VEIDEKKE'S ECONOMIC ACTIVITY REPORT
12 March 2018 WELCOME TO TOUGHER TIMES
A few headlines from the past five years: So far, accurate
2 Veidekke's Economic Activity Report March 2018 AGENDA
1230: Welcome and introduction
1235: The world around us – positive surprises?
Nejra Macic, macroeconomist at Prognosesenteret
1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019
Kristoffer Eide Hoen, Director of Analysis at Veidekke
1315: Transport market – big plans, what is the reality?
Anders Wettre, Junior Analyst at Veidekke
1330: The green transition – what does it mean to the contractor market?
Thomas Bjørnerud, Senior Consultant, DNV GL
1345: Concluding remarks Sønderborg Multicultural Centre Arne Giske, President and CEO of Veidekke
3 Veidekke's Economic Activity Report March 2018 THE WORLD AROUND US – POSITIVE SURPRISES?
Nejra Macic 5 Veidekke's Economic Activity Report March 2018 GDP GROWTH
5.0% 4.9% 4.7%
3.9% 3.9% 3.7%
2.3% 2.3% 2.2%
2017 2018 2019 2017 2018 2019 2017 2018 2019 Global economy Advanced economies Emerging economies
6 Veidekke's Economic Activity Report March 2018 Higher interest rates Surprisingly positive 5 interest rate increases since 2015, and further increases ahead development in the EU, particularly in Germany Accounts for more Tax reform than half of the growth Oil prices in the global economy increased 20%, expected to gradually Higher commodity prices decline and stronger demand from the USA → Mexico and Brazil adjusted upwards Only 5 countries in the world with a negative GDP growth outlook in 2018–19
7 Veidekke's Economic Activity Report March 2018 8 Veidekke's Economic Activity Report March 2018 LEVEL OF ECONOMIC + Positive GDP growth is expected in all ACTIVITY IN 2017 European countries in 2018–19 + The forecast has been adjusted upwards for most countries, especially Germany, which will be in strong economic expansion throughout the period
+ Spain is the only country that has been adjusted downwards
+ Strong economic expansion in all of northern Europe except Norway and Finland in 2017–18, and from 2019 also including these two countries Strong economic expansion + Poland: after strong GDP growth of 4% last year, growth is expected to decline, Strong economic contraction but the economy will still be expanding
+ The ECB has started to reduce the printing of money from January 2018. First interest rate increase 9 Veidekke's Economic Activity Report March 2018 in the spring of 2019 10 Veidekke's Economic Activity Report March 2018 + Higher growth this year, but no strong economic expansion until 2019
+ First interest rate increase towards the end of 2018 or early 2019
+ Residential housing investments are declining, while the oil investments are starting to recover
2.5% + Fiscal policy is being tightened 2.4% + Improvement in South-West Norway: 1.9% minor regional differences
+ Economic upturn among our trading partners and higher oil prices will result in stronger export growth 2017 2018 2019 + Employment shows signs of improvement GDP growth and unemployment continues to decline
11 Veidekke's Economic Activity Report March 2018 12 Veidekke's Economic Activity Report March 2018 + The strong economic expansion will continue throughout the forecast period, despite declining growth
+ Improvement internationally and a continuing weak krone gives stronger export growth 2.9% + Residential housing prices down 6% during 2.5% last autumn, but prices have still more than doubled in 10 years 2.0% + Declining residential prices and investments
+ Continued decline in unemployment 2017 2018 2019 + First interest rate increase this autumn, reduction in the printing of money GDP growth
13 Veidekke's Economic Activity Report March 2018 14 Veidekke's Economic Activity Report March 2018 + Strong economic expansion last year 2.0% will continue throughout the period 1.9% despite declining growth 1.7% + Gradual tightening of fiscal policy and declining productivity growth
+ GDP growth will not reach old heights, 2017 2018 2019 but it may last longer GDP growth + Continued decline in unemployment. Lack of the right expertise
+ First interest rate increase in the summer of 2019
+ Residential housing prices have increased for the last 5 years, but did not really take off until 2017
15 Veidekke's Economic Activity Report March 2018 AGENDA
1230: Welcome and introduction
1235: The world around us – positive surprises?
Nejra Macic, macroeconomist at Prognosesenteret
1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019
Kristoffer Eide Hoen, Director of Analysis at Veidekke
1315: Transport market – big plans, what is the reality?
Anders Wettre, Junior Analyst at Veidekke
1330: The green transition – what does it mean to the contractor market?
Thomas Bjørnerud, Senior Consultant, DNV GL
1345: Concluding remarks Sønderborg Multicultural Centre Arne Giske, President and CEO of Veidekke
16 Veidekke's Economic Activity Report March 2018 CONSTRUCTION AND CIVIL ENGINEERING MARKET FORECASTS 2018–2019 Kristoffer Eide Hoen VEIDEKKE'S ECONOMIC ACTIVITY REPORT
Provide forecasts for investments/revenue in construction and civil engineering through to the end of 2019 • Thoughts concerning driving forces and uncertainties
Consensus economic forecasts based on data from recognised economic analysis institutions: • The IMF, the Swedish National Institute of Economic Research (KI), Statistics Norway, the Danish Economic Councils, central banks, etc.
The forecasts for construction and civil engineering are prepared by Veidekke on the basis of: • Our experience of the correlation between economic factors and construction and civil engineering • Internal observation points across Scandinavia • Industry reports • Detailed market data at the county level in Norway and Sweden* • Machine learning to quantify forecasts • Enhanced monitoring of the major project market in transport and construction
*Denmark is currently under development
18 Veidekke's Economic Activity Report March 2018 DIFFERENT PHASES IN A MARKET CYCLE
Year 1–2 Year 3–5
Drivers Sales Start Production Handover
19 Veidekke's Economic Activity Report March 2018 CONSTRUCTION & CIVIL ENGINEERING FROM GROWTH TO DECLINE IN 2019
Scandinavian construction and civil engineering market*, NOK billion -2% Residential sector dominates, but will make a negative contribution from 2019 Downward adjustment of forecasts for +5% 2018 and 2019
+5%
+4%
*Veidekke’s forecasts for 2018 og 2019
Source: Statistics Norway, DST, Statistics Sweden and Veidekke
20 Veidekke's Economic Activity Report March 2018 CONSTRUCTION & CIVIL ENGINEERING FROM GROWTH TO DECLINE IN 2019
Scandinavian construction and civil engineering market*, NOK billion Residential sector dominates, but will make a negative contribution from 2019 Downward adjustment of forecasts for 2018 and 2019
*Veidekke’s forecasts for 2018 og 2019
Source: Statistics Norway, DST, Statistics Sweden and Veidekke
21 Veidekke's Economic Activity Report March 2018 CONSTRUCTION & CIVIL ENGINEERING MARKET SIZES, NORWAY AND SWEDEN
Construction market in Norway and Sweden by segment,% of production value in 2017 (NOK 415 billion)
Small houses & apartments Detached houses etc. Industrial & Schools Health Office 38% 22% warehouses 5% and care buildings 9% services 4% 5%
Recreational Retail and Culture Other homes commercial and bldgs 7% buildings sports 2% 3% 2% Bldgs for housing primary industy Hotels
2% 1%
Student Student 0,2%
Source: Veidekke’s market data
22 Veidekke's Economic Activity Report March 2018 RESIDENTIAL SCANDINAVIAN RESIDENTIAL HOUSING MARKET HAS PEAKED
Residential production*, NOK billion Common denominators: -5% • Good macroeconomy -7% • High production level in Sweden and Norway +10% • Measures regarding credit to households • Improvement in resale market, worsening for new residential housing • Wide variation within the segments
*Veidekke’s forecasts for 2018 og 2019
Source: Statistics Norway, DST, Statistics Sweden and Veidekke
23 Veidekke's Economic Activity Report March 2018 RESIDENTIAL SCANDINAVIAN RESIDENTIAL HOUSING MARKET HAS PEAKED
Production in various residential segments in Norway, NOK billion per quarter Common denominators: • Good macroeconomy • High production level in Sweden and Norway • Measures regarding credit to households • Improvement in resale market, worsening for new residential housing • Wide variation within the segments
Source: Veidekke’s market data
24 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – RECENT OBSERVATIONS
Resale prices, per square metre Improvement in residential resale prices, as expected Volume of unsold residential units has declined somewhat Sale of new residential units has declined a lot, but the prices have not softened
Last 3 months 2017* 2018* 2019* Oslo 0 % -11 % -2 % 1 % Bergen -1 % 0 % 8 % 2 % Trondheim 0 % 2 % 4 % 2 % Stavanger -2 % -2 % 6 % 2 % Source: Property Development Norway and Veidekke * Growth December–December
25 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – RECENT OBSERVATIONS
Improvement in residential resale prices, as expected Volume of unsold residential units has declined somewhat Sale of new residential units has declined a lot, but the prices have not softened
26 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – EXPECTATIONS FOR 2018 AND 2019
Apartment and small house starts, on a revolving 12-month basis, total number of units Adjusted downwards from the previous Economic Activity Report 30–40% decline in starts in 2018 Decline in production from the second half of 2018
Average 2012-2016 2017 (units) 2017P 2018P 2019P Starts apartments and small houses 16 621 22 446 6 % -33 % 7 % Units under construction 16 089 22 130 22 % 0 % -20 %
Source: Statistics Norway and Veidekke *Red dotted line indicates Veidekke’s forecast for 2018 and 2019. Black line indicates previous forecast.
27 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN NORWAY – GEOGRAPHICAL DIFFERENCES
Production of apartments and small houses, NOK billion Forecast based on the current sales situation Strongest correction in the Oslo region, but from an abnormally high level
Forecast for 2018 and 2019
Source: Veidekke’s market data
28 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN SWEDEN – RECENT OBSERVATIONS
Prices for multi-family residential units, per square meter Stabilisation in the residential resale market, but too early to make a conclusion Volume of new and used residential units is still high Sale of new residential units significantly down Increase in percentage of units relaunched at lower prices Last 3 months 2017* 2018* 2019* Stockholm -4 % -9 % 3 % 3 % Gothenburg -5 % -1 % 5 % 5 % Malmø -3 % 0 % 3 % 4 %
Source: HOX Valueguard and Veidekke *Red dotted line indicates Veidekke’s forecast for 2018 and 2019. Black line indicates previous forecast.
29 Veidekke's Economic Activity Report March 2018 RESIDENTIAL RESIDENTIAL MARKET IN SWEDEN – EXPECTATIONS FOR 2018 AND 2019
Start and production of apartments and small houses, number of units Strong downward adjustment of forecasts for starts 30% decline in starts during 2018 Broader geographical decline than previously estimated
2017 (units) 2017P 2018P 2019P Starts apartments and small houses 50 800 9 % -30 % 0 % Units under construction 48 350 22 % 3 % -18 %
Source: Statistics Sweden and Veidekke *Red dotted line indicates Veidekke’s forecast for 2018 and 2019. Black line indicates previous forecast.
30 Veidekke's Economic Activity Report March 2018 RESIDENTIAL SOLVING STRONG CAPACITY CHALLENGES
Contract costs for multi-family residential units*, SEK per square metre Strong increase in construction contract costs • In Stockholm and Gothenburg, both the construction contract costs and land costs have increased significantly in recent years Increasing capacity challenges in the Oslo region as well Situation will improve from the second half of this year
* Figures for the industry
Source: Statistics Sweden
31 Veidekke's Economic Activity Report March 2018 NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS – TOTAL SHOWS STEADY PROGRESS
Production of non-residential buildings*, NOK billion +6% Common denominators: • Growth in employment and economy +1% • Low interest rates and high demand for commercial property +7% • The totals conceal strong fluctuations for the segments and geography
*Veidekke’s forecast for 2018 og 2019
Source: Statistics Norway, DST, Statistics Sweden and Veidekke
32 Veidekke's Economic Activity Report March 2018 NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, NORWAY MAIN FEATURES: GEOGRAPHIC OPPOSITES
Production of office and commercial buildings, NOK million Oslo market was up sharply last year after a low new construction volume over several years Oil-heavy in Western Norway – growth potential Steady state in the Trondheim region
Source: Veidekke’s market data
33 Veidekke's Economic Activity Report March 2018 NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, SWEDEN MAIN FEATURES: EFFECTS OF AN INDUSTRIAL UPSWING
Production of new buildings* in Stockholm, Uppsala, Gothenburg, and Skåne, SEK billion per year Good export markets provide a boost for industrial and warehouses Growth in employment and consumption will eventually have a positive impact on office and retail space Growth higher than expected in 2017, high expectations for 2018 as well
*The data do not currently include renovation, which is a comprehensive, but less cyclical market
Source: Veidekke’s market data
34 Veidekke's Economic Activity Report March 2018 NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, SWEDEN MAIN FEATURES: POSITIVE ESTIMATES FOR 2018 ALSO
Investment estimates for 2018 versus 2017 Good export markets provide a boost for industrial and warehouses Growth in employment and consumption will eventually have a positive impact on offices and retail space Growth higher than expected in 2017, high expectations for 2018 as well
Source: Statistics Sweden
35 Veidekke's Economic Activity Report March 2018 NON-RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS, DENMARK MAIN FEATURES: VACANCY RATE REMAINS DOWN IN COPENHAGEN
Vacancy rate for offices, selected Danish urban regions Good economic conditions support a positive development for private non-residential buildings Vacancy rate for private non-residential buildings continues to fall Still only moderate growth for new construction*
* Due to major problems for Denmark's statistics in the second half of 2017, it is difficult to estimate the development of the construction area precisely
Source: Sadolin & Albæk
36 Veidekke's Economic Activity Report March 2018 CIVIL ENGINEERING THE SCANDINAVIAN CIVIL ENGINEERING MARKET
Production of civil engineering*, NOK billion Strong growth in Norway and Sweden +5% • Very high levels per capita in Norway +6% • Investment peak is approaching +2% Steady in Denmark, potential growth from 2019 and beyond
*Veidekke’s forecast for 2018 and 2019
Source: Statistics Norway, DST, Statistics Sweden and Veidekke
37 Veidekke's Economic Activity Report March 2018 TRANSPORT: BIG PLANS, WHAT IS THE REALITY?
Anders Wettre BIG PLANS, WHAT IS THE REALITY?
NATIONAL TRANSPORT PLAN ACTION PROGRAMME STATE BUDGET
NOK 1,064 billion SEK 622.5 billion Specification of the input for the coming plan period Final framework and concrete actions
39 Veidekke's Economic Activity Report March 2018 BIG PLANS, WHAT IS THE REALITY?
Source: Aftenposten
40 Veidekke's Economic Activity Report March 2018 TRANSPORT NORWAY: HISTORICALLY GOOD FOLLOW-UP
Plan periods for the National Transport plan 2017 kroner, NOK billion Historically, the follow-up ratio has been good NOK 412 billion 2018–2023 90% follow-up ratio Less leeway in public budgets will limit the follow-up rate going forward • Impacts our forecasts from 2019
NTP budget Actual framework grant
Source: NTP
41 Veidekke's Economic Activity Report March 2018 E69 Skarvbergtunnelen
TRANSPORT PARALLEL INVESTMENT E10/Rv 85 Evenes-Sortland
Projects with a construction start in 2018/2019 encompass more than NOK 100 billion for Norway and Sweden combined* Swedish Transport Administration (Road)
Transport Administration (Railway) International competition E39 Betna-Stormyra E6 Kvithammar-Åsen Stockholm County Council Expertise and capacity E6 Ranheim-Værnes
Rv. 13 Vik-Vangsnes Rv. 3/25 Løten-Elverum IC Dovrebanen: Kleverud-Sørli Rv. 4 Roa-Gran grense IC Dovrebanen: Venjar-Langset E16 Eggemoen-Olum E16 Herbegsåsen-Nybakk E4 Förbifart Stockholm Bergtunnlar Akalla E18 Lysaker E16 Bjørum-Skåret E4 Förbifart Stockholm Trafikplats Vinsta Norwegian Public Roads Administration Oslos trikker Fv. 47 Fagerheim-Ekrene E4 Förbifart Stockholm Trafikplats Lovö Laxå-Arvika Stockholm C-Stockholm Södra PPP/Norwegian Public Roads Administration E39 Rogfast Rv. 9 Setesdal Drammen-Kobbervikdalen Tunnelbanan: Akalla-Hjulsta-Östra Fv. 44 Bypakken IC Vestfoldbanen: Nykirke-Barkåker Tunnelbanan: Odenplan-Arenastaden Norra Nye Veier AS Tunnelbanan: Kungsträdgården-Nacka Södra E18 Langangen-Rugtvedt IC Østfoldbanen: Haug-Seut Bane NOR E39 Mandal øst-Mandal by E20 Alingsås-Vårgårda E6.20 Hisingsleden, Södra delen E39 Kristiansand vest-Mandal øst Västlänken Kvernberget Västlänken Korsvägen E6.21 Göteborgs hamn/Lundbyleden Västlänken Centralen/Olskroken Västlänken Haga Varberg, dubbelspår E4 Ljungby-Toftanäs, motorväg Source: Norwegian Public Roads Administration, Bane NOR, NTP, E22 Sätaröd och Vä Swedish Transport Administration, SLL, NPT Ängelholm-Maria, dubbelpårsutbyggnad
* Projects over NOK 500 million
42 Veidekke's Economic Activity Report March 2018 TRANSPORT ROADS NORWAY: NEW MARKET STRUCTURE
Road production by customer, NOK billion 2017 “Year of rest” Road production is increasing further: • Investment peak will probably be reached in 2018 Increased percentage managed by Nye Veier High level throughout the forecast period
Source: Veidekke, Statistics Norway, NPRA, NTP, SB
43 Veidekke's Economic Activity Report March 2018 TRANSPORT ROADS NORWAY: MORE TURNKEY CONTRACTS
Percentage of turnkey construction contracts in the road market*, NOK billion Nye Veier Parts of the Norwegian Public Roads Administration PPP contracts managed by the Norwegian Public Roads Administration
*Incl. PPP
Source: Veidekke, Statistics Norway, NPRA, NTP, SB
44 Veidekke's Economic Activity Report March 2018 TRANSPORT RAILWAY NORWAY: REALISTIC AMBITIONS?
Investments in the railway market, NOK billion High, but stable market in 2017 and 2018 • But slower progress than assumed Comprehensive projects provide strong growth towards the end of the forecast period • InterCity • Bergen Light Rail
Source: Veidekke, Statistics Norway, NPRA, NTP, SB
45 Veidekke's Economic Activity Report March 2018 TRANSPORT O&M IN NORWAY: HIGH FOR ROADS, BEHIND ON RAIL
Operation and maintenance of roads, NOK billion Operation and maintenance of rail, NOK billion
Source: Veidekke, Statistics Norway, NPRA, NTP, SB
46 Veidekke's Economic Activity Report March 2018 TRANSPORT ROADS IN SWEDEN: TOWARDS A PEAK IN 2019
Road production by customer, SEK billion High public demand drives the growth to a historically high level Municipal road investments account for a greater proportion of the investment activity High level of activity around Stockholm (Förbifarten) and Gothenburg (E45 Lilla Blommen)
Source: Veidekke, Statistics Sweden, Swedish Transport Administration
47 Veidekke's Economic Activity Report March 2018 TRANSPORT RAIL IN SWEDEN: NEW GROWTH AHEAD?
Rail investments, SEK billions High level of production in ongoing projects Many new and big projects will start up during the forecast period • Västlänken in Gothenburg • New underground railway in Stockholm Ambitious development plans for the future, full speed ahead from 2020?
Source: Veidekke, Statistics Sweden, Swedish Transport Administration
48 Veidekke's Economic Activity Report March 2018 SUMMARY
Economic cycle for construction and civil engineering: Expected production growth 2018-2019 Decline in the Scandinavian construction and civil engineering market from 2019, led by the apartment segment Steady progress in non-residential buildings, but considerable variation between different geographies and segments Strong civil engineering market to the end of 2019
49 Veidekke's Economic Activity Report March 2018 AGENDA
1230: Welcome and introduction
1235: The world around us – positive surprises?
Nejra Macic, macroeconomist at Prognosesenteret
1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019
Kristoffer Eide Hoen, Director of Analysis at Veidekke
1315: Transport market – big plans, what is the reality?
Anders Wettre Junior Analyst at Veidekke
1330: The green transition – what does it mean to the contractor market?
Thomas Bjørnerud, Senior Consultant, DNV GL
1345: Concluding remarks Sønderborg Multicultural Centre Arne Giske, President and CEO of Veidekke
50 Veidekke's Economic Activity Report March 2018 THE GREEN TRANSITION WHAT DOES IT MEAN TO THE CONTRACTOR INDUSTRY?
51 Climate change and the UN goal of a maximum two-degree temperature increase on Earth will lead to major changes in policies, technology and the markets...
... and this applies to the contractor industry as well
52 CLIMATE CHANGE
High risk Environmental Water and certification of drainage Great buildings opportunities Sweden 800 700 9 600 10 Norway (NOK) 500 30 Sweden (SEK) 400 billion 300 Denmark (DDK) 200 100 11 0 2010 2011 2012 2013 2014 2015 2016 2017
Source: Norwegian Water, Swedish Water, DANVA, GreenBookLive
53 GLOBAL ELECTRICITY PRODUCTION IS CHANGING
54 DNV GL – ENERGY TRANSITION OUTLOOK 2017 Offshore wind 12% World electricity production Unit: Petawatt-hours/year Hydropower 12% 60
50 Other Coal-fired power 40 Nuclear power Gas power 30 2050 Hydropower 20 Solar power (PV) Onshore wind 10 Offshore wind
0 1980 1990 2000 2010 2020 2030 2040 2050 Solar energy 36% Onshore wind 24% Source: DNV GL Energy Transition Outlook 2017
55 STRONG GROWTH IN RENEWABLE ENERGY IN THE NORDIC COUNTRIES AS WELL
56 NORDIC RENEWABLE MARKET
60000 7000
50000 6000 5000 40000 4000 30000 3000 20000 2000 10000 1000
0 0
2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015 2016 2020 2025 BIOMASS (MW)
HYDROPOWER(MW) Sweden Norway Denmark Sweden Norway Denmark
25000 4000 3500 20000 3000 15000 2500 2000 10000 1500 1000 5000 500 0 0
2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015 2016 2020 2025 SOLAR (PV) (MW) WIND POWER (MW) Sweden Norway Denmark Sweden Norway Denmark
Source: Entso-E and DNV GL
57 NORDIC RENEWABLE MARKET
NORWAY (MW) SWEDEN (MW) DENMARK (MW)
45000 45000 45000 40000 40000 40000 35000 35000 35000 30000 30000 30000 25000 25000 25000 20000 20000 20000 15000 15000 15000 10000 10000 10000 5000 5000 5000 0 0 0 2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015 2016 2020 2025 2010 2011 2012 2013 2014 2015 2016 2020 2025
Hydropower Wind power PV Biomass Hydropower Wind power PV Biomass Hydropower Wind power PV Biomass
NOK 35 BILLION NOK 18 BILLION NOK 4 BILLION
Source: Entso-E and DNV GL
58 CONTRACTOR MARKET IN RENEWABLE ENERGY
4 13 18
57 57 billion 30 billion
14 35
Hydropower Wind power Biomass Sweden Norway Denmark Source: DNV GL
59 AGENDA
1230: Welcome and introduction
1235: The world around us – positive surprises?
Nejra Macic, macroeconomist at Prognosesenteret
1250: Tougher times ahead? – Veidekke’s market assessments for 2018 and 2019
Kristoffer Eide Hoen, Director of Analysis at Veidekke
1315: Transport market – big plans, what is the reality?
Anders Wettre, Junior Analyst at Veidekke
1330: The green transition – what does it mean to the contractor market?
Thomas Bjørnerud, Senior Consultant, DNV GL
1345: Concluding remarks Sønderborg Multicultural Centre Arne Giske, President and CEO of Veidekke
60 Veidekke's Economic Activity Report March 2018 VEIDEKKE’S POSITION
Arne Giske, CEO Selected figures turnover 2017: Hydropower: NOK 135 million Wind power: NOK 370 million Environmentally certified buildings: NOK 4.6 billion OUR FOCUS
LIFTING PROFITABILITY WITHIN ADJUSTING TO A SOFTER CONSTRUCTION REAL ESTATE MARKET
63 VEIDEKKE IS WELL POSITIONED
OMSETNINGSOLID ORDEROG BACKLOG MARGIN* BALANCED ORDER BACKLOG BY SECTOR
32 Other 28 infrastructure 10% Commercial 24 buildings 25% Public 20 infrastructure 20% Building Construction NOK 16 32 bill.
NOK billion NOK 12 Public buildings 18% 8 Residential construction 4 Civil Engineering 28%
0 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17
64 ADJUSTING TO A SOFTER REAL ESTATE MARKET
Lower residential sales – fewer construction starts
Opportunities and flexibility from good project portfolio and land bank
Our focus: manage the business in a demanding housing market
65 UNITS UNDER CONSTRUCTION
100% 90% 91% 3 000 82% 83% 74% 2 500 75%
Units for 2 000 delivery in 2018
50% 1 500
1 000 Units for 25% delivery in 500 2019 and beyond
0 0% 2013 2014 2015 2016 2017 Units under construction Sales ratio (%) *Veidekke’s share, sum Norway and Sweden 66 STRONGER MARKET POSITIONS
The land bank provides flexibility
A total of 14,050 residential units • Stated at cost • 40% option-based
Selective commercial building development
A robust portfolio • High sales ratio • Minimum 50% pre-sale ahead of construction start
67 ECONOMIC ACTIVITY REPORT: MAIN FEATURES
Macroeconomic outlook: Positive forecast, first interest rate increase is approaching
Construction and civil engineering: Tighter market, mainly driven by the apartment segment
Green transition: Increasing commercial opportunities in renewable energy
68 APPENDIX MARKET DATA NORWAY
Current prices, Level 2017 2018 2019 2018-2019 change (%) NOK bill. Growth Growth Growth Growth
Residential 157 14 % -2 % -12 % -7 %
Commercial buildings 69 9 % 6 % -4 % 1 %
Public buildings 36 -1 % -4 % 6 % 1 %
Civil engineering 79 5 % 9 % 4 % 6 % Constructuon and civil 340 9 % 2 % -5 % -1 % engineering total
No. of apartments and 22 500 15 000 16 000 small houses started Explanation: Forecast unchanged from EA Report September 2017 Forecast revised downwards/upwards from EA Report September 2017 MARKET DATA SWEDEN
Current prices, Level 2017 2018 2019 2018-2019 change (%) SEK bill. Growth Growth Growth Growth
Residential 201 17 % 3 % -12 % -5 %
Commercial buildings 87 5 % 9 % 3 % 6 %
Public buildings 51 16 % 9 % 5 % 7 %
Civil engineering 86 4 % 6 % 4 % 5 % Constructuon and civil 425 12 % 5 % -3 % 1 % engineering total
No. of apartments and 50 800 35 560 35 560 small houses started Explanation: Forecast unchanged from EA Report September 2017 Forecast revised downwards/upwards from EA Report September 2017 MARKET DATA DENMARK
Current prices, Level 2017 2018 2019 2018-2019 change (%) DKK bill. Growth Growth Growth Growth
Residential 77 17 % 13 % 8 % 10 %
Commercial buildings 24 8 % 10 % 10 % 10 %
Public buildings 22 -1 % -1 % 7 % 3 %
Civil engineering 39 -5 % 0 % 3 % 1 % Constructuon and civil 162 7 % 7 % 7 % 7 % engineering total
No. of apartments and 14 500 16 000 17 000 small houses started Explanation: Forecast unchanged from EA Report September 2017 Forecast revised downwards/upwards from EA Report September 2017