Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (October 2021)
34 slides from Veidekke Asa's investor presentation, Oct 20, 2021
Slide 1: Market update Autumn 2021
Market update Autumn 2021 20 October 2021 Kristoffer Eide Hoen and Anders Wettre
Slide 2: 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” work Production of buildings* and infrastructure in NOK billion and households’ own work Commercial Privat
Slide 3: 30 years since the last major downturn
30 years since the last major downturn Construction and civil engineering as a proportion of Norwegian production* 14% 12% 10% 8% 6% 4% 2% 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 C&CE proportion of the economy Average Sources: Statistics Norway, Veidekke *Production in the construc
Slide 4: Are crises becoming less severe?
Are crises becoming less severe? (2017 “new residential unit crisis”) 1970s: Inflation crisis Banking crisis Financial crisis Oil crisis Covid-19 14% 12% 10% 8% 6% 4% 2% 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 C&CE proportion of the economy Average Sources: Statistics Norway, Veide
Slide 5: Interest rates and credit the most important drivers?
Interest rates and credit the most important drivers? 14% 12% 10% 8% 6% 4% 2% 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 C&CE proportion of the economy Interest rate level* Sources: Statistics Norway, Macrobond, Veidekke *5-year government bond rate 5 © Veidekke
Slide 6: Inflation and bottlenecks – could rising interest rates threaten economic recovery?
Inflation and bottlenecks – could rising interest rates threaten economic recovery? 6 © Veidekke
Slide 7: The spectre of inflation and rising interest rates
The spectre of inflation and rising interest rates The Economist: “Commodity price index” 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Non-Food Agricultural Index Metals Index 7 © Veidekke
Slide 8: Imbalances resulting from Covid-19 measures
Imbalances resulting from Covid-19 measures 8 © Veidekke
Slide 9: Normalisation expected
Normalisation expected Inflation forecasts 2021–2023 Comments Percentages 4,5 4,2 • Inflation is expected to decline or remain low 4,0 in the years ahead. 3,5 3,2 • Bottlenecks will remain in coming quarters, 3,0 but will gradually be eliminated. 2,5 2,2 2,1 2,2 2,2 • In the construction and civil e
Slide 10: Strongly increasing construction costs
Strongly increasing construction costs Cost inflation, residential blocks, by country Comments Index, Q1 2020 = 100 112 • Construction costs and inflation since Q1 2020: 110 110 +9.5% in Norway 108 106 107 +6.8% in Sweden 104 103 +3.4% in Denmark (up to and including Q2 only) 102 100 98 96 94 92 90
Slide 11: Strongly increasing construction costs
Strongly increasing construction costs Cost inflation, residential blocks in Norway Comments Index, Q1 2020 = 100 120 • Thus far, cost inflation has been driven by 115 117 rising material prices • Rising energy and CO2 prices are playing an 110 110 increasing role, both directly and indirectly in 10
Slide 12: How important are “deliveries of goods”?
How important are “deliveries of goods”? Example: Cost structure, Norwegian residential blocks • Materials account for approx. 35%–40% in the residential block example* • Sample calculation: 50% increase in rebar prices will lead to an increase of approximately 1% in the total cost of the “Statistic
Slide 13: Peaked, but not yet back to normal
Peaked, but not yet back to normal Lumber Rebar Comments Index: January 2020 = 100 Index: January 2020 = 100 Lumber (CME) 180 Rebar (LME) • Two types of cost effect: 330 Estimate, imported lumber 170 Estimated import cost rebar • Direct price increases Construction cost index, lumber Construction co
Slide 14: Cementa – “Sweden’s concrete supplier”
Cementa – “Sweden’s concrete supplier” • Limestone quarry and cement production at Slite on Gotland • Slite supplies 75% of the cement used in concrete production in Sweden • Licence not renewed initially • Two reports ordered by the Swedish Government have concluded that there are no alternative so
Slide 15: Contracting markets
Contracting markets 15 © Veidekke
Slide 16: Strong order intake and numerous building starts in Q2 2021
Strong order intake and numerous building starts in Q2 2021 Order intake, Nordic construction operation Estimated order intake, construction in Scandinavia Reporting companies, estimate in NOK billion NOK billion. Data based on registered building permits 80 160 69,5 136,3 70 140 121,6 60 58,0 58,0
Slide 17: Contracting markets: Market developments
Contracting markets Market developments 2020 2021 2022 2023 Norway -1% (-1%) 0% (1%) 2% (2%) 2% Sweden 2% (0%) 3% (0%) 2% (2%) 0% Denmark -1% (-1%) -4% (-5%) -1% (3%) 5% Scandinavia 0% (0%) 0% (-1%) 1% (2%) 2% Sources: Veidekke's market data, Statistics Norway, Statistics Sweden and Statistics Denma
Slide 18: Scandinavian contracting markets: Historical figures and forecasts
Scandinavian contracting markets Historical figures and forecasts Norway Sweden Denmark By sector, NOK billion By sector, NOK billion By sector, NOK billion 110 110 110 CAGR 2022–2023 CAGR 2022–2023 +2% CAGR 2022–2023 100 +5% 100 100 +1% +3% 90 90 90 80 80 80 70 70 70 +1% +1% 60 60 60 50 50 -3% 50 +
Slide 19: Civil engineering
Civil engineering 19 © Veidekke
Slide 20: Civil engineering market in Norway and Sweden
Civil engineering market in Norway and Sweden More moderate growth following high investment activity Investment by civil engineering segment Investment by civil engineering segment Comments Norway, NOK billion Sweden, NOK billion • Investment levels were very high in both 120 8% 19% 11% 3% 5% 9% 8%
Slide 21: Transport infrastructure in Sweden: National Transport Plan
Transport infrastructure in Sweden National Transport Plan Draft Government Budget 2022 National Transport Plan 2022–2033 Comments Excerpt regeringen.se SEK billion (2021 kroner) • The draft budget for 2022 foresees continued high investment levels in Total budget: SEK 799 billion the years ahead SE
Slide 22: Transport infrastructure in Sweden: Major state-owned projects
Transport infrastructure in Sweden Major state-owned projects Roads market, investment Railways market, investment Comments NOK billion NOK billion 40 • Strong momentum in ongoing projects -10% -3% 3% 13% 16% 12% 3% 17% 4% 3% -5% 40 -14% 7% 17% -11% 4% 11% 18% 26% 15% 3% 5% entailed strong growth in
Slide 23: Transport infrastructure in Norway: Will a change of government have an impact?
Transport infrastructure in Norway Will a change of government have an impact? Development of transport infrastructure investments Planning periods National Transport Plan NOK billion NOK billion 70 Red-green coalition Centre-right coalition NOK 300 billion CAGR CAGR 2018-2021 60 93% follow-up ratio
Slide 24: Transport infrastructure in Norway: National Transport Plan 2022-2033
Transport infrastructure in Norway National Transport Plan 2022-2033 Road purposes, NTP Railway purposes, NTP Comments Annual average, NOK billion (2021 kroner) Annual average, NOK billion (2021 kroner) NTP 2022–2033 Investment 23,8 Investment • The NTP budget totals almost NOK 20,5 NTP 2022–2033 17
Slide 25: Transport infrastructure in Norway: Amended priorities?
Transport infrastructure in Norway Amended priorities? Roads market, investment Railways market, investment Comments NOK billion NOK billion 50 • National budget largely “as expected” 10% 8% 4% 7% 14% 13% 4% -6% 0% 14% 8% 50 30% 55% 13% -12% 3% 3% 20% 4% 25% 3% -5% 45 45 Roads market 40 40 35 35 • M
Slide 26: Transport infrastructure in Norway: Contract size and internationalisation
Transport infrastructure in Norway Contract size and internationalisation Development in contract sizes > NOK 500 million Awarded contracts > NOK 500 million Proportion by contract size, percentages Proportion by contractor, percentages 100 % 100 % 12% 10% 9% 90 % 16% 90 % 80 % 41% 40% 39% 39% 80 %
Slide 27: Construction
Construction 27 © Veidekke
Slide 28: Scandinavian contracting markets: Historical figures and forecasts
Scandinavian contracting markets Historical figures and forecasts Norway Sweden Denmark By sector, NOK billion By sector, NOK billion By sector, NOK billion 110 110 110 CAGR 2022–2023 CAGR 2022–2023 +2% CAGR 2022–2023 100 +5% 100 100 +1% +3% 90 90 90 80 80 80 70 70 70 +1% +1% 60 60 60 50 50 -3% 50 +
Slide 29: Commercial buildings in Norway and Sweden
Commercial buildings in Norway and Sweden Estimated value of order intake by quarter Comments NOK billion 40 Industry and warehouses • Surprisingly strong quarters for the commercial buildings Office buildings 35 Retail and commercial buildings segment Hotels, restaurants and accommodation Multi-sto
Slide 30: Residential market: Net immigration
Residential market Net immigration Net immigration, Norway Net immigration, Sweden Comments Proportion of population, percentage Proportion of population, percentage 1,5% 1,5% • Clear Covid-19 effect in 2020 • Covid-19 has had the greatest 1,0% 1,0% impact in major cities: Oslo and Stockholm 0,5% 0,
Slide 31: Apartments and small houses in Norway: Estimated order intake
Apartments and small houses in Norway Estimated order intake Estimated value of order intake by quarter Comments NOK billion 20 East Oslo South West Trøndelag North • The total estimated order intake for apartments 18 and small houses is high 1,6 • Residential construction is particularly strong in
Slide 32: Apartments and small houses in Sweden: Estimated order intake
Apartments and small houses in Sweden Estimated order intake Estimated value of order intake by quarter Comments NOK billion 40 Other Greater Stockholm Uppsala Greater Gothenburg Greater Malmö • Strong demand in the three major cities 35 3,4 • “Extremely” high Q2 figures for several counties 4,1 out
Slide 33: Veidekke market update autumn 2021: Highlights
Veidekke market update autumn 2021 Highlights • Primary drivers of imbalances in the materials supply and residential markets appear to have slowed • Prices of input factors like lumber and steel are expected to fall, but remain significantly higher than normal. High energy prices and the situation
Slide 34: Thank you
Thank you