Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (September 2022)
41 slides from Veidekke Asa's investor presentation, Sep 27, 2022
Slide 1: Autumn 2022 Veidekke market update
Autumn Veidekke 2022 market update 27 September 2022 Kristoffer Eide Hoen | Head of Business Development and Analysis Questions? kristoffer.eide.hoen@veidekke.no
Slide 2: Agenda
Agenda 01 Introduction 02 Economic environment 03 Construction costs 04 The contracting markets 05 Summary 06 Annexes 2
Slide 3: About Veidekke's market report
About Veidekke’s market report • Veidekke prepares figures for the Scandinavian markets based • Veidekke calculates best-estimate forecasts of production on statistics published by Statistics Norway, Statistics Sweden levels using a forecasting model that incorporates national and Statistics Denmark
Slide 4: Introduction
O1 Introduction VEIDEKKE
Slide 5: Our focus: the Scandinavian contracting markets
Our focus: the Scandinavian contracting markets Not included: - Detached houses and holiday homes - Primary industry The contracting markets in 2021 - Residential refurbishment, “off-the-books Production of buildings* and infrastructure in NOK billion work” and household DIY Total Scandinavian marke
Slide 6: Interest rates and credit – primary construction and civil engineering drivers?
Interest rates and credit – primary construction and civil engineering drivers? • The contracting markets have been operating at historically high levels since the early 2000s. • The contracting markets have performed robustly in the face of various “crises” over the past 30 years. • Rising interest
Slide 7: Economic environment
O2 Economic environment VEIDEKKE
Slide 8: Economic growth
Economic growth A cooldown is welcome, but energy gives cause for concern • Leading GDP forecasts indicate 2020 2021 2022 2023 2024 a mild economic downturn. 8 • Reduced demand is good in terms of avoiding higher inflation and interest rates. 5,5 6 5,2 5,1 • Reduced energy supply is causing 4,0 4 un
Slide 9: Inflation/CPI
Inflation/CPI Inflation forecasts are falling • Inflation will remain high into 2023, 2020 2021 2022 2023 2024 but is still expected to decline gradually. 10 • Although energy prices are currently 8,6 8,6 the primary inflation driver, core inflation 9 8,5 8,1 is also high* 8 • A declining future inf
Slide 10: Interest rates
Interest rates Market rates continue to rise on the back of high inflation figures • Continuing high inflation figures have 4,5 % triggered further rises in market rates 4,0 % • Risk premiums on European corporate debt 3,5 % have also increased somewhat in Q3 3,0 % • In isolation, interest rate rise
Slide 11: Construction costs
O03 Construction costs VEIDEKKE
Slide 12: Construction cost index, residential
Construction cost index, residential Prices are stabilising Comment Construction cost index, residential blocks • Construction cost indices have stabilised, resulting in Index 2015 = 100, level a declining year-on-year growth trend in recent months 160 • Higher energy prices may drive prices up furt
Slide 13: Construction cost index, residential
Construction cost index, residential Prices are stabilising Comment Construction cost index, residential blocks • Construction cost indices have stabilised, resulting in Percentage change compared to the same month in the previous year a declining year-on-year growth trend in recent months 25% • Hig
Slide 14: Construction cost index, civil engineering (Norway)
Construction cost index, civil engineering (Norway) Prices are stabilising Comment Construction cost index, road projects Norway • Construction cost indices have stabilised, resulting in Percentage change compared to the same quarter in the previous year a declining year-on-year growth trend in rece
Slide 15: Commodity prices
Commodity prices Metals and timber – clear downward trend Comment Commodity Index, The Economist • Price indices for metals and non-food agricultural goods Index, 1 January 2022 = 100 (including timber) show a clear drop since the spring • Indices remain 15%–20% above pre-Covid-19 “normal” 140 • In
Slide 16: Commodity prices: Logistics
Commodity prices Logistics Comment Logistics indices • International logistics have improved significantly Index, 1 January 2022 = 100 from a customer perspective 250 • Key price indicators for the logistics segment are again within more normal historical intervals, although they 200 remain at a hig
Slide 17: Commodity prices: Energy
Commodity prices Energy Comment Energy prices • Energy prices and security of supply remain the major Index, 1 January 2022 = 100 challenges from both a production and price perspective in Europe 350 • Reduced natural gas supply in the EU has raised gas and coal 300 prices to 5–10 x normal levels 25
Slide 18: The contracting markets
O04 The contracting markets VEIDEKKE
Slide 19: The contracting markets: Forecasts 2022–2024
The contracting markets Forecasts 2022–2024 Comment Production in the Scandinavian contracting markets • Strong volume growth in 2022, particularly in Sweden, Percentage change compared to previous year, current prices will be followed by a downturn in 2023 and 2024 • High inflation in 2022 means a
Slide 20: The Scandinavian contracting markets
The Scandinavian contracting markets Historical figures and forecasts, current prices Norway, by sector Sweden, by sector Denmark, by sector NOK billion, current prices NOK billion, current prices NOK billion, current prices 160 160 160 CAGR 2022–2024 CAGR 2022–2024 CAGR 2022–2024 140 140 +4 % 140 1
Slide 21: Estimated order intake, construction and civ. eng.
Estimated order intake, construction and civ. eng. Still satisfactory, even when adjusted for inflation Order intake, Nordic construction and civ. eng. operations Estimated order intake, Scandinavian construction operations Reporting companies, estimates in NOK billion NOK billion. Data based on reg
Slide 22: Construction
Construction “Activity is being driven by certain segments and geographical regions”
Slide 23: Clear change in the residential market
Clear change in the residential market Residential prices, apartments Comment Prices, secondhand residential units in Scandinavia, apartments • Marked change in Sweden’s secondhand Index: January 2020 = 100 residential market, less clear in Norway 125 • Challenging to forecast future 120 development
Slide 24: Apartments and small houses, Norway and Sweden
Apartments and small houses, Norway and Sweden Estimated value of order intake up to and including Q2 2022 Comment Norway, estimated order intake Sweden, estimated order intake • In Sweden, the number of building starts NOK billion NOK billion remained high in the first half of the year, 180 180 Gre
Slide 25: New residential unit sales in Norway
New residential unit sales in Norway Are stocks exhausted (in the short term)? Comment Ready-for-sale and sold apartments New residential unit prices (apartments) • Very high sales and strong price growth for Number of units Year-on-year percentage change in price per m2 new project apartments in th
Slide 26: New residential unit sales in Norway
New residential unit sales in Norway Are stocks exhausted (in the short term)? Comment Ready-for-sale and sold apartments New residential unit prices (apartments) • Very high sales and strong price growth for Number of units, 12-month rolling total Year-on-year percentage change in price per m2 new
Slide 27: Commercial buildings in Norway and Sweden
Commercial buildings in Norway and Sweden Logistics and industrial operations are driving the sector Comment Norway, estimated order intake Sweden, estimated order intake • The market for commercial buildings NOK billion NOK billion is dominated by logistics and 80 Hotels, restaurants and accommodat
Slide 28: Public buildings in Norway and Sweden
Public buildings in Norway and Sweden Weak during Covid-19 pandemic in Norway, more activity in Sweden Comment Norway, estimated order intake Sweden, estimated order intake • Low construction activity following NOK billion NOK billion municipal mergers in Norway in 2020; 50 Care homes, etc. Hospital
Slide 29: The contracting markets, construction
Region 2020 2021 2022 Totalt Romerike 47 908 54 737 56 974 53 206 The contracting markets, construction Trondheim 31 278 41 117 47 965 40 120 Buskerud 45 007 23 104 46 723 38 278 Uppsala 30 816 36 537 31 532 32 962 Order intake per capita 2020–2022 Greater Malmö 38 753 27 534 30 079 32 122 Nord-Trøn
Slide 30: Infrastructure
Infrastructure New priorities?
Slide 31: The civil engineering market in Norway and Sweden
The civil engineering market in Norway and Sweden Almost flat development in volume terms Comment Production by civil engineering segment Production by civil engineering segment • Adjusted for inflation, flat development Norway, NOK billion, current prices Sweden, NOK billion, current prices is expe
Slide 32: Sweden: updated transport plan with extensive railways investment
Sweden: updated transport plan with extensive railways investment • The Andersson Government adopted a new transport plan in June 2022 • Pending other signals, we will assume that the plan survives the change of government • With regard to new-builds, the plan gives clear priority to railway over ro
Slide 33: Transport infrastructure in Norway
Transport infrastructure in Norway The wind has shifted Nye Veier har hatt planer om å gjennomføre hele sju konkurranser til en samlet verdi på 15 mrd i 2022. Denne planen ble laget før krigen i Ukraina. I NTP var det egentlig planlagt vekst i pengebruken på vei i 2023, men Nygård peker på at den si
Slide 34: Transport infrastructure in Norway
Transport infrastructure in Norway Large backlog of construction projects Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Increased investment through Nye Veier 50 50 8% 4% 7% 14% 13% 4% -4% 1% 7% 6% 8% 55% 13% -12% 3% 3% 2
Slide 35: Transport infrastructure in Sweden
Transport infrastructure in Sweden Slowdown at a high level Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Several major central-government 40 40 projects are reaching completion -3% 3% 13% 16% 12% 3% 16% -4% 6% -2% -1% 7%
Slide 36: Energy, water supply and sewerage
Energy, water supply and sewerage A future high-growth segment? Comment Norway Sweden Energy NOK billion, current prices NOK billion, current prices • Further growth anticipated until the end of the forecast period following a substantial drop 50 50 11% 12% 13% 3% 19% 4% -1% -9% 6% 9% 7% 7% -3% -11%
Slide 37: Energy, water supply and sewerage
Energy, water supply and sewerage Several “green lights” Energy • Further growth anticipated until the end of Sickla | SEK 1.4 billion Oset | NOK 600 million the forecast period following a substantial drop in 2021 • Growth linked to new investment in renewable energy sources (hydropower and wind po
Slide 38: Road maintenance in Norway
Road maintenance in Norway Roads market, operation and maintenance Railways market, operation and maintenance NOK billion NOK billion 40 40 -2% 21% 3% 20% -12% 10% 8% 3% 6% 7% 4% 4% 11% 8% 9% 4% 9% 1% 2% 15% 10% 11% 3% 3% 35 35 Forecasts for the period 2022-2024 Forecasts for the period 2022-2024 30
Slide 39: Summary
O5 Summary VEIDEKKE
Slide 40: Key points
Key points Autumn 2022 • Clear ongoing economic slowdown, but we believe that the contracting markets will cope well • Construction cost indices are thought to have peaked, although there are variations among different products • Certain energy-intensive goods like cement and steel may become more e
Slide 41: 4
4 1