Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (September 2016)
47 slides from Veidekke Asa's investor presentation, Sep 14, 2016
Slide 1: Economic Activity Report September 2016
ECONOMIC ACTIVITY REPORT SEPTEMBER 2016 14 September 2016 Kristoffer Eide Hoen Director of Analysis
Slide 2: What is driving the private sector in Norway?
WHAT IS DRIVING THE PRIVATE SECTOR IN NORWAY? Facsimile from Dagbladet 25 August 2016 INVESTMENTS 2007-2016 70 PETROLEUM 60 50 NOK bill. 40 “Investments in housing take over as the main driver in the Norwegian economy” 30 RESIDENTAL 20 2007 2009 2011 2013 2015 Kilde: SSB
Slide 3: What is driving the private sector in Norway?
WHAT IS DRIVING THE PRIVATE SECTOR IN NORWAY? NET JOB CREATION LAST 12 MONTHS* Public sector 8 700 Construction 4 300 Hotels & restaurants 2 300 Farming and fishing 1 500 Trade & logistics -5 400 Petroleum -9 200 Services -9 800 Manufacturing -12 700 -15 000 -10 000 -5 000 0 5 000 10 000 * Change in
Slide 4: Contents
CONTENTS Macroeconomic trends Forecasts for investments in construction 2016 and 2017 Key markets
Slide 5: How we make our forecasts
HOW WE MAKE OUR FORECASTS: Macroeconomic forecasts based on consensus among recognized economic analysis institutions, such as: • IMF, Konjunkturinstitutet, SSB, the Danish Economic council, central banks etc. Forecasts for construction are prepared by Veidekke on the basis of: • Our experience abou
Slide 6: Geopolitics has a greater impact
GEOPOLITICS HAS A GREATER IMPACT ... THE REFUGEE CRISIS TENSIONS TO THE EAST BREXIT – NOT QUITE AS EXPECTED Asylum seekers to Sweden 200 000 150 000 100 000 50 000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Drama in Bornholm: Russian fighter plane chases Swedis
Slide 7: Geopolitics has a greater impact
GEOPOLITICS HAS A GREATER IMPACT... «From a macroeconomic perspective, the Brexit vote implies a substantial increase in economic, political and institutional uncertainty…» IMF, July 2016 7 14.09.2016
Slide 8: International GDP forecasts are downgraded
INTERNATIONAL GDP FORECASTS ARE DOWNGRADED WEAKER EXPORT GROWTH THAN EXPECTED? GDP growth (%) 2013–2015 2016 2017 Annual percentage growth in exports* Eurozone 0.7 1.8 (0)--- 1.4 (-0.6) Germany 1.2 1.8 (-0.1) 1.4 (-0.6) UK 2.4 1.8 (-0.6) 0.8 (-1.4) USA 2.2 1.5 (-1.1) 2.2 (-0.4) China 7.3 6.5 (+0.1)
Slide 9: Economic growth: Sweden leading the way
ECONOMIC GROWTH: SWEDEN LEADING THE WAY Norway: weak growth in GDP Sweden: booming economy Denmark: disappointing GDP figures - Have we reached rock bottom? - …Though declining GDP-growth ahead - Declining growth rate - GDP-forecast at 1.5% in 2017 - …but does not provide a complete picture Source:
Slide 10: Labour market: stabilising in Norway, strong in Sweden and Denmark
LABOUR MARKET: STABILISING IN NORWAY, STRONG IN SWEDEN AND DENMARK Norway: stabilising after decline Sweden: strong growth Denmark: strong growth - Employment growth is weak - Increased challenges in recruiting - Significant employment growth - …but the growth in workforce has also - Unemployment de
Slide 11: Labour market: stabilising in Norway, strong in Sweden and Denmark
LABOUR MARKET: STABILISING IN NORWAY, STRONG IN SWEDEN AND DENMARK Norway: stabilising after decline Sweden: strong growth Denmark: strong growth - Employment growth is weak - Increased challenges in recruiting - Significant employment growth - …but the growth in workforce has also - Unemployment de
Slide 12: Unemployment moderate in all counties
UNEMPLOYMENT MODERATE IN ALL COUNTIES UNEMPLOYED AND PEOPLE ON LABOUR MEASURES, JULY 2016 AND 2015 10% 8% 6% 4% 2% July 15 July 16 0% Avg. Sweden Hedmark Oslo Telemark Finnmark Oppland Østfold Rogaland Troms Vestfold I alt Hordaland Buskerud Vest-Agder Aust-Agder Akershus Nordland Sør-Trøndelag Nord
Slide 13: Close to 0% interest and no immediate prospect of change
CLOSE TO 0% INTEREST – AND NO IMMEDIATE PROSPECT OF CHANGE ... Historically low interest rates during the forecast period Households' interest rate expectations are even lower Limited possibilities for further stimulus Source: Norges Bank, Danish National Bank og Riksbanken
Slide 14: Contents
CONTENTS Macroeconomic trends Forecasts for investments in construction 2016 and 2017 Key markets
Slide 15: Our forecasts – logic and time frame
OUR FORECASTS – LOGIC AND TIME FRAME: Last year This year Next year 2 years «MACROs» «DEMAND» «ACTIVITY» Investment Economic forces Investments (production) decisions Typical indicators: Interest rate House prices Growth and the labour market Investments Consumption and confidence construction start
Slide 16: Our forecasts for investments in construction (March 2016)
OURBilde FORECASTS av skandinaviaFOR INVESTMENTS IN CONSTRUCTION INVESTMENTS* IN CONSTRUCTION. FORECASTED GROWTH IN VOLUMES FOR 2016 AND 2017 kommer MARCH 2016 2015 2016 2017 2015 2016 2017 2015 2016 2017 NOK bill.** growth growth NOK bill.** growth growth NOK bill.** growth growth Residential 130 0
Slide 17: Our forecasts for investments in construction (Sept. 2016)
OUR FORECASTS FOR INVESTMENTS IN CONSTRUCTION INVESTMENTS* IN CONSTRUCTION. FORECASTED GROWTH IN VOLUMES FOR 2016 AND 2017 SEPT. 2016 2015 2016 2017 2015 2016 2017 2015 2016 2017 NOK bill.** growth growth NOK bill.** growth growth NOK bill.** growth growth Residential 130 5% 5% 150 15% 2% 61 5% 10%
Slide 18: Contents: key markets
CONTENTS Macroeconomic trends Forecasts for investments in construction 2016 and 2017 Key markets: • Strong demand for housing • Commercial buildings – weak recovery • Civil engineering – expanding markets
Slide 19: Investments in construction, NOK billion
INVESTMENTS IN CONSTRUCTION, NOK BILLION 25% Residential 130 50% 140 60% 59 Commercial 55 22 buildings 96 Public buildings 35 39 28 40% 40% Civil engineering 80 60% 77 46 Total 299 Total 352 Total 155 Source: Veidekke, Statistics Sweden, Statistics Denmark, Statistics Norway and Norges Bank Share of
Slide 20: 1. Strong demand for housing
Residential 1. STRONG DEMAND FOR HOUSING
Slide 21: Sweden: strong demand in 2017 as well
Residental SWEDEN: STRONG DEMAND IN 2017 AS WELL Autumn residental markets off to a good start +7%* +7%* • Positive sales starts in the industry • Price recovery in Aug./Sept.*** +8%* +8%* Price levels testing upper boundaries? • Boindex close to 100 indicates an +11%* +11%* upper bound for househol
Slide 22: Sweden: growth in new homes continues
Residential SWEDEN: GROWTH IN NEW HOMES CONTINUES The annual rate for housing 56 starts is close to 60,000 units Recent figures show 17% growth in investments in the first half of 2016 • Investment growth of 15% in 2016 • Forecast for 2017 shows high level of activity but declining growth Legend: Re
Slide 23: Norway: strong growth in prices
Residential NORWAY: STRONG GROWTH IN PRICES Strong demand due to low Completed new homes per Q2 2016 interest rates and the No. of units, rolling sum of 12 months stabilizing economy +17%* 5000 • Unemployment levels out 4000 • Household psychology +3%* 3000 • Share of investor-related 2000 demand sl
Slide 24: Norway: strong growth in prices
Residential NORWAY: STRONG GROWTH IN PRICES Strong demand due to low interest rates and the stabilising economy +17%* • Unemployment leves out • Household phsycology +3%* • Share of investor-related demand slightly increased, +8%* albeit at a low level -6%* Imbalance last 12-24 months • Supply is la
Slide 25: Norway: strong growth in start ups
Residential NOWRAY: STRONG GROWTH IN START UPS Growth in flats and terraced houses Strong growth in activity past Contribution to total annual growth in sq.m. per Q2 2016 12 months 34 25% • Annual rate for new build housing 20% is almost at 34,000 units 15% • 22% growth in flats and terraced housing
Slide 26: 2. Commercial buildings – slow recovery
Commercial buildings 2. COMMERCIAL BUILDINGS – SLOW RECOVERY Kilde: DST, SCB, SSB og Veidekke
Slide 27: Investments in commercial buildings
Commercial buildings 2. COMMERCIAL BUILDINGS – SLOW RECOVERY INVESTMENTS IN COMMERCIAL BUILDINGS. NOK BILLION, 2016 PRICES The highest recorded level and Veidekke's forecast for 2017 120 107 100 101 80 91 60 53 49 40 20 24 0 Source: Veidekke, Statistics Sweden, Statistics Denmark and Statistics Norw
Slide 28: Sweden: levelling off after two years of growth?
Commercial buildings SWEDEN: LEVELLING OFF AFTER TWO YEARS OF GROWTH? INVESTMENT FORECASTS FOR SELECTED INDUSTRIES: Underlying drivers have been As of February in the For 2015 For 2016 Change positive in recent years respective years: • Positive forecasts for 2016 Manufacturing 5.9 bill. 7.7 bill. +
Slide 29: Sweden: levelling off after two years of growth?
Commercial buildings SWEDEN: LEVELLING OFF AFTER TWO YEARS OF GROWTH? Underlying drivers have been positive in recent years • Positive forecasts for 2016 with 4% investment growth Levelling off at a high level in 2017 • Household demand remains positive • Slowdown in export growth and manufacturing
Slide 30: Norway: structural factors?
Commercial buildings NORWAY: STRUCTURAL FACTORS? COMMERCIAL BUILDINGS START UPS Rolling 12 months Weak forecasts: 1400 • Forecasts of 2% decline remains for 2016 and 2017 1200 +11%* Structural changes in the demand for 1000 1,000 800 new buildings? m2 • Growth in logistics 600 -30%* • Warehouses rem
Slide 31: Denmark: on the right track, but still high vacancy rate
Commercial buildings DENMARK: ON THE RIGHT TRACK, BUT STILL HIGH VACANCY RATE Growth from a very low level • Forecasts of 3% investment growth in 2016 and 7% in 2017 Positive development in underlying driving forces: • Employment growth • Household consumption • Manufacturing production … but capaci
Slide 32: 3. Civil engineering – expanding markets
Anlegg 3. CIVIL ENGINEERING – EXPANDING MARKETS
Slide 33: Transport investments: several large projects due for tendering
Civil Rv 83 Harstadtunnelen E6 Sjømanskirka - Ornes E6 Mørsvikbotn - Ballangen E10 Evenes - Gullesfjord TRANSPORT INVESTMENTS: Several large projects are due for tendering in 2016/17 Fv 17 Steinkjer - Namsos Trønder- og Meråkerbanen The projects amount to more E6 Vindåsliene FV659 Nordøyvegen than N
Slide 34: Increasing volumes in water supply and sewerage
Civil INCREASING VOLUMES IN WATER SUPPLY AND SEWERAGE MUNICIPAL INVESTMENTS IN WATER AND SEWERAGE NOK billion (current prices) CAGR +10% VEIDEKKE PROJECT OHARA*, OS MUNICIPALY, HORDALAND 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Os main sewerage tube facility Source: Statis
Slide 35: Increasing volumes in water supply and sewerage
Civil INCREASING VOLUMES IN WATER SUPPLY AND SEWERAGE MUNICIPAL INVESTMENTS IN WATER AND SEWERAGE Holmen, Akershus August 6 2016 NOK billion (current prices) 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Statistics Norway 35 14.09.2016
Slide 36: Tighter priorities or...?
TIGHTER PRIORITIES OR…? Net surplus National budget % of GDP Mainland 1,5 1,0 0,5 0,0 -0,5 -1,0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: National Budget for 2016 36 14.09.2016 Norwegian Finance Minister: Siv Jensen
Slide 37: Hoyre om!
Hoyre om! Hoyre-Torbjorn freder formuesskatten ill it i L e
Slide 38: Better at maintenance – new political rhetoric?
PLANNING BASIS ON NATIONAL TRANSPORTATION PLAN 2018-2029: «BETTER AT MAINTENANCE…» - NEW POLITICAL RETORICS? Norwegian National Transport Plan 2018–2029 “We must look after what we already have” • Operation and maintenance safeguard society’s investments • Priority before investment • Catch up on ba
Slide 39: 2017 investment financing secured?
«No cuts in the use of petroleum revenues» Hans Olav Syversen (KRF), Chair of the Finance Committee Facsimile from Dagens Næringsliv 10.9.2016 2017 investment 39 financing secured? 14.09.2016
Slide 40: Norway: heading for higher activity levels
Civil NORWAY: HEADING FOR HIGHER ACTIVITY LEVELS NOK billions Continued growth in Roads 50 • Although some projects are 45 +11%* 40 postponed 35 30 High levels in railway 25 +3%* • But new projects will not 20 15 +25%* provide growth until after 2017 10 Growth continues in Energy 5 -12%* - +0%* • Up
Slide 41: Sweden – boom in public demand
Civil SWEDEN – BOOM IN PUBLIC DEMAND SEK billions Roads growing after years of 35 stagnation +5%* 30 Railway sector «taking a 25 +13%* break» in 2016 and 2017 20 -3%* Positive development in water 15 10 and sewerage +1%* 5 • New requirements – climate - and water quality • Infrastructure for residen
Slide 42: Summary
SUMMARY
Slide 43: Activity growth continues
ACTIVITY GROWTH CONTINUES INVESTMENTS IN CONSTRUCTION. NOK* BILLIONS 2016-PRICES 450 +6 %** Mainly positive outlooks for 400 the Economies 350 +4 %** 300 High level of activity in the forecasting period 250 Residental and public 200 +3 %** infrastructure are the main 150 drivers of growth 100 50 200
Slide 44: Appendix – Forecasts
APPENDIX – FORECASTS
Slide 45: Forecasts – local currency (NOK)
FORECASTS – LOCAL CURRENCY Level 2015 2015 2016 2017 CAGR NOK bill. growth growth growth 2015-17 Residental 130 2% 5% 5% 5% Commercial buil. 55 -2% -2% -2% -2% Public buil. 35 3% 3% 3% 3% Civil engineering 80 7% 7% 7% 7% Total 299 3% 4% 4% 4% Housing starts, 31.000 34.000 35.000 units Forecast uncha
Slide 46: Forecasts – local currency (SEK)
FORECASTS – LOCAL CURRENCY Level 2015 2015 2016 2017 CAGR SEK bill. growth growth growth 2015-17 Residental 149 17% 15% 2% 8% Commercial buil. 102 4% 4% 1% 2% Public buil. 42 1% 7% 5% 6% Civil engineering 78 0% 3% 6% 4% Total 370 8% 9% 3% 6% Housing starts, 46.000 58.000 60.000 units Forecast unchan
Slide 47: Forecasts – local currency (DKK)
FORECASTS – LOCAL CURRENCY Level 2015 2015 2016 2017 CAGR DKK bill. growth growth growth 2015-17 Residental 48 0% 5% 10% 7% Commercial buil. 17 -1% 3% 7% 5% Public buil. 21 6% -2% -2% -2% Civil engineering 39 0% 3% -2% 0% Total 125 1% 3% 4% 3% Housing starts, 14,500* 17,000 19,500 units Forecast unc