Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (March 2022)
37 slides from Veidekke Asa's investor presentation, Mar 31, 2022
Slide 1: Market update Spring 2022
Market update Spring 2022 31 March 2022 Kristoffer Eide Hoen and Johanna Malkan Nyberg
Slide 2: Contents
Contents 01. Status at the outset of 2022 02. Market impact of the invasion of Ukraine 03. Key uncertainties and summary 2 © Veidekke
Slide 3: Our focus: the Scandinavian construction markets
Our focus: the Scandinavian construction markets The construction markets in 2021 Production of buildings* and infrastructure in NOK billion Commercialbuildings commercial buildings Total Scandinavian market in 2021: NOK 153billion billion ~ NOK 790 billion NOK 144 civil Civil engineering engineerin
Slide 4: Status at the outset of 2022
01 Status at the outset of 2022 4 © Veidekke
Slide 5: Status at the outset of 2022
Status at the outset of 2022 Comments Covid-19-related deaths, global Estimated excess deaths • Covid-19 infections declining, for now • Continued measures and high relevance in many countries • Economic upturn and labour shortages • Increased wage inflation? • Robust construction market in Norway a
Slide 6: Status at the outset of 2022 – labour shortages
Status at the outset of 2022 Comments Labour shortages Danish construction industry. % reporting shortages hindering production growth • Covid-19 infections declining, for now 50 45 • Continued measures and high relevance 40 in many countries 35 30 25 • Economic upturn and labour shortages 20 15 • I
Slide 7: Status at the outset of 2022 – order intake
Status at the outset of 2022 Comments Order intake, Nordic construction operation Reporting companies, estimate in NOK billion • Covid-19 infections declining, for now 70 63 • Continued measures and high relevance 59 62 60 in many countries 50 • Economic upturn and labour shortages 40 • Increased wa
Slide 8: Infrastructure – large projects
Infrastructure – large projects Contracts >500 million Norway Sweden Production value in NOK billion Production value in SEK billion 30,4 10,4 9,6 9,2 9,1 22,0 21,1 6,9 17,4 7,5 16,2 5,4 6,9 15,5 13,9 14,5 12,0 4,5 4,2 4,3 11,7 10,0 9,0 3,1 4,8 2,9 2,7 3,8 8,3 2,7 7,1 7,5 7,1 3,8 1,4 2,4 2018 2019 2
Slide 9: Status at the outset of 2022 – estimated order intake
Status at the outset of 2022 Estimated order intake, construction, up to and including Q4 2021 Comments NOK billion. Based on number of building permits registered by Statistics Norway, Statistics Sweden and Statistics Denmark • Covid-19 infections declining, for now 180 Sweden Norway Denmark 163 •
Slide 10: Status at the outset of 2022 – order intake by segment
Status at the outset of 2022 Estimated order intake, construction, up to and including Q4 2021 Comments NOK billion. Based on number of building permits registered by Statistics Norway, Statistics Sweden and Statistics Denmark • Covid-19 infections declining, for now 200 Apartments and small houses
Slide 11: Status at the outset of 2022 – commercial buildings
Status at the outset of 2022 Estimated order intake, construction, up to and including Q4 2021 Comments NOK billion. Based on number of building permits registered by Statistics Norway and Statistics Sweden • Covid-19 infections declining, for now Retail and commercial buildings 43 45 • Continued me
Slide 12: Increasing production costs and overall effect
Increasing production costs and overall effect Residential block index, Norway December 2022 • Construction costs up 5.8% year/year as at February 9% Index Yr/Yr Forecast Yr/Yr November 2021 8% • Future outlook? 8% • An estimate based on observed price rises, both direct and indirect: 6% • Expected
Slide 13: Level of construction costs and demand for new projects
Level of construction costs and demand for new projects Example: residential blocks in Norway Price increases – costs and revenues Comments Growth February 2021 to February 2022 Costs Revenues 100% • High price hikes for certain input factors over the past year 90% 100% 80% • Contributed to 15% incr
Slide 14: Market impact of the invasion of Ukraine
02 Market impact of the invasion of Ukraine 14 © Veidekke
Slide 15: Business expectations, adjusted for mean value
ZEW-indeksen Ifo Business Cycle Clock 60 Recovery Boom Business expectations, adjusted for mean value 40 20 Juni 2021 0 -20 Last observation March 2022 -40 Crisis April 2020 Slowdown -60 -60 -40 -20 0 20 40 60 Current business situation, adjusted for mean value Kilde: Ifo 15 © Veidekke
Slide 16: Observations: Interest rates
Observations Interest rates Risk premium Interest rate levels Comments Companies* and banks 10-year government bonds 3% 3% • Increased risk premiums on European corporate bonds, declined somewhat 2% 2% • Small movements in interbank interest rates, indicating low systemic risk 1% 1% • Clear expectat
Slide 17: Observations: Energy/commodities
Observations Energy/commodities Metals Energy Comments Index: January 1 2022 = 100 Index: January 1 2022 = 100 160 • Extreme increases in the prices 300 of metals and energy following the 140 invasion of Ukraine, but have dropped again 200 120 • Sharp price increases and sanctions are creating chall
Slide 18: Imports from conflict areas
Imports from conflict areas Comments Import percentage, sanctioned/invaded countries Russia, Belarus and Ukraine • Food (grains) – a potential challenge • Energy – natural gas a major challenge • Other relevant sectors: • Challenges in key niches (e.g. nickel) • Challenges for supply chains and supp
Slide 19: Imports from conflict areas in selected areas
Imports from conflict areas in selected areas Limited exposure, but some critical niches Supply: metal ores Supply: basic metals (NACE 24) Supply: timber (NACE 2 and 16) EUR billion and % in 2020 EUR billion and % in 2020 EUR billion and % in 2020 3,6 6,9 1% 2% Other imports EU production 53,8 13 15
Slide 20: War has historically had a significant impact on commodity prices
War has historically had a significant impact on commodity prices Historic annual development in Historic oil prices and wars in oil- CRB commodities index producing countries +100% Real USD 2010/barrel 2007-08 Global 130 financial crisis Provisionally +50% 120 +100% 2022 1979-80 110 Russia invades
Slide 21: European Central Bank March 2022
European Central Bank 10 March 2022 Christine Lagarde, ECB President Source: ECB • Reduction of supporting purchases continue, somewhat quicker than planned • Potential increase in interest rates in Q3, but uncertain • Relatively “mild” alternative scenarios, but could also be worse • No observable
Slide 22: Federal reserve March 2022
Federal reserve 16 March 2022 Comments • First increase in interests rates since 2018 (+25 bp) • Six further increases expected this year • Inflation up markedly, GDP reduced • Interest-rate projections materially increased (+100 bp) this year 22 © Veidekke
Slide 23: GDP and inflation
Strong growth and temporary inflation are the main developments GDP and inflation GDP growth Inflation 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 8 6 5,3 5,3 5,1 5,5 5,4 4,9 4,8 6 4,1 4,1 3,9 5 3,7 4,3 3,3 2,8 2,8 2,8 4 2,2 2,2 2,1 2,1 2,1 1,6 1,6 4 2 1,2 3,4 3,4 3,4 2 0,5 2,7 2,6 0 3 2,2 2,2
Slide 24: Developments with a high degree of certainty
Developments with a high degree of certainty • Still strong Scandinavian trend – short-term pressure on the labour market and parts of supply chains • High general inflation until the end of 2022, and further increases in construction cost indices • The highest priority for businesses is security of
Slide 25: Key uncertainties and summary
03 Key uncertainties and summary 25 © Veidekke
Slide 26: What are the unknowns?
What are the unknowns? • Geopolitical situation, further developments Scenarios in two dimensions • Stabilisation vs. escalation • Energy prices, range of potential outcomes in both directions • Inflation rate and access to materials and labour • Interest-rate levels and financial stability • Expect
Slide 27: Uncertain drivers and primary scenarios
Uncertain drivers and primary scenarios Conflict level Interest-rate level and financial volatility Limited Economic escalation Physical escalation “Economic slowdown” “Financial crisis 2.0” High “Mobilisation” “Crimea large” “Energy crisis” Low Where are we? Direction of development 27 © Veidekke
Slide 28: Summary and highlights
Summary and highlights Comments Production in the Scandinavian construction market Percentage change since last year, current prices • Strong demand in the Scandinavian market at 2020 2021 2022 2023 the beginning of 2022 indicates high activity levels well into 2022, unless production is disrupted N
Slide 29: Detailed estimates and market data
Detailed estimates and market data 29 © Veidekke
Slide 30: Scandinavian construction markets by sector
Scandinavian construction markets by sector Historical figures and forecasts Norway, production Sweden, production Denmark, production 150 150 150 140 140 140 130 130 130 CAGR 2022–2023 CAGR 2022–2023 +11% CAGR 2022–2023 120 120 120 +6% 110 110 +3% 110 100 100 100 +0% 90 90 90 +5% +7% 80 80 80 +2% 7
Slide 31: Apartments and small houses in Norway and Sweden
Apartments and small houses in Norway and Sweden Estimated order intake Norway, estimated value of order intake by quarter Sweden, estimated value of order intake by quarter NOK billion NOK billion 53 North Oslo South Trøndelag West East Greater Gothenburg Greater Malmö Greater Stockholm Uppsala Oth
Slide 32: Commercial buildings in Norway and Sweden
Commercial buildings in Norway and Sweden Estimated order intake Norway, estimated value of order intake by quarter Sweden, estimated value of order intake by quarter NOK billion NOK billion 30 Multi-storey car parks 30 Hotels, restaurants and overnight accommodation 28 Hotels, restaurants and overn
Slide 33: The civil engineering market in Norway and Sweden
The civil engineering market in Norway and Sweden Norway, production by civil engineering segment Sweden, production by civil engineering segment NOK billion NOK billion 120 8% 19% 11% 3% 5% 9% 10% -1% 5% 9% 4% 120 -3% 10% 0% -2% 3% 10% 16% 10% -7% 3% 2% 100 Country 2021 2022 2023 100 Country 2021 2
Slide 34: Transport infrastructure in Norway
Transport infrastructure in Norway Roads market, production Railways market, production NOK billion NOK billion 50 10% 8% 4% 7% 14% 13% 4% -4% 1% 11% 9% 50 30% 55% 13% -12% 3% 3% 20% 6% 31% 9% -3% 45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 20
Slide 35: Transport infrastructure in Sweden
Transport infrastructure in Sweden Roads market, production Railways market, production NOK billion NOK billion 40 -10% -3% 3% 13% 16% 12% 3% 16% -5% -2% -3% 40 -14% 7% 17% -11% 4% 11% 18% 26% 7% 9% 7% 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 36: Energy and water supply/sewerage
Energy and water supply/sewerage Production in power plants Production in water and sewerage systems NOK billion NOK billion 30 16 14 15 25 26 14 14 13 24 12 12 20 11 21 11 20 10 19 19 10 19 18 10 10 17 17 17 9 9 15 8 9 16 8 8 7 7 7 6 7 7 6 10 11 6 11 10 5 8 4 5 8 7 5 7 6 6 6 6 6 2 0 0 2012 2013 201
Slide 37: Veidekke's market data
Veidekke’s market data Methodological changes • The method for calculating contract value in NOK and in production has been amended since the previous report • Raw data still comprise data on permits and building approvals as reported by Statistics Norway, Statistics Sweden and Statistics Denmark. •