Slide 1: Veidekke's Economic Activity Report September 2017
VEIDEKKE'S ECONOMIC ACTIVITY REPORT SEPTEMBER 2017 27 September 2017 Kristoffer Eide Hoen Director of Analysis
Slide 2: "It's tough to make predictions, especially about the future"
"It's tough to make predictions, especially about the future" Yogi Berra Veidekke's Economic Activity Report September 2017
Slide 3: Forecasts for construction and civil engineering production in 2017, 2018 and 2019
FORECASTS FOR CONSTRUCTION AND CIVIL ENGINEERING PRODUCTION IN 2017, 2018 AND 2019 Economic drivers Investment decisions Const. & civ. eng. market 3 Veidekke's Economic Activity Report September 2017
Slide 4: Forecasts for construction and civil engineering production in 2017, 2018 and 2019
FORECASTS FOR CONSTRUCTION AND CIVIL ENGINEERING PRODUCTION IN 2017, 2018 AND 2019 Indicators: GDP, interest rates, Construction starts, Production / revenue labour market sales, orders 4 Veidekke's Economic Activity Report September 2017
Slide 5: Forecasts for construction and civil engineering production in 2017, 2018 and 2019
FORECASTS FOR CONSTRUCTION AND CIVIL ENGINEERING PRODUCTION IN 2017, 2018 AND 2019 Indicators: GDP, interest rates, labour Construction starts, 2017 2018 2019 market sales, orders * Degree of visibility / predictability as per September 2017 5 Veidekke's Economic Activity Report September 2017
Slide 6: Highlights
HIGHLIGHTS Fundamental drivers still seem good, and stronger than expected in March Good prospects for the construction and civil engineering market in the forecast period until the end of 2019, but with diminishing growth The turnaround in the residential market in Oslo and Stockholm is stronger th
Slide 7: Veidekke's Economic Activity Report
VEIDEKKE'S ECONOMIC ACTIVITY REPORT: Provide forecasts for investments / revenue in construction and civil engineering through to the end of 2019 • Thoughts concerning drivers and uncertainties Consensus economic forecasts based on data from recognised economic analysis institutions: • The IMF, the
Slide 8: Content
CONTENT Economic drivers Forecasts for 2017–2019 Key market areas 8 Veidekke's Economic Activity Report September 2017
Slide 9: The global economy is looking healthy
THE GLOBAL ECONOMY IS LOOKING HEALTHY GDP growth Figures in % 2016 2017 2018 2019 Euro zone 1.8 1.9 (1.9) 1.7 (1.6) 1.8 Germany 1.8 1.8 (1.5) 1.6 (1.5) 1.4 Stable and moderately positive forecasts UK 1.8 1.7 (1.5) 1.5 (1.4) 1.6 for the international economy US 1.6 2.1 (2.3) 2.1 (2.5) 2.1 China 6.7 6
Slide 10: Slide 10
Slide 11: Positive GDP surprises in all three countries
ECONOMIC GROWTH: POSITIVE GDP SURPRISES IN ALL THREE COUNTRIES GDP growth mainland Norway (%) GDP growth Sweden (%) GDP growth Denmark (%) Forecast Economic Activity Report March 2017 Forecast Economic Activity Report September 2017 Source: Veidekke, Statistics Norway, Statistics Sweden and Statisti
Slide 12: Positive GDP surprises in all three countries
ECONOMIC GROWTH: POSITIVE GDP SURPRISES IN ALL THREE COUNTRIES Production growth past 3 months. GDP growth Sweden (%) GDP growth Denmark (%) Forecast Economic Activity Report March 2017 Forecast Economic Activity Report September 2017 Source: Veidekke, Norges Bank, Statistics Sweden and Statistics D
Slide 13: Positive employment figures, moderate in Norway
LABOUR MARKET: POSITIVE EMPLOYMENT FIGURES, MODERATE IN NORWAY Employment growth Norway (%) Employment growth Sweden (%) Employment growth Denmark (%) Forecast Economic Activity Report March 2017 Forecast Economic Activity Report September 2017 Source: Veidekke, Statistics Norway, Statistics Sweden
Slide 14: Moderate future interest rate path, led by Sweden
INTEREST RATES: MODERATE FUTURE INTEREST RATE PATH, LED BY SWEDEN Interest rates Norway Interest rates Sweden Interest rates Denmark Forecast Economic Activity Report March 2017 Forecast Economic Activity Report September 2017 Source: Macrobond and Veidekke 14 Veidekke's Economic Activity Report Sep
Slide 15: RDARE2 > DEBATT @ » MOHETERS=a3 +
RDARE2 > DEBATT @ » MOHETERS=a3 + VALCEN LAS AMAL 28 » ENTHUP MENG SO > ROAR 0 ing, ordforanden Lukas Lundin, ska dubbla bolagets storlek genom mangmiljardforvary BNYHETER6—7 Nordkorea provocerar Omvariden reas med bestortnix
Slide 16: Content
CONTENT Economic drivers Forecasts for 2017–2019 Key market areas 16 Veidekke's Economic Activity Report September 2017
Slide 17: Strong Scandinavian market through to the end of 2019, in relative terms
STRONG SCANDINAVIAN MARKET THROUGH TO THE END OF 2019, IN RELATIVE TERMS ... Construction and civil engineering production in NOK billions Residential production will remain at a high level through to the end of 2019 The other segments are projected a solid growth rate of 5–6% in 2018–2019 * Annual
Slide 18: But growth is slowing down after a strong recovery
... BUT GROWTH IS SLOWING DOWN AFTER A STRONG RECOVERY Market growth in NOK billions, contribution to growth Almost 10% growth in construction and civil engineering in 2017 Falling to about 6% in 2018 and 2% in 2019 (lower than inflation) Source: Veidekke, Statistics Norway, Statistics Sweden and St
Slide 19: Market growth in metropolitan regions in 2018 and 2019
MARKET GROWTH IN METROPOLITAN REGIONS IN 2018 AND 2019 TREND FOR PRODUCTION / REVENUE IN 2018 AND 2019 The cities represents the metropolitan regions (Greater Oslo, Greater Stockholm, etc.) Source: Veidekke, Statistics Norway, Statistics Sweden and Statistics Denmark 19 Veidekke's Economic Activity
Slide 20: Content
CONTENT Economic drivers Forecasts for 2017–2019 Key market areas 20 Veidekke's Economic Activity Report September 2017
Slide 21: Residential – decline after strong growth
RESIDENTIAL 1. RESIDENTIAL – DECLINE AFTER STRONG GROWTH Investments in Residential Current prices – 2017, NOK billions – 2016 exchange rate 200 +0%* High but falling production volumes -2%* • Very high number of construction starts to 150 the end of Q2 2017, but sales have slowed +10%* down 100 Pro
Slide 22: Norway: back to normal after record strong 2016
RESIDENTIAL NORWAY: BACK TO NORMAL AFTER RECORD STRONG 2016 Prices per sq.m, apartments in selected cities The turnaround has been stronger than expected Effective credit measures Situation reminiscent of 2013 • Upturn before tightening of credit measures, vacuum and psychological effects afterwards
Slide 23: Norway: back to normal after record strong 2016
RESIDENTIAL NORWAY: BACK TO NORMAL AFTER RECORD STRONG 2016 Start and construction of apartments and small houses, total of rolling 12 month "Normalisation" to 15,000–17,000 units • Involves a drop of 25–35% from the record level in Q2 2017 Fundamental conditions are good, and have improved in the p
Slide 24: Sweden: more balanced market
RESIDENTIAL SWEDEN: MORE BALANCED MARKET Prices per sq.m, apartments in selected cities Prices have levelled off in Stockholm • Continued strong recovery in Gothenburg and Malmö Healthier market situation • Supply more in balance with demand More normal competition for customers (which is both posit
Slide 25: Sweden: growth in the residential segment is slowing down
RESIDENTIAL SWEDEN: GROWTH IN THE RESIDENTIAL SEGMENT IS SLOWING DOWN Start and construction of apartments and small houses, total of rolling 12 month The slower pace of sales in the Stockholm region will entail fewer housing starts • Gothenburg and Malmö still look strong Positive effects on indust
Slide 26: Public and commercial buildings
BUILDINGS 2. PUBLIC AND COMMERCIAL BUILDINGS Commercial buildings: Offices, wholesale and retail trade, industry and warehouses Public buildings: Schools, cultural and recreational buildings, nursing homes and hospitals 26 Veidekke's Economic Activity Report September 2017
Slide 27: Commercial buildings
COMMERCIAL BUILDINGS COMMERCIAL BUILDINGS Investments in commercial buildings Current prices, NOK billions – 2016 exchange rate 120 +6%* Good market for public and commercial 100 buildings through to the end of 2019 80 +2%* • Good growth rate in Sweden, from an 60 already high level 40 +10%* • Stabl
Slide 28: Commercial buildings
COMMERCIAL BUILDINGS COMMERCIAL BUILDINGS Production volumes in selected segments Current prices, NOK billions Growth in several segments • Retail (shopping centres) • Storage & logistics Some regional differences More storage & logistics • The current mood within commercial property could well trum
Slide 29: Denmark: positive signs in the Danish market
COMMERCIAL BUILDINGS DENMARK: POSITIVE SIGNS IN THE DANISH MARKET Office vacancy rate in selected metropolitan regions The vacancy rate is falling Low investments for many years suggest a potential for growth But we must not count our chickens before they hatch • Many development projects are experi
Slide 30: Public buildings
PUBLIC BUILDINGS PUBLIC BUILDINGS Investments in public buildings Current prices, NOK billions – 2016 exchange rate 60 +7%* Good market through to the end of 2019 50 • The growth in Sweden looks set to persist 40 +4%* • Renewed growth in Norway in 2019 30 • Moderate outlook in Denmark +3%* Highlight
Slide 31: Public buildings
PUBLIC BUILDINGS PUBLIC BUILDINGS Hospital projects initiated in 2017–2018 Current prices, NOK billions – 2016 exchange rate Good market through to the end of 2019 • The growth in Sweden looks set to persist • Renewed growth in Norway in 2019 • Moderate outlook in Denmark Highlights: • Good economy
Slide 32: Public buildings
PUBLIC BUILDINGS PUBLIC BUILDINGS Production volumes in selected segments Current prices, NOK billions Schools dominate the situation We are expecting a clear increase in institutional construction projects • Hospital expansions from Lier to Kristiansund Nursing homes / care homes; • The calm before
Slide 33: Civil engineering market
CIVIL ENGINEERING 3. CIVIL ENGINEERING MARKET 33 Veidekke's Economic Activity Report September 2017
Slide 34: Civil engineering
CIVIL ENGINEERING 3. CIVIL ENGINEERING Investments in civil engineering Current prices, NOK billions – 2016 exchange rate 120 Growth expected in Norway and +7%* 100 Sweden 80 +6%* • But that will reach a limit, probably not long after 2019 60 +4%* • Strong international competition in parts 40 of th
Slide 35: Civil engineering
CIVIL ENGINEERING 35 Veidekke's Economic Activity Report March 2017
Slide 36: Materialisation of the green shift?
CIVIL ENGINEERING MUNICIPAL INVESTMENTS IN WATER SUPPLY AND SANITATION MATERIALISATION OF THE GREEN SHIFT? Investments in water supply and sanitation Investments in water supply and sanitation Current prices, SEK billions Current prices, NOK billions Source: Statistics Norway and Statistics Sweden 3
Slide 37: Sweden: civil engineering reaching new heights?
CIVIL ENGINEERING SWEDEN: CIVIL ENGINEERING REACHING NEW HEIGHTS? Investments in various civil engineering segments Current prices, SEK billions The growth in roads is continuing, but competition is tough in the largest projects Strong growth in the civil engineering market related to buildings • Re
Slide 38: Norway: new dynamics in road construction
CIVIL ENGINEERING NORWAY: NEW DYNAMICS IN ROAD CONSTRUCTION Road production by customer Current prices, NOK billions Further growth in infrastructure: • High level, starting to peak in 2019 Nye Veier and the Norwegian Public Roads Administration’s PPP projects are accounting for a larger share of th
Slide 39: Norway: new dynamics in road construction
CIVIL ENGINEERING NORWAY: NEW DYNAMICS IN ROAD CONSTRUCTION Major contracts’ share of the infrastructure market, Contracts over NOK 3 billion. Further growth in infrastructure: • High level, starting to peak in 2019 Nye Veier and the Norwegian Public Roads Administration’s PPP projects are accountin
Slide 40: Civil engineering
CIVIL ENGINEERING 40 Veidekke's Economic Activity Report September 2017
Slide 41: Road maintenance
CIVIL ENGINEERING ROAD MAINTENANCE ROADS RAIL Current prices, NOK billions Current prices, NOK billions Source: The Norwegian government, the Norwegian National Transport Plan, Statistics Norway, annual budgets and financial plans and Veidekke 41 Veidekke's Economic Activity Report September 2017
Slide 42: In summary
NEW IMAGE IN SUMMARY
Slide 43: Highlights
HIGHLIGHTS Fundamental drivers still seem good, and stronger than expected in March Good prospects for the construction and civil engineering market in the forecast period until the end of 2019, but with diminishing growth The turnaround in the residential market in Oslo and Stockholm is stronger th
Slide 44: Appendix – Forecasts
APPENDIX – FORECASTS
Slide 45: Norway: forecasts – local currency
NORWAY: FORECASTS – LOCAL CURRENCY Investments in NOK billions Current prices, Level 2016 2017 2018 2019 2018-2019 change (%) NOK bill. Growth Growth Growth Growth Growth Residential 139 11 % 9% 3% -7 % -2 % Commercial buildings 59 2% 6% 5% -1 % 2% Public buildings 36 8% -1 % 0% 9% 4% Construction a
Slide 46: Sweden: forecasts – local currency
SWEDEN: FORECASTS – LOCAL CURRENCY Investments in SEK billions Current prices, Level 2016 2017 2018 2019 2018-2019 change (%) SEK bill. Growth Growth Growth Growth Growth Residential 169 20 % 18 % 5% -5 % 0% Commercial buildings 85 1% 7% 9% 3% 6% Public buildings 44 15 % 7% 9% 5% 7% Construction and
Slide 47: Denmark: forecasts – local currency
DENMARK: FORECASTS – LOCAL CURRENCY Investments in DKK billions Current prices, Level 2016 2017 2018 2019 2018-2019 change (%) DKK bill. Growth Growth Growth Growth Growth Residential 66 10 % 17 % 13 % 8% 10 % Commercial buildings 22 4% 8% 10 % 10 % 10 % Public buildings 22 2% -1 % -1 % 7% 3% Constr
Slide 48: Veidekke's forecast for the construction and civil engineering market
VEIDEKKE’S FORECAST FOR THE CONSTRUCTION AND CIVIL ENGINEERING MARKET INVESTMENTS* IN CONSTRUCTION AND CIVIL ENGINEERING. GROWTH FORECAST FOR 2017-2019 All figures 2016 2017 2018-2019 2016 2017 2018-2019 2016 2017 2018-2019 measured in NOK Growth Annual SEK Growth Annual DKK Growth Annual value bill