Annual report 2012 - Peab

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CONSTRUCTION AND CIVIL ENGINEERING MARKET MACROECONOMY Sweden GDP in 2012 was slightly lower than forecasted and is expected to be to around 1.0 percent in 2013. Two underlying factors behind this development are weaker household consumption and exports. Unemployment is expected to increase in Housing investments, 2008 – 2013 MSEK 60,000 50,000 40,000 30,000 20,000 10,000 0 2008 2009 Housing investments Other building construction investments 2010 2011 2012 2013F Sweden Norway Finland F=Forecast After the recovery in 2010 in Sweden and Finland, and in 2011 in Norway, construction of new housing diminished in 2012 in all three countries. The forecasts for 2013 are a continued drop in primarily single homes in Sweden and Finland and apartments in Norway. This means the gap between single home construction in Sweden and other countries will remain significant as sluggish planning processes and requirements for larger down payments presses single home production to new lows. At the same time it appears that investments in the renovation of apartment buildings, mainly from the period 1960-1975, continue to grow in Sweden where they have long been needed. GROWING HOUSING SHORTAGE Demographic changes and urbanization in all three countries are fueling the need for more housing in growth regions, and particularly in Sweden the low level of housing construction is beginning to have a negative effect on economic recovery. Forecasts indicate that in 2012-2014 the already considerable lack of housing will increase by at least 50,000 apartments on top of the fact that nearly all the municipalities with growing populations have produced too little housing for the past several years. Similar problems exist in Norway and Finland even though there has been much more construction of new housing per inhabitant in recent years. LOW INTEREST RATES CAN STIMULATE Both Sweden and Finland have low interest rates which normally should stimulate housing demand. However, this may not be enough to counter the effects of rising unemployment, more stringent financing demands and the uncertainty about economic developments. In Norway, on the other hand, it is possible that continued stable employment levels, high housing prices and the strong development of disposable incomes will uphold the demand for housing for another few years. Source text: Industrifakta. 6 PEAB ANNUAL REPORT 2012 2013 and CPI inflation is expected to fall further from an already low level. Even the policy interest rate is expected to continue to drop and only increase marginally in 2014. At the same time there are signs of a more expansive financial policy from the government. Other building construction investments, 2008 – 2013 MSEK 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2008 2009 Norway Growth in Norway is still the highest in the Nordic region but it is expected to slow slightly to 3.0 percent in 2013. Household consumption increased in 2012 and is expected to remain on a high level in 2013. CPI inflation fell in 2012 but is expected to 2010 2011 2012 2013F Sweden Norway Finland F=Forecast Other building construction investments in commercial, industrial and public premises showed strong growth in Sweden and Norway in 2010-2011 with continued growth in Norway in 2012. In 2013 investments levels are expected to contract in both countries and in Finland premise construction is expected to remain on the same low but stable level as in recent years. OFFICE AND RETAIL SPACE There has been more construction in this sector in Norway than in the rest of the Nordic region, but despite a significant demand for premises in, for example, the Oslo region there was, just as in Sweden, a downturn in 2012 when external uncertainty increased. This decline is expected to continue in 2013 and reach Finland as well. One of the factors behind the weaker development in all three countries is that it has become more difficult to finance commercial space construction and the uncertainty surrounding how the service sector and retail stores will be affected by the developments in the rest of Europe. INDUSTRIAL CONSTRUCTION Industrial construction grew in both Sweden and Norway during 2012 primarily through major investments in base industry while in Finland developments were the opposite. Global turbulence is expected to lead to a decline in exports in 2013, which will dampen investments in industry in Sweden and Norway while Finland may experience a slight upturn from a low level. PUBLIC PREMISES Construction in the public sector in Sweden dropped slightly in 2012 while it continued to rise to new record levels in Norway. There was a minor upturn in Finland although investments are still on a low level. Construction in 2013 is expected to slowly cool down to more normal levels in both Sweden and Norway as a result of concerns about shrinking tax incomes in Sweden and the indebtedness of many municipalities in Norway.
ise again in 2013. Even the policy interest rate is expected to increase later in the year. This can dampen household borrowing and lead to a slightly weaker demand for housing. At the same time unemployment is expected to remain on the low level of around 3 percent in 2013. MSEK Civil engineering investments Ongoing investments, 2008-2013 100,000 80,000 60,000 40,000 20,000 0 2008 2009 2010 2011 Sweden Norway Finland 2012 2013F F=Forecast SWEDEN Civil engineering construction increased in 2012, in part through substantial private investments in energy supply. Even public civil engineering investments rose slightly but they are expected to fall back again in 2013 due to lower funding. Unchanged levels are forecasted for 2013 despite the enormous investment needs in mass communication and energy supply. NORWAY Civil engineering construction accelerated in Norway during 2012 and this is expected to continue in 2013 as well. Growth is generated in several areas but above all in roads and railroads as well as energy-related investments, including the offshore sector. Factors that may have a dampening effect on Norwegian civil engineering construction are the lack of available capacity and the inability of municipalities to finance major projects. FINLAND Finnish civil engineering investments were more or less unchanged in 2012 and this is projected for 2013 as well. Major mass transit investments are in progress in the region around the capital where an influx of new residents has created a need for more efficient communications including a new metro line. One area of uncertainty in the coming years is what will be prioritized in the government’s financial policy. Source text: Industrifakta. Finland Government finances continued to be stable despite lower growth in 2012. The forecasts for GNP in 2013 are on the same level as in Sweden despite slightly lower household consumption and growing unemployment. Comparatively high infla- CONSTRUCTION AND CIVIL ENGINEERING MARKET MSEK Total construction and civil engineering investments Total building construction and civil engineering investments, 2008-2013 300,000 250,000 200,000 150,000 100,000 50,000 0 2008 2009 tion of around 3 percent is expected to fall somewhat in the next two years, which can maintain real incomes. Household finances are also supported by an extremely low interest rate, which is expected to drop even further. 2010 2011 Sweden Norway Finland 2012 2013F F=Forecast PUBLIC SPACE DOMINATES The greatest single sector in Nordic construction in 2012 was public premises with investments for a total of around SEK 190 billion. Included in this sum are a number of smaller sectors such as healthcare, education and public administration. Next in line was civil engineering construction at around SEK 170 billion followed by new and refurbished housing for some SEK 142 billion and private premises such as offices, stores and industrial facilities at around SEK 118 billion. In addition to the total construction investments of about SEK 620 billion, costs for maintenance, renovation and repair amounted to around SEK 430 billion. CONSTRUCTION DEVELOPMENT 2008-2013 During the past five years total construction investments in Sweden and Norway have more or less hovered around SEK 200 to 250 billion per year, while total investments in Finland have been considerably more modest at around SEK 125 billion. And although Sweden and Norway have different underlying macroeconomic situations the two countries still had similar business cycles that were plainly affected by the crisis in the euro area. Finland, however, has had a completely different business cycle and a more stable investment level where, somewhat surprisingly, the effect of developments in the rest of Europe are not as obvious. Even the accumulated forecasts for 2013 vary between the countries. In both Sweden and Norway construction volumes are expected to contract while in Finland it looks like they will remain on the same stable level as the past few years. However, a prerequisite for this development is that no new negative events occur in the euro area that affect employment levels, financing terms etc. in the three Nordic countries. PEAB ANNUAL REPORT 2012 7
Page 1 and 2: Annual report 2012
Page 3 and 4: A Nordic Community Builder Peab is
Page 5 and 6: Stable volumes but lower profits Or
Page 7 and 8: LASTING While we have to be sensiti
Page 9: Nordic construction and civil engin
Page 13 and 14: A business concept that builds on l
Page 15 and 16: Financial and operative goals The s
Page 17 and 18: Board of Directors’ Report NET SA
Page 19 and 20: completion method. Unrealized inter
Page 21 and 22: A year of challenges NET SALES AND
Page 23 and 24: ate jobs there. Two examples of pro
Page 25 and 26: MARKET SEGMENTS Local market: Does
Page 27 and 28: BUSINESS AREA INDUSTRY Business are
Page 29 and 30: The past few years’ strong housin
Page 31 and 32: An active first year NET SALES AND
Page 33 and 34: Sustainability Peab’s vision of b
Page 35 and 36: Profit-sharing Peab has always ende
Page 37 and 38: Participation, security and confide
Page 39 and 40: The AGM 2007 resolved to issue and
Page 41 and 42: Income statement for the Group INCO
Page 43 and 44: MSEK Share capital REPORT ON CHANGE
Page 45 and 46: INCOME STATEMENT AND REPORT ON COMP
Page 47 and 48: MSEK REPORT ON CHANGES IN THE PAREN
Page 49 and 50: CONTENTS NOTES Note 1 Accounting pr
Page 51 and 52: trolling interest is involved, pote
Page 53 and 54: Financial instruments On the assets
Page 55 and 56: where the results of research or ot
Page 57 and 58: Taxes Untaxed reserves including de
Page 59 and 60: Group 2011 MSEK Construction Civil
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Salaries and other payments divided
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Note 12 Net financial income/expens
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Deferred Deferred Changes recognize
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Goodwill impairment testing in cash
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Note 19 Participation in joint vent
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Note 28 Construction contracts Reco
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Note 32 Pensions Defined benefit pe
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Note 36 Valuation of financial asse
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Note 37 Financial risks and financi
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Exposure of net assets in foreign c
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Note 41 Related parties Related par
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Company Corp.ID.nr Registered offic
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Note 43 Untaxed reserves Parent com
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The Annual Report has been prepared
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A Nordic Community Builder: Sweden
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Auditors Information Election Share
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Control Policy. This policy establi
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Executive management Jesper Görans
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List of shareholders on 28 February
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Financial definitions Capital emplo
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Financial information Follow Peab q
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Annual report 2012 - Peab

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