
TRANSPORT ROADS NORWAY: MORE TURNKEY CONTRACTS Percentage of turnkey construction contracts in the road market*, NOK billion Nye Veier Parts of the Norwegian Public Roads Administration PPP contracts managed by the Norwegian Public Roads Administration *Incl. PPP Source: Veidekke, Statistics Norway,
Slide 45: Railway Norway: realistic ambitions?
TRANSPORT RAILWAY NORWAY: REALISTIC AMBITIONS? Investments in the railway market, NOK billion High, but stable market in 2017 and 2018 • But slower progress than assumed Comprehensive projects provide strong growth towards the end of the forecast period • InterCity • Bergen Light Rail Source: Veidek
Slide 46: O&M in Norway: high for roads, behind on rail
TRANSPORT O&M IN NORWAY: HIGH FOR ROADS, BEHIND ON RAIL Operation and maintenance of roads, NOK billion Operation and maintenance of rail, NOK billion Source: Veidekke, Statistics Norway, NPRA, NTP, SB 46 Veidekke's Economic Activity Report March 2018
Slide 47: Roads in Sweden: towards a peak in 2019
TRANSPORT ROADS IN SWEDEN: TOWARDS A PEAK IN 2019 Road production by customer, SEK billion High public demand drives the growth to a historically high level Municipal road investments account for a greater proportion of the investment activity High level of activity around Stockholm (Förbifarten) an
Slide 48: Rail in Sweden: new growth ahead?
TRANSPORT RAIL IN SWEDEN: NEW GROWTH AHEAD? Rail investments, SEK billions High level of production in ongoing projects Many new and big projects will start up during the forecast period • Västlänken in Gothenburg • New underground railway in Stockholm Ambitious development plans for the future, ful
Slide 49: Summary
SUMMARY Economic cycle for construction and civil engineering: Expected production growth 2018-2019 Decline in the Scandinavian construction and civil engineering market from 2019, led by the apartment segment Steady progress in non-residential buildings, but considerable variation between different
Slide 50: Agenda
AGENDA 1230: Welcome and introduction 1235: The world around us – positive surprises? Nejra Macic, macroeconomist at Prognosesenteret 1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019 Kristoffer Eide Hoen, Director of Analysis at Veidekke 1315: Transport market – big plans
Slide 51: The green transition
THE GREEN TRANSITION WHAT DOES IT MEAN TO THE CONTRACTOR INDUSTRY? 51
Slide 52: Climate change and the UN two-degree goal
Climate change and the UN goal of a maximum two-degree temperature increase on Earth will lead to major changes in policies, technology and the markets... ... and this applies to the contractor industry as well 52
Slide 53: Climate change
CLIMATE CHANGE High risk Environmental Water and Great certification of drainage buildings opportunities Sweden 800 700 9 600 10 Norway (NOK) 500 30 billion Sweden (SEK) 400 300 Denmark (DDK) 200 100 11 0 2010 2011 2012 2013 2014 2015 2016 2017 Source: Norwegian Water, Swedish Water, DANVA, GreenBoo
Slide 54: Global electricity production is changing
GLOBAL ELECTRICITY PRODUCTION IS CHANGING 54
Slide 55: DNV GL – Energy Transition Outlook 2017
DNV GL – ENERGY TRANSITION OUTLOOK 2017 Offshore wind 12% World electricity production Unit: Petawatt-hours/year Hydropower 12% 60 50 Other Coal-fired power 40 Nuclear power Gas power 30 2050 Hydropower 20 Solar power (PV) Onshore wind 10 Offshore wind 0 1980 1990 2000 2010 2020 2030 2040 2050 Solar
Slide 56: Strong growth in renewable energy in the Nordic countries as well
STRONG GROWTH IN RENEWABLE ENERGY IN THE NORDIC COUNTRIES AS WELL 56
Slide 57: Nordic renewable market
NORDIC RENEWABLE MARKET 60000 7000 HYDROPOWER (MW) 50000 6000 BIOMASS (MW) 5000 40000 4000 30000 3000 20000 2000 10000 1000 0 0 2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015 2016 2020 2025 Sweden Norway Denmark Sweden Norway Denmark 25000 4000 WIND POWER (MW) 3500 SOLAR
Slide 58: Nordic renewable market
NORDIC RENEWABLE MARKET NORWAY (MW) SWEDEN (MW) DENMARK (MW) 45000 45000 45000 40000 40000 40000 35000 35000 35000 30000 30000 30000 25000 25000 25000 20000 20000 20000 15000 15000 15000 10000 10000 10000 5000 5000 5000 0 0 0 2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015
Slide 59: Contractor market in renewable energy
CONTRACTOR MARKET IN RENEWABLE ENERGY 4 13 18 57 30 57 billion billion 14 35 Hydropower Wind power Biomass Sweden Norway Denmark Source: DNV GL 59
Slide 60: Agenda
AGENDA 1230: Welcome and introduction 1235: The world around us – positive surprises? Nejra Macic, macroeconomist at Prognosesenteret 1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019 Kristoffer Eide Hoen, Director of Analysis at Veidekke 1315: Transport market – big plans
Slide 61: Veidekke's position
VEIDEKKE’S POSITION Arne Giske, CEO
Slide 62: Selected figures turnover 2017
Selected figures turnover 2017: Hydropower: NOK 135 million Wind power: NOK 370 million Environmentally certified buildings: NOK 4.6 billion
Slide 63: Our focus
OUR FOCUS LIFTING PROFITABILITY WITHIN ADJUSTING TO A SOFTER CONSTRUCTION REAL ESTATE MARKET 63
Slide 64: Veidekke is well positioned
VEIDEKKE IS WELL POSITIONED OMSETNING SOLID ORDER OGBACKLOG MARGIN* BALANCED ORDER BACKLOG BY SECTOR 32 Other 28 infrastructure 10% Commercial 24 buildings 25% Public 20 NOK billion infrastructure 20% Building Construction NOK 16 32 bill. 12 Public buildings 18% 8 Residential construction 4 Civil En
Slide 65: Adjusting to a softer real estate market
ADJUSTING TO A SOFTER REAL ESTATE MARKET Lower residential sales – fewer construction starts Opportunities and flexibility from good project portfolio and land bank Our focus: manage the business in a demanding housing market 65
Slide 66: Units under construction
UNITS UNDER CONSTRUCTION 91% 100% 90% 3 000 82% 83% 74% 2 500 75% Units for 2 000 delivery in 2018 50% 1 500 1 000 Units for 25% delivery in 500 2019 and beyond 0 0% 2013 2014 2015 2016 2017 Units under construction Sales ratio (%) *Veidekke’s share, sum Norway and Sweden 66
Slide 67: Stronger market positions
STRONGER MARKET POSITIONS The land bank provides flexibility A total of 14,050 residential units • Stated at cost • 40% option-based Selective commercial building development A robust portfolio • High sales ratio • Minimum 50% pre-sale ahead of construction start 67
Slide 68: Economic Activity Report: main features
ECONOMIC ACTIVITY REPORT: MAIN FEATURES Macroeconomic outlook: Positive forecast, first interest rate increase is approaching Construction and civil engineering: Tighter market, mainly driven by the apartment segment Green transition: Increasing commercial opportunities in renewable energy 68
Slide 69: Appendix
APPENDIX
Slide 70: Market data Norway
MARKET DATA NORWAY Current prices, Level 2017 2018 2019 2018-2019 change (%) NOK bill. Growth Growth Growth Growth Residential 157 14 % -2 % -12 % -7 % Commercial buildings 69 9% 6% -4 % 1% Public buildings 36 -1 % -4 % 6% 1% Civil engineering 79 5% 9% 4% 6% Constructuon and civil 340 9% 2% -5 % -1
Slide 71: Market data Sweden
MARKET DATA SWEDEN Current prices, Level 2017 2018 2019 2018-2019 change (%) SEK bill. Growth Growth Growth Growth Residential 201 17 % 3% -12 % -5 % Commercial buildings 87 5% 9% 3% 6% Public buildings 51 16 % 9% 5% 7% Civil engineering 86 4% 6% 4% 5% Constructuon and civil 425 12 % 5% -3 % 1% engi
Slide 72: Market data Denmark
MARKET DATA DENMARK Current prices, Level 2017 2018 2019 2018-2019 change (%) DKK bill. Growth Growth Growth Growth Residential 77 17 % 13 % 8% 10 % Commercial buildings 24 8% 10 % 10 % 10 % Public buildings 22 -1 % -1 % 7% 3% Civil engineering 39 -5 % 0% 3% 1% Constructuon and civil 162 7% 7% 7% 7%