Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (March 2023)
44 slides from Veidekke Asa's investor presentation, Mar 30, 2023
Slide 1: Spring 2023 market update
Spring Veidekke 2023 market update 30 March 2023 Kristoffer Eide Hoen | Head of Business Development and Analysis Questions? kristoffer.eide.hoen@veidekke.no
Slide 2: About Veidekke's market report
About Veidekke’s market report • Veidekke prepares figures for the Scandinavian markets based on statistics published by Statistics Norway (SSB), Statistics Sweden (SCB) and Statistics Denmark (DST). Other information sources include major construction clients like the Swedish Transport Administrati
Slide 3: Our focus: the Scandinavian construction markets
Our focus: the Scandinavian construction markets Not included: - Detached houses and holiday homes - Primary industry The construction markets in 2022 - Residential refurbishment, “off-the-books Production of buildings* and infrastructure in NOK billion work” and household DIY Total Scandinavian mar
Slide 4: Construction markets forecasts 2023-2024
construction markets Forecasts 2023–2024 Comment Production in the Scandinavian construction markets • While last year’s surprisingly strong market growth of 14% in value terms Percentage change since previous year, current prices was strongly inflation-driven, it also incorporated volume growth of
Slide 5: Agenda
Agenda 01 Introduction 02 Economic environment 03 The construction markets 04 Construction costs 05 Summary 5
Slide 6: Introduction
01 Introduction
Slide 7: Less geopolitical unrest, but new financial turbulence
Less geopolitical unrest, but new financial turbulence Geopolitical unrest and risk premiums on European corporate bonds • Despite ongoing, intense fighting in Ukraine, 350 indicators of geopolitical unrest have stabilised. • Last summer and autumn’s serious concerns 300 about the European energy si
Slide 8: Despite all the turbulence, one area stands out…
Despite all the turbulence, one area stands out… • The disruptive events of the past two years 1200 have been clearly reflected in international commodity, energy and logistics prices. • However, one price stands out compared to 1000 both recent years and the beginning of 2022, namely the price of E
Slide 9: Economic environment
O2 Economic environment VEIDEKKE
Slide 10: Moving towards an economic downturn
Moving towards an economic downturn GDP growth is slowing, but not as much as feared • Leading GDP forecasts indicate a milder 2020 2021 2022 2023 2024 2025 economic downturn in 2023 than feared in the autumn of 2022. 8 • One important explanatory factor is that a mild 5,7 6 5,2 winter and substanti
Slide 11: Surprisingly robust labour markets
Surprisingly robust labour markets Few current indications of higher unemployment 16 • Low unemployment equates to a lower risk of severe demand disruption in private segments 14 such as residential units and commercial buildings. 12 Percentage of workforce • To date, higher interest rates and weake
Slide 12: Inflation forecasts indicate a downward trend
Inflation/CPI Inflation forecasts indicate a downward trend • Inflation remains high at the beginning of 2023, but is expected to fall during the year and to 2020 2021 2022 2023 2024 2025 reach target levels in 2024. 9 8,4 8,1 • Throughout 2022 and in the early months of 7,7 2023, inflation fell som
Slide 13: Stable market interest rates?
Stable market interest rates? Flat trend for 10-year central government rates for the past six months, but risk premiums are falling • Market interest rates have shown a relatively flat 5 trend since the summer of 2022. • The risk premium on European corporate bonds 4 has now increased somewhat in r
Slide 14: Markets being supported by high migration to cities
Markets being supported by high migration to cities Many Scandinavian cities saw increased immigration throughout 2022 • Immigration may be linked to completion of Net migration to cities Net domestic migration, rankings 2022 residential units, but is primarily an important driver of demand for new
Slide 15: Suburbs growing strongly, for example in Stockholm
Suburbs growing strongly, for example in Stockholm Strong growth (>1.0%) Good growth (0.5-1.0%) Strong internal differences in net immigration between Stagnation (0.0-0.5%) Decline (<0.0%) central and peripheral areas in Stockholm County Net immigration Apartment blocks Municipalities… Population 20
Slide 16: The construction markets
O03 The construction markets VEIDEKKE
Slide 17: Accuracy for 2022
Accuracy for 2022 Forecasts and results one year later Comment Forecasts and accuracy for 2022 Estimated order intake in 2022 Estimated order intake, NOK billion • The estimated order intake for the construction markets in Norway and Sweden was approximately NOK 450 billion in 2022 – about 10% highe
Slide 18: Estimated order intake in the construction markets
Estimated order intake in the construction markets Acceptable even when adjusted for inflation Order intake, Nordic construction operations Estimated order intake, Scandinavian construction projects Reporting companies, reported figures and inflation-adjusted estimates in NOK billion Inflation-adjus
Slide 19: The Scandinavian construction markets, current prices
The Scandinavian construction markets Historical figures and forecasts, current prices Norway, production by sector Sweden, production by sector Denmark, production by sector NOK billion, current prices NOK billion, current prices NOK billion, current prices 160 160 160 CAGR 2023–2024 CAGR 2023–2024
Slide 20: The Scandinavian construction markets, fixed prices
The Scandinavian construction markets Historical figures and forecasts, fixed prices Norway, production by sector Sweden, production by sector Denmark, production by sector NOK billion, fixed prices NOK billion, fixed prices NOK billion, fixed prices 180 180 180 CAGR 2023–2024 CAGR 2023–2024 CAGR 20
Slide 21: Buildings
Buildings VEIDEKKE
Slide 22: Recent stabilisation in the secondhand residential market
Recent stabilisation in the secondhand residential market Residential prices, index Prices, secondhand residential units in Scandinavia, apartments • Residential prices in Norway and Sweden Index: January 2020 = 100 appear to have stabilised following last year’s price drop, but uncertainty remains
Slide 23: Apartments and small houses, Norway and Sweden
Apartments and small houses, Norway and Sweden Estimated value of order intake up to and including Q4 2022 Comment Norway, estimated order intake Sweden, estimated order intake • In Norway, the number of building starts involving NOK billion NOK billion apartments and small houses was satisfactory t
Slide 24: 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) • Sales of new apartments fell strongly in the Number of units, 12-month rolling total Year-on-year percentage change in price per m2 aut
Slide 25: 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 estimated order intake for commercial NOK billion NOK billion buildings in Norway and Sweden was a very Hotels, restaurants
Slide 26: 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 • In value terms, building starts in the public NOK billion NOK billion buildings segment remained relatively stable in 2022. W
Slide 27: Structural changes in the public buildings segment
Structural changes in the public buildings segment Reduced demand for new school buildings in both Norway and Sweden • Demographic trends are an important driver in Children of primary and lower Order intake, new school buildings the public buildings segment, alongside the general financial situatio
Slide 28: Infrastructure
Infrastructure VEIDEKKE
Slide 29: The civil engineering market in Norway and Sweden
The civil engineering market in Norway and Sweden The market remains strong Comment Production by civil engineering segment Production by civil engineering segment • Strong growth in 2022 is primarily attributable Norway, NOK billion, current prices Sweden, NOK billion, current prices to constructio
Slide 30: Transport infrastructure in Norway
Transport infrastructure in Norway Continuing high activity despite a slight decline Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Substantial drop in national road investment 50 50 this year following reduced budget allo
Slide 31: Transport infrastructure projects in Norway > NOK 500 million
Transport infrastructure projects in Norway > 500 million Published development plans Norway, March 2022 Norway, September 2022 Norway, March 2023 Project value in NOK billion Project value in NOK billion Project value in NOK billion 30,4 22,0 21,1 20,6 17,4 17,4 16,2 16,2 16,6 16,7 16,2 16,3 15,5 1
Slide 32: Transport infrastructure projects in Norway: start-up value
Transport infrastructure projects in Norway > 500 million Development of start-up value* Norwegian Public Roads Administration Nye Veier AS (NV) Railways Start-up value after start-up year, NOK billion Start-up value after start-up year, NOK billion Start-up value after start-up year, NOK billion 20
Slide 33: Transport infrastructure in Sweden
Transport infrastructure in Sweden Continuing high activity despite a slight decline Comment Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Many large central government construction projects are scheduled for completion in the 40
Slide 34: Transport infrastructure projects in Sweden: start-up value
Transport infrastructure projects in Sweden > NOK 500 million Development of start-up value* Swedish Transport Administration (Roads) Swedish Transport Administration (Railways) Stockholm Region (Railways) Start-up value after start-up year, SEK billion Start-up value after start-up year, SEK billio
Slide 35: Norway: energy, water supply and sewerage
Norway: energy, water supply and sewerage Positive developments Comment Production Production facilities, onshore wind power Energy NOK billion, current prices Installed effect (MW) • Energy investment fell in 2021 and 2022 due to a substantial drop in the number of wind power 30 6 000 1 800 11% 12%
Slide 36: Sweden: energy, water supply and sewerage
Sweden: energy, water supply and sewerage Positive developments Comment Production Production facilities, wind power Energy NOK billion, current prices Installed effect (MW) • Wind power development activity is expected to remain high throughout the forecast period. 60 20 000 2 500 7% -3% -11% 13% 1
Slide 37: Sweden: energy, water supply and sewerage
Sweden: energy, water supply and sewerage Positive developments Comment Production New projects according to Byggefakta Energy NOK billion, current prices Construction costs by start-up year, SEK billion • Wind power development activity is expected to remain high throughout the forecast period. 60
Slide 38: Road maintenance, Norway
Road maintenance, Norway Road maintenance Railway maintenance NOK billion, current prices NOK billion, current prices 40 40 -2% 21% 3% 20% -12% 10% 8% 3% 6% 7% 3% 4% 11% 8% 9% 4% 9% 1% 2% 15% 10% 11% 5% 3% 35 35 Forecasts for the period 2023–2024 Forecasts for the period 2023–2024 30 30 25 25 20 20
Slide 39: Construction costs
O04 Construction costs VEIDEKKE
Slide 40: Cost inflation set to fall
Cost inflation set to fall Construction cost indices show slower growth than last year Comment Construction cost index, residential blocks • Inflation as illustrated by construction cost indices has remained higher than Percentage change since same month last year forecast in the previous report, an
Slide 41: Construction cost index, civil engineering (Norway)
Construction cost index, civil engineering (Norway) Prices are flattening out Comment Construction cost index, roads (Norway) • Construction costs in the civil engineering and road maintenance segments Percentage change since same quarter last year increased strongly in 2022, driven not least by sub
Slide 42: Summary
05 Summary
Slide 43: Highlights Spring 2023
Highlights Spring 2023 • The economy appears set for a soft landing despite continuing uncertainty Production, Scandinavian construction markets about geopolitical and other factors. Important market drivers for Veidekke, such as unemployment and migration, continue to develop positively. Percentage
Slide 44: Takk for oppmerksomheten
Takk for 4 4