Veidekke Asa · OSL:VEI
Veidekke Asa — Investor Presentation (October 2024)
50 slides from Veidekke Asa's investor presentation, Oct 15, 2024
Slide 1: 15 October 2024 Questions?
15 October 2024 Questions? Kristoffer Eide Hoen | Head of Business Development and Analysis kristoffer.eide.hoen@veidekke.no Anders Wettre | Senior analyst anders.wettre@veidekke.no
Slide 2: Agenda
Agenda 01 Introduction 02 Economic environment 03 The contracting markets 04 Construction costs 05 Summary 2
Slide 3: Introduction
01 Introduction
Slide 4: About Veidekke's market report
About Veidekke’s market report • Veidekke prepares market analysis of the Scandinavian markets based on statistics published by Statistics Norway, Statistics Sweden and Statistics Denmark. Other information sources include major construction clients like the Swedish Transport Administration and the
Slide 5: Our focus: the Scandinavian contracting markets
Our focus: the Scandinavian contracting markets Not included: - Detached houses and holiday homes - “Off-the-books” work and household DIY The contracting markets in 2023 Production of buildings* and infrastructure in NOK billion Total Scandinavian market 2023: ~ NOK 1,035 billion Private yrkesbygg
Slide 6: Contracting markets
Contracting markets Forecasts 2024–2026 Comments Production in the Scandinavian contracting markets • The drop in activity seen in 2023 is continuing in 2024, primarily on Percentage change since previous year, current prices the back of weak building start numbers in the construction sector over se
Slide 7: Economic environment
02 Economic environment
Slide 8: Calm financial markets despite geopolitical turbulence
Calm financial markets despite geopolitical turbulence Geopolitical turbulence and risk premiums on European corporate debt • The geopolitical risk indicator (GPR) has risen recently, Geopolitical risk (GPR index) reflecting the elevated conflict level in the Middle East. Risk premium on European co
Slide 9: Very robust national macroeconomic positions
Very robust national macroeconomic positions Public finances, balance of trade and competitiveness Strong public finances Stable, positive balance of trade Global Competitiveness Rank 2023 Balance sheet, public sector, % of GDP Balance of trade, % of GDP Rank 1 (highest) – 67 (lowest) 30 35 1. Singa
Slide 10: Strong purchasing power and high job security
Strong purchasing power and high job security Growth in purchasing power and unemployment Comments Household purchasing power increasing… …while job security remains stable • The outlook for future household finances is Annual growth in real disposable income, households, % Unemployment , % of worki
Slide 11: Falling interest rates
Falling interest rates Key policy rates are being cut… …and market rates are falling Inflation is close to the 2% target Key policy rates, latest observation 8 October Five-year swap rates, %, latest observation 8 October Core inflation, % 4,95 4,73 9,3 5,0 3,82 4,5 3,68 6,7 7,0 3,21 5,4 3,5 1,85 2,
Slide 12: Less help from demographic trends?
Less help from demographic trends? Population growth and composition Comments Population growth, not like before Priority for schools or care services? • In Q2, population growth in Norway amounted Annual growth (CAGR) 2025–2035 for selected age groups to 1.1% year-on-year. Adjusted for immigration
Slide 13: Municipal finances and demand
Municipal finances and demand Municipal construction and Comments Profit margin, municipalities civil engineering investments* • Municipal investment capacity is under pressure Profit/gross income (income before financing costs) NOK billion, annual average due to cost increases without corresponding
Slide 14: EUs new Building Directive EPBD
EUs new Building Directive EPBD Comments Energy performance of buildings (EPBD) • EPBD came into force 28 May 2024, and EU member states have until Effective 28 May 2024 May 2026 to implement the directive in national law. The goal of EPBD is to improve energy efficiency in the building sector in th
Slide 15: The contracting markets
O03 The contracting markets
Slide 16: Estimated order intake, construction operation
Estimated order intake, construction operation Stable order intake among major listed companies Order book, Nordic construction operations Estimated order intake, Scandinavian construction projects Reporting companies, inflation-adjusted estimates in NOK/SEK billion Inflation-adjusted and in NOK bil
Slide 17: The Scandinavian contracting markets: current prices
The Scandinavian contracting 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 180 180 180 CAGR 2024–2026 CAGR 2024–2026
Slide 18: The Scandinavian contracting markets: fixed prices
The Scandinavian contracting 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 2024–2026 CAGR 2024–2026 CAGR 202
Slide 19: Forecast 2025–2026: approximately 50% recovery?
Forecast 2025–2026: approximately 50% recovery? Sector and country distribution Sector distribution Year-on-year change by sector Country distribution NOK billion. 2024 estimate and 2025–2026 forecast NOK billion. 2024 estimate and 2025–2026 forecast NOK billion. 2024 estimate and 2025–2026 forecast
Slide 20: Construction and civil engineering employment rate
Construction and civil engineering employment rate No dramatic changes 1,000 persons, as per Q2 in relevant years 392 396 377 255 260 254 211 210 212 Norway Denmark Sweden 2022 Q2 2023 Q2 2024 Q2 20 Sources: Statistics Norway, Statistics Sweden and Statistics Denmark
Slide 21: The contracting markets: Construction
The contracting markets Construction
Slide 22: Positive signs in the secondhand residential market
Positive signs in the secondhand residential market Residential prices, index Prices, secondhand residential units in Scandinavia, apartments • Prices of secondhand homes have developed Index: January 2020 = 100 positively in all three countries thus far this year. 130 • In addition, stable transact
Slide 23: New residential unit sales in Norway
New residential unit sales in Norway Sale starts and sales remain low, but there is an upward trend Comments Ready-for-sale and sold apartments Sales by region (apartments) • New residential unit sales in Norway appear Number of units, 12-month rolling total and last two months *Units, 12-month roll
Slide 24: Apartments and small houses, Norway and Sweden
Apartments and small houses, Norway and Sweden Estimated value of order intake Comments Norway, estimated order intake Sweden, estimated order intake • The estimated order intake related to new NOK billion NOK billion apartments and small houses in Norway was 16% lower in the first half of 2024 than
Slide 25: Commercial buildings in Norway and Sweden
Commercial buildings in Norway and Sweden Surprisingly strong figures for 2023 Comments Norway, estimated order intake Sweden, estimated order intake • The order intake related to commercial buildings NOK billion NOK billion shrank by 13% in Norway and 33% in Sweden in the first half of 2024. 120 Bu
Slide 26: Public buildings in Norway and Sweden
Public buildings in Norway and Sweden Reduced number of building starts in Norway and Sweden Comments Norway, estimated order intake Sweden, estimated order intake • The number of new public building starts in NOK billion NOK billion Norway increased markedly in the first half of the year, primarily
Slide 27: The contracting markets: Infrastructure
The contracting markets Infrastructure
Slide 28: Recent events
Recent events 22 March 2024: 5 April 2024: 19 September 2024: 7 October 2024: NO: National Transport NO: Long-term plan for the Sweden: Norway: Plan 2025–2036 defence sector 2025–2036 Draft National Budget 2025 Draft National Budget 2025 21 March 2024: 15 October 2024: Spring 2024 Autumn 2024 market
Slide 29: National Budgets in Norway and Sweden
National Budgets in Norway and Sweden High proportion of transport infrastructure, strong increase in defence spending Comments Norway: National Budget spending Sweden: National Budget spending Norway NOK billion SEK billion • Ongoing high levels of transport-infrastructure spending, although the pr
Slide 30: The civil engineering market in Norway and Sweden
The civil engineering market in Norway and Sweden Robust activity levels through the forecast period Comments Norway, production Sweden, production • The infrastructure market remains strong, NOK billion, current prices NOK billion, current prices although trends differ from segment to segment CAGR
Slide 31: Infrastructure: Transport
Infrastructure Transport
Slide 32: Transport infrastructure in Norway
Transport infrastructure in Norway High production related to the national road network, some decline in the railway sector Comments Roads market, production Railways market, production Roads NOK billion, current prices NOK billion, current prices • Investment growth in the period to 2026, driven by
Slide 33: Transport infrastructure in Sweden
Transport infrastructure in Sweden Positive outlook for 2025 and 2026, particularly in the rail sector Comments Veimarkedet, production Banemarkedet, production Roads NOK billion, current prices NOK billion, current prices • Increased estimate of central government 40 40 investment, primarily due to
Slide 34: Transport infrastructure: planned investment
Transport infrastructure: planned investment Norway: National Transport Plan 2025–2036 Sweden*: Draft National Budget 2025 Annual average. 2024 NOK, NOK billion Annual average. 2024 SEK, SEK billion * Major investments in the national plan for specific investments + 33% and measures where the planne
Slide 35: Transport infrastructure projects >500 million
Transport infrastructure projects >500 million Order intake Norway Sweden Project value in NOK billion Project value in SEK billion 40,2 30,5 30,5 26,0 20,6 19,9 19,1 17,1 17,4 16,5 10,4 11,0 11,2 8,9 8,0 7,0 6,1 3,0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2018 2019 2020 2021 2022 2023 2024 202
Slide 36: Infrastructure: Road and rail maintenance
Infrastructure Road and rail maintenance
Slide 37: Road and rail maintenance, Norway
Road and rail maintenance, Norway High priority going forward Comments Road maintenance Railway maintenance Roads NOK billion NOK billion • 11% growth in the National Budget for 2025. 40 4% 9% 1% 2% 15% 10% 8% 17% -2% 4% 3% 40 20% -12% 10% 8% 3% 1% -14% 3% 14% 35% 5% • Higher priority is primarily b
Slide 38: Road and rail maintenance, Norway
Road and rail maintenance, Norway More money for maintenance, particularly in the rail sector National Transport Plan 2025–2036 Maintenance by segment Annual average. 2024 NOK, NOK billion NOK billion + 48% 14 + 20% 13,2 12 12,1 11,6 10 10,8 9,7 8 8,9 6 4 2 0 2015 2016 2017 2018 2019 2020 2021 2022
Slide 39: Infrastructure: Energy, water supply and sewerage
Infrastructure Energy, water supply and sewerage
Slide 40: Norway: energy, water supply and sewerage
Norway: energy, water supply and sewerage Strong drivers powering high growth rate Comments Production • The market is subject to strong drivers, including climate-related challenges. NOK billion, current prices CAGR • Norway has to reduce its greenhouse gas emissions sharply by 2030, +11% 35 and re
Slide 41: Sweden: energy, water supply and sewerage
Sweden: energy, water supply and sewerage Strong drivers powering high growth rate Comments Production • Energy-related investments are driven by factors including Sweden’s adopted NOK billion, current prices objective of becoming climate-neutral by 2045. CAGR • The climate neutrality target is fost
Slide 42: Norway and Sweden: water supply and sewerage
Norway and Sweden: water supply and sewerage Several major projects in the market Norway: water supply and sewerage projects > 300 million Sweden: water supply and sewerage projects > 300 million * Estimated project cost * Estimated project cost Construc- Project name Project type Project County Con
Slide 43: Construction costs
O04 Construction costs
Slide 44: Cost inflation has slowed down
Cost inflation has slowed down Flat trend in construction cost indices Comments Construction cost index, residential blocks, Norway Construction cost index, residential blocks, Sweden • Construction cost inflation has been relatively Percentage change since same month last year Percentage change sin
Slide 45: Construction cost index, civil engineering (Norway)
Construction cost index, civil engineering (Norway) Prices are stabilising Comments Construction cost index, roads • Construction costs in the civil engineering and road maintenance sectors Percentage change since same month last year fell sharply at the beginning of 2023 after peaking at 17.2% in 2
Slide 46: Construction cost indices by material
Construction cost indices by material Planed timber, steel and concrete Norway Sweden Denmark Index Jan. 2020 = 100, latest observation Aug. 2024 Index Jan. 2020 = 100, latest observation Aug. 2024 Index Q1 2020 = 100, latest observation Q2 2024 274 267 269 223 192 181 162 168 160 152 130 141 140 11
Slide 47: Key inflation drivers
Key inflation drivers Energy and foreign exchange… Foreign exchange (trade-weighted indices) Energy prices Latest observation 11 October Jan. 2020 = 100. Latest observation 8 October 1400 123,6 125,5 132,2 1200 129,1 126,7 126,2 125,0 1000 121,4 800 115,6 465 119,6 114,9 600 331 116,6 117,1 124,6 24
Slide 48: Summary
05 Summary
Slide 49: Contracting markets
Contracting markets Forecasts 2024–2026 Comments Production, Scandinavian contracting markets • The decline in activity levels observed in 2023 intensified in 2024, Percentage change since previous year, current prices primarily due to several quarters of weak building start numbers for the construc
Slide 50: Takk for
Takk for 5 0