Annual Report 2012 Report Annual

Vik Annual report 2012 report Annual

Rygg PEAB ANNUAL REPORT 2012 Vik

CONTENTS 2012 in summary 1 Comments from the CEO 2 Construction and civil engineering market 5 Business model 8 Group strategies 10 Financial and operative goals 11 Board of Directors’ report 13-35 The Group 13 Business area Construction 16 Business area Civil Engineering 20 Business area Industry 23 Business area Property Development 26 Risks and risk management 28 Sustainability 29 Other information and profit disposition 34 Financial reports and notes 37-83 Auditors’ report 84 Corporate governance report 86 Board of Directors 90 Executive management and auditors 91 The Peab share 92 Five-year overview 94 Financial and construction-related definitions 95 Summons to attend the Annual General Meeting 96 Shareholder information and addresses 97

Peab AB is a public company. Company ID 556061-4330. Domicile Förslöv, Sweden.

All values are expressed in Swedish krona, abbreviated to SEK and million to MSEK. Numbers presented in parentheses refer to 2011 unless otherwise specified.

Data regarding markets and the competition are Peab’s own assessments, unless another source is specified. These assessments are based on the best and latest available facts from, among others, published material.

The formal annual and consolidated accounts which has been audited by the company accountant, pages 13-83.

Cover picture: Gothia Towers, Gothenburg, Sweden Photo: Andreas Ulvdell Vik

A Nordic Community Builder

Peab is a Nordic construction and civil engineering company with operative net sales of SEK 46 billion. We have 14,000 engaged employees and around 130 offices in Sweden, Norway and Finland. With our local presence and four collaborating business areas we can handle both small and large, complex projects. Our goal is to always surpass our customers’ expectations.

Construction performs contract work for external customers, the other Operative net sales units in Peab and our own developed housing projects. Operations comprise per business area, 2012 everything from new construction of homes and premises to renovation and construction maintenance. Property Development, 1% (0%)

Industry, Civil Engineering is active on the local civil engineering market as 21% (21%) well as in infrastructure projects such as bridges and roads and the management and maintenance of streets and roads. Construction, 54% (56%) Industry delivers among other things asphalt, cement, foundations, electricity services, transportation, machine and crane services as well as prefab to both Civil external customers and the other units in Peab. Engineering, 24% (23%) Property Development primarily develops commercial property and apartment buildings. These operations are a vital part of developing Peab’s contractor business and complete customer offers.

A Nordic Community Builder: World class events and shopping

Arenastaden, Solna October 2012: Peab is building a completely new city district, Arenastaden, outside Stockholm with apartments, offices, a multi-arena and one of the biggest shopping malls in the Nordic region. Every part is unique in itself – together they are exceptional. This is a place for special meetings and moments. Arenastaden, which breaks both construction technological and size records, was previously a rundown industrial area that is being transformed through state-of-the-art engineering. We are creating a city district that will take both inhabitants and visitors into the future. Read more about Arenastaden at www.peab.se/arenastaden Vik Rygg

PEAB IN SUMMARY

A Nordic customer base creates Highlights opportunities for profitable growth Peab is organized in four business areas; Construction, Civil Engineering, Peab works on a Nordic market. Sweden is the largest market at 81 percent. Industry and new in 2012 Property Development. Norway and Finland increased their share of Group operating net sales In addition to continued investments in existing development projects, business during 2012 from 18 to 19 percent. area Property Development acquired a handful of large new projects, among them parts of Vasallen and at the same time sold others such as the housing development property to Domestica. As part of Peab’s long-term program for Norrland, which Peab initiated over 20 years ago, we won a number of new contracts during the year from customers such as LKAB, Boliden and Northland Resources. Peab is currently one of the Operative net sales per Operative net sales per largest private employers in Norrland. geographic market, 2012 customer type, 2012 Sweden’s new national arena, Friends Arena, was built by Peab and inaugurated Finland Other in October 2012. We continue to develop Arenastaden in Solna. We have started 6% (7%) 11% (13%) construction on housing there and on one of Sweden’s largest shopping centers, Norway Public 13% (11%) 31% (32%) the Mall of Scandinavia. Through a jointly owned company Peab and Folksam acquired KF Fastigheter’s share of Kvarnholmen Utveckling AB as well as another company that came with development rights. After the acquisition Kvarnholmen Utveckling AB, which works with managing the development rights for the production of more than 1,500 new apartments, is owned equally by JM and by the Peab and Folksam jointly owned company. Private 58% (55%) Peab is building the extension of E4 South at Sundsvall. The project is a general contract with functional requirements and a future management and repair Sweden contract that Peab’s business areas Civil Engineering and Industry are jointly 81% (82%) responsible for. In March 2013 Deputy CEO Jesper Göransson took over as CEO and acting President of Peab. He replaces Jan Johansson. The process to find a new ordinary CEO has been initiated by the Board. 2012 IN SUMMARY Stable volumes but lower profits

Orders received for Construction and Civil Engineering increased by 2 percent to SEK Operative net sales 38,743 million. Order backlog at the end of the year was somewhat lower than at the start MSEK largely due to a high level of production during 2012. 50,000 Group operative net sales increased by 5 percent to SEK 45,997 million due to the good 40,000

market situation in the beginning of the year together with a high level of production 30,000 throughout the year. Net sales increased in all the business areas. 20,000 The operative operating profit decreased to SEK 1,002 million (1,483) primarily due to write- 10,000 downs totaling SEK 675 million, of which SEK 300 million was for Tele2 Arena in Stockholm and SEK 375 million in construction operations in Norway. 0 2008* 2009 2010 2011 2012

Cash flow from current operations increased to SEK 503 million (60) despite an increase in * Pro forma including Peab Industri acquisitions of project and development property. Earnings per share were SEK 2.47 (3.26). The equity/assets ratio amounted to 24.9 percent (25.4), which is on par with the financial goal. Operative operating profit and The Board proposes a dividend of SEK 1.60 per share, which is equivalent to 65 percent of margin the result for the year. MSEK % 3,000 6 An action plan was initiated in the business area Construction with the intent to improve profitability by methodically developing leadership, project organization and internal pro- 2,500 5 cesses. This will, among other things, lead to a greater focus on profitability when choosing 2,000 4 projects, ensure that we have the right resources for the projects we take on and that 1,500 3 follow-up and control of ongoing projects function well. 1,000 2 The Group’s other operations and Group staff were reviewed during the year for the purpose 500 1 of reducing costs and thereby raising profitability. 0 0 2008* 2009 2010 2011 2012 Peab set up a Medium Term Notes program (MTN) with a loan ceiling of SEK 3,000 million. * Pro forma including Peab Industri This extended our capital base with a new complement to traditional bank financing. At the end of the year obligations worth a total of SEK 1,000 million were outstanding under the MTN program.

Financial summary Orders received and order backlog Construction and Civil Engineering Jan-Dec Jan-Dec Jan-Dec 2012 2011 2010 MSEK MSEK Operative net sales, MSEK 1) 45,997 44,015 38,184 40,000 40,000 Net sales, MSEK 46,840 43,539 38,045 Operative operating profit, MSEK 1) 1,002 1,483 1,563 30,000 30,000 Operative operating margin, % 1) 2.2 3.4 4.1 20,000 20,000 Operating profit, MSEK 1,055 1,505 1,503 Operating margin, % 2.3 3.5 4.0 10,000 10,000 Pre-tax profit, MSEK 813 1,195 1,513 Earnings per share before dilution, SEK 2.47 3.26 4.11 0 0 Dividend per share, SEK 2) 1.60 2.10 2.60 2008 2009 2010 2011 2012 Return on equity, % 9.2 12.1 15.6 Order backlog per 31 Dec Order intake Equity/assets ratio, % 24.9 25.4 27.8 Cash flow before financing, MSEK 974 –1,071 –315 Net debt, MSEK 6,470 6,626 5,719

1) Operative net sales and operative operating profit are reported according to pecentage of completion method. Net sales and operating profit are reported according to legal accounting. 2) Board of Directors’ proposal for 2012 to the AGM.

Return on equity 1) Equity/assets ratio 1) Dividend % % SEK % 35 35 4 80 Goal >25% 30 30 70 25 25 3 60 Goal >20% 50 20 20 2 40 15 15 30 10 10 1 20 5 5 10 0 0 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012* 1) According to legal accounting 1) According to legal accounting Dividend per share Dividend, % * For 2012, Board of Directors' proposal

PEAB ANNUAL REPORT 2012 1 COMMENTS FROM THE CEO Lasting, sustainable and cooperation

In many ways 2012 was an eventful year for Peab, a mixture of good news and disappointments. Production levels were high but our profitability was way too low. We had a stable and good level of orders received but we also watched demand on the Nordic construction market recede. The most significant factor behind the decline is the weak development of new production in housing. The housing sector did not drive construction investments the way it usually does.

THE PAST YEAR The orders I and the other members of our projects. Our customers are making During 2012 Peab worked in four business executive management have received from increasingly higher demands on expertise areas; Construction, Civil Engineering, the Board are to speed up the work to lower and experience in matters that concern Industry and Property Development. Our costs and increase profitability. We also sustainability. Sustainability is often a business areas make up a complete need to make changes in the balance sheet matter of using common sense, exercising customer offer but they also comprise a and reduce the amount of capital tied up. good judgment and maintaining order in our vital diversification in terms of markets and workplaces. This might revolve around how customers. Three of the business areas SUSTAINABLE COMMUNITY we take care of waste the best way, mini- Civil Engineering, Industry and Property BUILDING mize energy consumption or what we think Development developed well in 2012 but In addition to our traditional role as a about certification. For example, all our own our largest business area was less construction company in recent years Peab developed homes are environmentally successful than anticipated. During the year has developed its position as a community certified. Peab’s goal is to be on the cutting write-downs amounted to SEK 675 million builder. We participate more and more in edge of efficient sustainability, not just talk at the same time underlying earning was far the creation of a forward looking and the talk but walk the walk. We want what- too low. Our highest priority now is to restore sustainable society by taking a broader ever we build today to meet demands from profitability in 2013. responsibility and thereby benefiting the future generations whether they be environ- In March 2013 CEO and President Jan community. mental, financial or social. Building sustain- Johansson chose to quit his position and I This means we offer fully functional ably means building to last. was appointed CEO and acting President. sustainable and environmental solutions in

THE TUREBERG CHURCH Sollentuna

2 PEAB ANNUAL REPORT 2012 COMMENTS FROM THE CEO

Jesper Göransson, CEO and acting President ”While we have to be sensitive and capable of changing, lasting is one of Peab´s mottos”

LASTING Group’s value foundation. These values department stores in Peab’s group level While we have to be sensitive and capable reflect our company culture and the way we contract with IKEA. of changing, lasting is one of Peab’s want our customers and business partners mottos. By building lasting relationships to perceive us. Our value foundation is built IMPROVED PROFITABILITY with customers, suppliers and other part- on the credibility of our brand and this is a An action plan was adopted in 2012 that ners we create stability in our organization. matter that concerns everyone in the delineates how we can improve profitability. We have the same lasting view of our company. It’s a given that our customers This will be done by developing leadership, employees, and the expertise and experi- must be able to trust us just as we must be project organization and internal processes. ence they develop is a significant competi- able to trust them. We build our credibility Work on this action plan will intensify during tive advantage. Job satisfaction, safety and when we keep our promises, meet dead- 2013. security at our workplaces are based on our lines, stay within a budget and comport In order to generate the desired level of long-term perspective and the best platform ourselves with good ethics. We will always profitability everyone, on every level, needs for achieving good results. By having this be a company that is open and acessible to perform well. At the same time everyone lasting perspective when we do things we and which other companies and people in the Group has to constantly keep costs in can improve the way we produce, better want to deal with. Peab’s brand stands and mind. develop construction material and provide falls with our credibility. This concerns Even when the economy is slow we our employees on all levels with the oppor- everyone in the Group and is something we must meet our profit targets. We will there- tunity to grow. Lasting creates added value all must cherish and take responsibility for. fore put even more energy into rationalizing and credibility. our construction processes and avoiding EFFICIENT CONSTRUCTION projects that do not have the right risk pro- COOPERATION Peab’s business areas Construction, Civil file. The old words of wisdom that say make From the very beginning Peab has been a Engineering, Industry and Property Devel- sure the right resources are available company based on cooperation. Through opment cover together virtually anything before digging the hole ring truer than ever. internal collaboration between the Group’s and everything offered on the construction different business areas we can offer the market. Having four business areas market alternatives that are very competi- broadens the range of our expertise and Förslöv in April 2013 tive. Cooperation is also the way we work this means we can offer our customers externally. Years of building networks with competitive, complete solutions in our customers, authorities, suppliers and other community building. It also entails being partners facilitates and speeds up our daily able to further rationalize our processes on operations. the worksite in both small and large Jesper Göransson Cooperation is another motto at Peab projects, which is of benefit to our CEO and acting President and it’s important that this collaboration is customers. correct and transparent where all the part- A concrete example of how we can ners involved participate on equal terms. By rationalize construction is the new produc- working together we can realize our ambition methods which have recently been tion to bring costs down and reduce lead implemented in logistics. Simple changes times without lowering our standards of like respect for delivery times, an overhaul quality. Although we have done quite a bit in of the flows on sites, new ideas concern- this area there are always more ways to ing waste management and more have improve and this is something we work on lead to tangible improvements. The inno- every day. vative thinking in logistics has had a very positive effect on the end result in several OUR VALUES of our major projects like Clarion Hotel Peab’s core values Down-to-earth, Devel- Post in Gothenburg, Waterfront in Stock- oping, Personal and Reliable make up the holm, Arenastaden in Solna and the

PEAB ANNUAL REPORT 2012 3 A Nordic Community Builder: Experience is passed from project to project

IKEA, Uddevalla, June 2012: Peab was commissioned to build a new store for IKEA in Uddevalla as part of the agreement made in 2010 between IKEA and Peab. The store in Uddevalla is the third of ten included in the contract and is expected to be completed by the summer of 2013. As far as possible the same production leadership works with all the stores in the Nordic region. This provides us with valuable experiences that go from one project to the next. It also saves money and the environment, for the good of everyone involved.

4 PEAB ANNUAL REPORT 2012 CONSTRUCTION AND CIVIL ENGINEERING MARKET Nordic construction and civil engineering market

Building houses, roads, bridges and other infrastructure is as old as our civilization. Today the construction and civil engineering industry is one of the most important and largest players in the global economy. It is also a market that grows over time, even though some years are affected negatively by a turndown in the economy.

CONTRACTING WHILE Sweden from the period 1960-75 need to CONTINUED URBANIZATION INVESTMENTS ARE STILL NEEDED be refurbished in the next five years. Populations continue to rise in growth There are signs that the Nordic construction Throughout the Nordic region public prem- regions in the Nordic countries. This puts market is contracting. At the same time ises require renovation to meet demo- higher demands on housing and public underlying investment needs continue to graphic changes and older retail premises services,augmented by the needs of an be substantial in Sweden, Norway and and offices need to be refitted to modern aging citizenry. Finland. The housing market is not in technical demands. balance, refurbishments are greatly needed UNDER DIMENSTIONED in both homes and premises and an under ENERGY AND CLIMATE INFRASTRUCTURE dimensioned infrastructure requires exten- An important part of renewing buildings is Greater mobility in the labor market raises sive investments in communications, drastically reducing energy consumption to the need for efficient commuting. Well func- energy supplies and water and sewage achieve established climate goals. At the tioning mass transit systems and transpor- networks. same time newly constructed buildings are tation networks are essential to employ- expected to rapidly approach a zero energy ment and growth. This, and EU’s efforts to BIG HOUSING SHORTAGES standard and the construction industry’s create a more effective trans-European Population growth and continued urbaniza- production processes are becoming more transportation network, generate greater tion are strong forces on the housing market. energy efficient. Parallel with this develop- investments in road and railroad networks. The housing shortage in Sweden will accel- ment, major investments in a more sustain- erate in 2012-2014 and hinder mobility in the able supply of energy are needed in every LOW INTEREST RATES labor force through uncertainty in house- sector of society. It appears that at least Sweden and Finland holds, more stringent financing requirements will continue to have low interest rates in and sluggish planning processes. At the GROWTH AND RISING INCOMES 2013, which reduces the risk of falling same time special municipal demands on Despite a slowing business cycle, econo- housing prices and can facilitate recovery housing design leads to higher and higher mies in the Nordic region are stronger and of the demand for housing. To a certain construction costs. developments in disposable incomes more extent low rates also counter the negative positive than in the rest of Europe. This effects of higher equity and amortization RENOVATION AND RENEWMENT creates a platform for a quick recovery in requirements to buy a home. The need for renovation is considerable in demand for housing and premises when both housing and premises in all three the situation in the euro area begins to countries. Up to 300,000 apartments in stabilize.

Gross domestic product in the Nordic region Interest rates and currencies Fixed prices, change in percent 10 year government bonds

% Intrest 8 6 6 5 4 2 4 0 3 -2 -4 2 -6 1 -8 -10 0 2008 2009 2010 2011 2012 2013F 2005 2006 2007 2008 2009 2010 2011 2012

Sweden Norway Finland F=Forecast Sweden Norway Finland

Source: Konjunkturinstitutet, Sweden. Source: Sveriges Riksbank.

Source text: Industrifakta.

PEAB ANNUAL REPORT 2012 5 CONSTRUCTION AND CIVIL ENGINEERING MARKET

MACROECONOMY 2013 and CPI inflation is expected to fall Norway Sweden further from an already low level. Even the Growth in Norway is still the highest in the GDP in 2012 was slightly lower than fore- policy interest rate is expected to continue Nordic region but it is expected to slow casted and is expected to be to around 1.0 to drop and only increase marginally in slightly to 3.0 percent in 2013. Household percent in 2013. Two underlying factors 2014. At the same time there are signs of a consumption increased in 2012 and is behind this development are weaker more expansive financial policy from the expected to remain on a high level in 2013. household consumption and exports. government. CPI inflation fell in 2012 but is expected to Unemployment is expected to increase in

Housing investments Other building construction investments

Housing investments, 2008 – 2013 Other building construction investments, 2008 – 2013 MSEK MSEK 60,000 160,000 140,000 50,000 120,000 40,000 100,000 30,000 80,000 60,000 20,000 40,000 10,000 20,000 0 0 2008 2009 2010 2011 2012 2013F 2008 2009 2010 2011 2012 2013F

Sweden Norway Finland F=Forecast Sweden Norway Finland F=Forecast

After the recovery in 2010 in Sweden and Finland, and in 2011 Other building construction investments in commercial, indus- in Norway, construction of new housing diminished in 2012 in trial and public premises showed strong growth in Sweden all three countries. The forecasts for 2013 are a continued and Norway in 2010-2011 with continued growth in Norway in drop in primarily single homes in Sweden and Finland and 2012. In 2013 investments levels are expected to contract in apartments in Norway. This means the gap between single both countries and in Finland premise construction is home construction in Sweden and other countries will remain expected to remain on the same low but stable level as in significant as sluggish planning processes and requirements recent years. for larger down payments presses single home production to new lows. At the same time it appears that investments in the OFFICE AND RETAIL SPACE renovation of apartment buildings, mainly from the period There has been more construction in this sector in Norway 1960-1975, continue to grow in Sweden where they have long than in the rest of the Nordic region, but despite a significant been needed. demand for premises in, for example, the Oslo region there was, just as in Sweden, a downturn in 2012 when external GROWING HOUSING SHORTAGE uncertainty increased. This decline is expected to continue in Demographic changes and urbanization in all three countries 2013 and reach Finland as well. One of the factors behind the are fueling the need for more housing in growth regions, and weaker development in all three countries is that it has become particularly in Sweden the low level of housing construction is more difficult to finance commercial space construction and beginning to have a negative effect on economic recovery. the uncertainty surrounding how the service sector and retail Forecasts indicate that in 2012-2014 the already considerable stores will be affected by the developments in the rest of lack of housing will increase by at least 50,000 apartments on Europe. top of the fact that nearly all the municipalities with growing populations have produced too little housing for the past INDUSTRIAL CONSTRUCTION several years. Similar problems exist in Norway and Finland Industrial construction grew in both Sweden and Norway even though there has been much more construction of new during 2012 primarily through major investments in base housing per inhabitant in recent years. industry while in Finland developments were the opposite. Global turbulence is expected to lead to a decline in exports in LOW INTEREST RATES CAN STIMULATE 2013, which will dampen investments in industry in Sweden Both Sweden and Finland have low interest rates which and Norway while Finland may experience a slight upturn from normally should stimulate housing demand. However, this a low level. may not be enough to counter the effects of rising unemployment, more stringent financing demands and the uncertainty PUBLIC PREMISES about economic developments. In Norway, on the other hand, Construction in the public sector in Sweden dropped slightly in it is possible that continued stable employment levels, high 2012 while it continued to rise to new record levels in Norway. housing prices and the strong development of disposable There was a minor upturn in Finland although investments are incomes will uphold the demand for housing for another few still on a low level. Construction in 2013 is expected to slowly years. 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.

Source text: Industrifakta.

6 PEAB ANNUAL REPORT 2012 CONSTRUCTION AND CIVIL ENGINEERING MARKET

rise again in 2013. Even the policy interest Finland tion of around 3 percent is expected to fall rate is expected to increase later in the Government finances continued to be somewhat in the next two years, which can year. This can dampen household stable despite lower growth in 2012. The maintain real incomes. Household finances borrowing and lead to a slightly weaker forecasts for GNP in 2013 are on the same are also supported by an extremely low demand for housing. At the same time level as in Sweden despite slightly lower interest rate, which is expected to drop unemployment is expected to remain on household consumption and growing even further. the low level of around 3 percent in 2013. unemployment. Comparatively high infla-

Total construction and civil Civil engineering investments engineering investments

Ongoing investments, 2008-2013 Total building construction and civil engineering investments, 2008-2013 MSEK MSEK 100,000 300,000

80,000 250,000

200,000 60,000 150,000 40,000 100,000 20,000 50,000

0 0 2008 2009 2010 2011 2012 2013F 2008 2009 2010 2011 2012 2013F

Sweden Norway Finland F=Forecast Sweden Norway Finland F=Forecast

SWEDEN PUBLIC SPACE DOMINATES Civil engineering construction increased in 2012, in part The greatest single sector in Nordic construction in 2012 was through substantial private investments in energy supply. public premises with investments for a total of around SEK Even public civil engineering investments rose slightly but they 190 billion. Included in this sum are a number of smaller are expected to fall back again in 2013 due to lower funding. sectors such as healthcare, education and public administra- Unchanged levels are forecasted for 2013 despite the enor- tion. Next in line was civil engineering construction at around mous investment needs in mass communication and energy SEK 170 billion followed by new and refurbished housing for supply. some SEK 142 billion and private premises such as offices, stores and industrial facilities at around SEK 118 billion. In NORWAY addition to the total construction investments of about SEK Civil engineering construction accelerated in Norway during 620 billion, costs for maintenance, renovation and repair 2012 and this is expected to continue in 2013 as well. Growth amounted to around SEK 430 billion. is generated in several areas but above all in roads and railroads as well as energy-related investments, including the CONSTRUCTION DEVELOPMENT 2008-2013 offshore sector. Factors that may have a dampening effect on During the past five years total construction investments in Norwegian civil engineering construction are the lack of avail- Sweden and Norway have more or less hovered around SEK able capacity and the inability of municipalities to finance 200 to 250 billion per year, while total investments in Finland major projects. have been considerably more modest at around SEK 125 billion. And although Sweden and Norway have different FINLAND underlying macroeconomic situations the two countries still Finnish civil engineering investments were more or less had similar business cycles that were plainly affected by the unchanged in 2012 and this is projected for 2013 as well. crisis in the euro area. Finland, however, has had a completely Major mass transit investments are in progress in the region different business cycle and a more stable investment level around the capital where an influx of new residents has where, somewhat surprisingly, the effect of developments in created a need for more efficient communications including a the rest of Europe are not as obvious. Even the accumulated new metro line. One area of uncertainty in the coming years is forecasts for 2013 vary between the countries. In both what will be prioritized in the government’s financial policy. 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.

Source text: Industrifakta.

PEAB ANNUAL REPORT 2012 7 BUSINESS MODEL A Nordic Community Builder in constant development

Peab’s business model is built on our shared fundamental values that are in turn based on our four core values: Down-to-Earth, Developing, Personal and Reliable. These are the cornerstones of Peab’s company culture and they steer the way we work. Together our four business areas form a comprehensive offer to the market.

Fundamental Values Peab’s business model is built on our shared values and the four core Vision values that permeate every aspect of our business. We continually develop our personnel based on this foundation.

OUR CORE VALUES Down-to-earth: We will be down-to-earth in the way we work, decision-making will be close at hand and we will be sensitive to the needs structi Con on of our customers.

Developing: We will be innovative, flexible and strive for continuous improvement.

Personal: Through an honest and trustful dialogue with our customers and partners we will create and maintain long-term, good relationships. Business

Reliable. We will always perform with good business ethics, compe-

concept tence and professional skill. P

C e

Stakeholders r v t i

Owners y l

Financiers D

Customers e Stakeholders Fundamental g

Suppliers i Value creation n

Employees External factors e Values e

Society o e

p r

i m n

e g

n t External factors

The economy

Interest rates Financial Financial market goals Market needs

Demographic growth and urbanization The environment

Industry

Financial goals Strategies Earnings in Peab will be used to develop the business and generate a return to the owners. The business is steered by the financial goals: Return on equity The equity/assets ratio Dividends These are broken down into a number of operational goals adjusted to suit different operations in the Group. Read more about our goals on page 11.

8 PEAB ANNUAL REPORT 2012 BUSINESS MODEL

A business concept that builds on local entrepreneurs with a big group’s resources Our vision We have a clearly defined business concept that is built on a large PEAB BUILDS SUSTAINABLE COMMUNITIES number of entrepreneurs working close to our customers with access to FOR THE FUTURE the competence and scale advantages that only a big group can offer. We are the obvious partner for community building in the Nordic region. We come up with ideas, take initiative and break new BUSINESS CONCEPT ground. We conserve resources and our climate smart solutions “Peab is a construction and civil engineering company that puts have spearheaded developments. Our work is sustainable throug- total quality in every step of the construction process first. Through hout its entire life cycle. innovation combined with solid professional skills we make the PEAB IS THE NORDIC COMPANY FOR CONSTRUCTION customer’s interest our own and thereby build for the future.” Our entire organization works together to exceed our customers’ expectations. Peab is always close to our customers no matter whether they operate locally, nationally or globally. Satisfied customers contribute to our success in the entire Nordic region.

PEAB ATTRACTS TALENTED PEOPLE We are the number one Nordic employer. Our values are simple and clear. Our personnel is deeply engaged and our leaders committed to helping people develop. When our employees grow, Vision Peab grows.

u Constr ction Value creation

Sustainable community building

Customer benefits Return on investments

Business Competence development

concept Experience transfers P

Community benefits r

C e

r v t i

y l

E D

n e

Stakeholders Fundamental g

i Value creation n

External factors e Values e

o e

p r

i m n

e g

n t

Financial

goals Four business areas that form

a competitive offer

With our four business areas Construction, Civil Engineering, Industry

and Property Development we have access to, either through direct Industry ownership or well-developed partnerships, the strategic resources required to carry out major, resource-demanding projects. This allows us to offer customers everywhere in the Nordic region effective comprehensive solutions. Read more about our business areas on pages 16-27.

Strategies

Group strategies that lead to our vision We realize our vision through six Group strategies: Cost-efficient business Investment in profitable growth in the Nordic region Be seen and heard in the Nordic region Pioneers in sustainable community building Strengthen and develop customer relations Be the best workplace in the Nordic region Read more about our strategies on page 10.

PEAB ANNUAL REPORT 2012 9 GROUP STRATEGIES Group Strategies

Our six defined Group strategies help us in the work to achieve our vision. Our strategic focus is long-term but can be adapted short-term to current conditions. Starting in the latter part of 2012 our focus has been on ensuring cost-efficient operations due to the latest developments in profitability and the weakening market.

Strategy Description Cost-efficient business Cost efficiency is essential to developing a competitive business that can also produce a return for Peab’s owners, which is why we are always focused on increasing efficiency throughout our operations.

Investment in profitable Profitable growth is essential to Peab’s value creation. Growth is important since it growth in the Nordic region improves our ability to compete – in part because big companies are usually involved in big projects and in part because size is an advantage that lowers costs.

Be seen and heard in the We intend to make Peab a household name as a Nordic Community Builder. By being seen Nordic region and heard, in our own industry and on the Nordic market, we can better attract customers, personnel and investors.

Pioneers in sustainable By being pioneers in sustainable community building we not only create value for our community building customers and their customers, we create value for society at large, our employees and our owners. This, in turn, paves the way for new markets and business opportunities for both our customers and us.

Strengthen and develop In addition to being the foundation of Peab’s operations our strong customer relations are customer relations the key to efficient production at lower prices with higher quality.

The best workplace in the In the coming years more and more Peab employees will retire while the labor force Nordic region will diminish as people born in the 40s leave it. This sharpens the competition for young, qualified workers – in construction and in industry in general. At the same time Peab plans to grow which means we must be able to attract, develop and keep new employees.

10 PEAB ANNUAL REPORT 2012 FINANCIAL AND OPERATIVE GOALS Financial and operative goals

The surplus from operations will be used in investments, to develop our business and deliver a return to our owners.

FINANCIAL GOALS In 2012 we have continued to invest in Cash flow and liquidity: Cash flow Peab’s management steers operations housing and property development projects before financing must always be posi- based on the Board’s guidelines that are as well as machines. In coming years Peab tive in the long-term. Even if this may founded on three financial goals; Return on will scale down investments below 2012 deviate for a particular year, the tied up equity, Equity/assets ratio and Dividends. levels in all our business areas except working capital and investment levels They were adopted in the spring of 2007 Property Development which is under must, over time, match the cash flow and are valid for the entire Group. The construction. generated by operative units. The goals are clear and simplify communication Group’s liquid funds, including unuti- with financial markets. OPERATIVE GOALS lized credit facilities, amounted to SEK Over time goal achievement can vary Peab consists of a number of different 5.7 billion per 31 December 2012. with changes in the economy but also operations with different conditions and Tied up capital: Tied up capital is an therefore they have internal goals that fit depending on the different stages of our important steering instrument to ensure each individual business. These goals are development where some are character- that the business is capital effective, regularly followed up through reports on ized by expansion and others by consolida- that the Group prioritizes the right pro- projects and profit units. Operative goals tion. Last year Peab successively moved ject and that Peab always has the are primarily focused on three areas: out of the expansive phase of the past few resources it needs to grow. A Group years that was coupled with heavy invest- Profitability: This is measured through level investment team decides on the ments. We have acquired companies, the operating margin where we focus business areas’ investments for both started up in new places and invested in dif- on price-setting and particularly over- machines and project property. This ferent development projects. These invest- head, as well as through the return on keeps the entrepreneurial spirit in our ments have been aimed at strengthening capital employed in order to ensure units intact while ensuring that the our position but they have charged profita- optimal use of the capital tied up in Group’s tied up capital is used bility and cash flow in the short term. facilities and project developments. optimally.

PEAB GROUP’S FINANCIAL GOALS Goal Comments Return on equity will be a minimum In recent years returns on equity have fallen largely due Return on equity of 20 percent to lower earnings in current operations. At the same time % 35 we have expanded our business which has in the short- The goal is set to create an effective 30 term charged profitability but will long-term strengthen Goal >20% business and a rational capital structure 25 our earnings. In 2012 profitability in business areas Civil based on Peab´s business. 20 Engineering, Industry and Property Development 15 improved. The result in Construction was charged by 10 project adjustments and write-downs that totaled SEK 5 675 million, which had a negative effect on the return on 0 equity. In 2012 return on equity amounted to 9.2 percent. 2008 2009 2010 2011 2012

Equity/assets ratio will be a minimum The equity/assets ratio goal has been reached or Equity/assets ratio of 25 percent surpassed in recent years. The high rate of investment % in the past few years has led to a larger balance sheet 35 The equity/assets ratio regulates the rela- 30 Goal >25% tionship between equity and debt. The total, which has resulted in a lower equity/assets ratio. In 2012 substantial write-downs in construction operations 25 goal, which is set to balance the owners’ 20 have, in addition, affected the equity/assets ratio nega- demands on returns and the need to 15 tively. The equity/assets ratio amounted to 24.9 percent safeguard the business during times with 10 per 31 December 2012. a more difficult market situation, entails 5 that a minimum of 25 percent of Group 0 2008 2009 2010 2011 2012 assets are financed through equity.

Dividends will be a minimum of 50 A dividend of SEK 1.60 per share is proposed for 2012. Dividends 1) % percent of profit after tax Calculated as a share of consolidated reported profit 70 The goal is set to ensure the owners’ after tax the proposed dividend is 65 percent. The 60 Goal >50% return on their contributed capital as well proposed dividend corresponds to a direct return of 5.2 50 as meet the company’s need for funds to percent calculated at the closing price on 31 december 40 develop operations. 2012. 30 20 10 0 2008 2009 2010 2011 2012

1) For 2012, Board of Directors’ proposal.

PEAB ANNUAL REPORT 2012 11 A Nordic Community Builder: Fewer accidents on straight roads

E6 Bohus County, June 2012: E6 ties together the financially important regions Öresund, Gothenburg and Oslo. The highway has been notoriously crowded in Bohus County where heavy traffic, tourists and residents jostle shoulder to shoulder. The worn road has entailed major traffic problems and caused accidents. In June 2012 Peab opened new stretches of E6 that were now rerouted to keep heavy, through traffic off city streets. Through this project business areas Industry and Civil Engineering have laid yet another piece of the community puzzle that brings Nordic people closer to each other. Read more about E6 Bohus County at www.peab.se/E6-bohuslan

E6 Bohus County

12 PEAB ANNUAL REPORT 2012 BOARD OF DIRECTORS’ REPORT Board of Directors’ Report

The Board of Directors and the Chief Executive Officer of Peab AB (publ), Corporate ID Number: 556061-4330, hereby submit the following annual report and consolidated accounts for the 2012 financial year.

NET SALES1) stable but too low. An action plan to restore Profit for the year amounted to SEK 725 Group operative net sales for 2012 profitability was therefore initiated during million (943). increased from SEK 44,015 to 45,997 the year. The other three business areas million, which was an increase of 5 percent. Civil Engineering, Industry and Property FINANCIAL POSITION

Net sales in all the business areas increased. Development have developed positively The equity/assets ratio on 31 December REPORT DIRECTORS’ OF BOARD This increase is due to a relatively good during the year and operating profit 2012 was 24.9 percent compared to 25.4 market at the beginning of the year and a increased in all of them. percent at the previous year-end, which high level of production throughout the The operative operating margin was is in line with the Group financial goal. year. After adjustments for acquired and 2.2 percent compared to 3.4 percent in Interest-bearing net debt amounted to SEK divested units operative net sales increased 2011. Corrected for project adjustments 6,470 million (6,626). During the year Peab by 5 percent compared to the last year. and write-downs for a total of SEK 675 has continued to invest in housing and The adjustment in housing reporting million underlying Group operative operating property developments as well as machines. affected net sales by SEK 843 million margin amounted to 3.6 percent (3.4). Net debt decreased during the fourth (-476). Reported Group net sales for 2012 Depreciation for the year was SEK 848 quarter by around SEK 1,600 million as a therefore increased by 8 percent to SEK million (803). result of property sales, settling receivables 46,840 million (43,539). Net financial items amounted to SEK in partly owned projects and the divestiture Of the year’s net sales, SEK 9,551 -242 million (-310), of which net interest of the Catena holding. million (7,616) were attributable to sales expense amounted to SEK -294 million The average interest rate in the loan and production outside Sweden, which (-234). Received dividends were SEK 46 portfolio including derivatives was 2.9 means that the Group has expanded its (20) million during the year. The effect of percent (3.5) on 31 December 2012. Nordic presence. valuing financial instruments at fair value Group liquid funds, including non- affected net financial items by SEK 39 utilized credit facilities, were SEK 5,661 PROFIT 1) million (-78). The income effect of valuing million (4,944) at the end of the year. Operative operating profit for 2012 was the Brinova holding at fair value until its SEK 1,002 million compared to SEK 1,483 divestiture in the third quarter amounted to INVESTMENTS million last year. The adjustment in housing SEK 27 million (-81), which explains most Net investments of tangible and intangible reporting affected operating profit by SEK of the improvement in net financial items. assets increased from SEK 906 million to 53 million (22). Reported operating profit for Pre-tax profit amounted to SEK 813 SEK 925 million during the year. Project 2012 therefore amounted to SEK 1,055 million (1,195). and development properties were acquired million (1,505). The lower operating profit is Tax for the year was SEK -88 million for a total of SEK 822 million (273) during largely due to project adjustments and (-252). Tax was affected by the sales of prop- the year. write-downs in business area Construction erty projects through the divestiture of shares for a total of SEK 675 million, consisting of where the gains are not taxable. There have CASH FLOW SEK 300 million for Tele2 Arena in Stock- also been positive tax effects due to the Cash flow from current operations was SEK holm and SEK 375 million in Norway. lowered tax rate in Sweden, which affected 503 million (60). The acquisition of project Underlying earnings in construction are deferred tax positively by SEK 80 million. and development property for SEK -989

Operative net sales Operative operating profit and Equity/assets ratio1) margin

MSEK MSEK % % 50,000 3,000 6 35 Goal >25% 30 40,000 2,500 5 25 2,000 4 30,000 20 1,500 3 20,000 15 1,000 2 10 10,000 500 1 5 0 0 0 0 2008* 2009 2010 2011 2012 2008* 2009 2010 2011 2012 2008 2009 2010 2011 2012 * Pro forma including Peab Industri 1) * Pro forma including Peab Industri According to legal accounting

1) Peab applies IFRIC 15, Agreements for the Construction of Real Estate, in legal reporting. As a result IAS 18, Revenue, will be applied to Peab’s housing projects in Finland and Norway as well as Peab’s own single homes in Sweden. Revenue from these projects will be recognized first when the home is handed over to the buyer. Segment reporting is based on the percentage of completion method for all our projects since this mirrors how executive management and the Board monitor the business. There is a bridge in segment reporting between operative reporting according to the percentage of completion method and legal reporting. Operative net sales and operative operating profit are reported according to the percentage of completion method. Net sales and operating profit are reported according to legal accounting.

PEAB ANNUAL REPORT 2012 13 BOARD OF DIRECTORS’ REPORT

million (-682) is also included in the cash hotels in Sweden and several other large business area Civil Engineering were for flow from current operations. projects such as a new stage of MAX IV local industries, new maintenance con- Cash flow from investment activities laboratory in Lund. tracts for roads and extensions of Nordic was SEK 471 million compared to SEK Some of the orders received in the roads. We also received an order from -1,131 million the previous year. The year SSAB for an extension of the deep harbor has been affected positively by divestitures in Oxelösund and a number of orders from of property and settling interest-bearing the mining industry. receivables in partly owned projects as well Order backlog yet to be produced at the as the disposal of the holdings in Brinova end of the year amounted to SEK 28,056 and Catena. During the year investments million (28,378). Although the number of in housing and property development pro- orders received increased in 2012 com- jects and in machines have continued. pared with 2011, the high rate of production The redemption of futures for shares in during the year meant that the order back- Lemminkäinen Oyj has affected cash flow log was slightly lower at the end of 2012 by the cash paid for shares. The previous than at the end of 2011.

BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD year was characterized by broad expansion Of the total order backlog, 30 percent with investments in all our operations. (24) is expected to be produced after 2013. Cash flow before financing amounted Swedish operations accounted for 87 to SEK 974 million compared to SEK -1,071 percent (86) of the order backlog. million last year. Environmentally No orders received or order backlog is classified senior given for the business areas property ORDERS RECEIVED AND ORDER and sheltered Development and Industry. BACKLOG CONSTRUCTION AND CIVIL ENGINEERING housing COMMENTS ON THE BUSINESS AREAS Orders received in 2012 amounted to SEK The demand for secure and comfortable 38,743 million compared to SEK 37,986 housing is growing as the average age of As of 1 January 2012 the Peab Group is million in 2011. Included in orders received populations rises. Peab is building senior and presented in four different business areas: for Construction is Peab’s single largest sheltered housing in several places in Construction, Civil Engineering, Industry Sweden. One example is Sala where the four- project ever, the Mall of Scandinavia in and Property Development. The business floor, 80 room building has been environmen- Solna, as well as housing connected to tally classified as a Miljöbyggnad (Environ- areas are also operating segments. Arenastaden and other housing projects mental Building) Gold. The concept Miljö Comparable figures for the year 2011 located primarily in major Nordic cities. byggnad documents important qualities in a have been translated into the new business Business area Construction has received building regarding energy, indoor environment areas. Construction of our own develop- and material. A building can be given one of ment projects is presented in segment new orders for a number of shopping three rankings and Gold is the highest. centers, new construction or renovation of reporting according to the percentage of

Orders received and order backlog Orders received and order backlog Construction and Civil Engineering Orders received Order backlog MSEK MSEK 2012 2011 31 Dec 31 Dec 40,000 40,000 MSEK 2012 2011

Construction 27,185 27,841 20,132 20,578 30,000 30,000 Civil Engineering 12,729 11,350 8,610 8,526 Eliminations –1,171 –1,205 –686 –726 20,000 20,000 Group 38,743 37,986 28,056 28,378 10,000 10,000

0 0 2008 2009 2010 2011 2012 Order backlog per 31 Dec Order intake

Return on equity1) Net investments incl. project Cash flow before financing and development property % MSEK Mkr 35 8,000 1,200 30 900 600 25 6,000 Goal >20% 300 20 0 4,000 15 -300 -600 10 2,000 -900 5 -1,200 0 0 -1,500 2008 2009 2010 2011 2012 2008* 2009 2010 2011 2012 2008* 2009 2010 2011 2012 1) According to legal accounting * Including the effect of the acquisition of * Including the effect of the acquisition Peab Industri of Peab Industri

14 PEAB ANNUAL REPORT 2012 BOARD OF DIRECTORS’ REPORT completion method. Unrealized internal profits and net sales are eliminated within the Group. When our own housing development projects are divested these effects are returned to the Group and the capital gains from the sales are reported in business area Property Development. Read more about our business areas on pages 16-27. In addition to the business areas, central companies, certain subsidiaries and other holdings are presented. The central companies primarily consist of the parent company Peab AB and Peab Finans AB. Peab AB’s operations consist of executive management and shared Group functions.

The internal bank Peab Finans AB handles REPORT DIRECTORS’ OF BOARD the Group’s liquidity and debt management as well as financial risk exposure. The company is also a service function for the subsidiaries and works out solutions for loans STOCKHOLM WATERFRONT Stockholm and investments, project-related financing and currency risk hedging. Operating profit for the year for Group functions was SEK -232 million (-210).

Net sales and operating profit per business area Net sales Operating profit Operating margin MSEK 2012 2011 2012 2011 2012 2011 Construction 27,992 27,822 –13 600 0.0% 2.2% Civil Engineering 12,643 11,554 440 390 3.5% 3.4% Industry 10,723 10,404 788 693 7.3% 6.7% Property Development 345 189 51 31 14.8% 16.4% Group functions 109 132 –232 –210 Eliminations –5,815 –6,086 –32 –21 Operative 1) 45,997 44,015 1,002 1,483 2.2% 3.4% Adjustment in housing reporting 2) 843 –476 53 22 Legal 46,840 43,539 1,055 1,505 2.3% 3.5% 1) According to percentage of completion method (IAS 11). 2) Adjustment of the accounting principle for own homes in Sweden and housing in Finland and Norway to the completion method (IAS 18).

Share of Group operative Share of Group operative Share of Group net sales, 2012 operating profit, 2012 employees, 2012

Construction, Property Development, 1% (0%) Property Development, 4% (2%) Property Development, 1% (0%) –1% (35%) Industry, Industry, 21% (20%) 21% (21%) Industry, Civil 62% (40%) Engineering, 35% (23%) Construction, Construction, 54% (56%) 53% (55%)

Civil Engineering, Civil 24% (23%) Engineering, 25% (25%)

PEAB ANNUAL REPORT 2012 15 BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

Business area Construction – everything from construction maintenance to extensive community projects

With many years of experience from all kinds of projects Peab’s construction operations offer customers a wide range of expertise and cost-efficient solutions. Business area Construction provides complete service in housing, building construction, construction maintenance and project development. Operations comprise everything from construction service and renovation to developing entire city blocks.

ÄLVSJÖ RESECENTRUM 16 PEAB ANNUAL REPORT 2012 Älvsjö BUSINESS AREA CONSTRUCTION A year of challenges

NET SALES AND RESULTS Weaker development in housing Operative net sales for 2012 increased New production of Peab’s own housing marginally by around one percent from SEK developments made up 8 percent of net 27,822 to 27,992 million. sales in 2012 compared to 11 percent last Operative operating profit for the year year. amounted to SEK -13 million compared to Developments continued to be weak in SEK 600 million in 2011. The drop in oper- the housing market. Only in Stockholm, ating profit is due to the project write-down Gothenburg and Helsinki are operations for Tele2 Arena in Stockholm which charged running more or less on a normal level. Own profits by SEK 300 million. Construction housing development start-ups were 1,679 operations in Norway and Finland charged (1,711). During the fourth quarter two major REPORT DIRECTORS’ OF BOARD profits through higher costs and lower earn- housing projects, one in Solna and one in ings in ongoing production. In the second Bromma with a total of some 300 apart- quarter two projects in the Norwegian oper- ments, were started up. The number of sold ations were written down by SEK 125 mil- Gothia Towers homes during the year was 1,738 compared lion. A revision of Norwegian construction Gothenburg – high to 1,531 during 2011. The number of our operations was completed in the fourth level logistics own homes in production at the end of the quarter. This led to project adjustments and year was 3,134 compared to 3,470 at the write-downs for a total of SEK 250 million The 24 meter long main body of the bridge previous year-end. The share of sold homes that connects the two Gothia Towers is being in production was 72 percent compared to attributable to write-downs in goodwill and lifted into place here. This is high level logis- 73 percent at the end of 2011. receivables, a revaluation of disputes in a tics. Another logistics challenge is handling all number of finished projects in the Oslo the material being transported in and out of The current financial turbulence and region and write-downs of development the busy city. Solving this type of complex the ceiling on mortgages in Sweden have problem in a cost-efficient and environmentally property. entailed longer sales processes. This has a friendly way has become Peab’s hallmark. negative effect on our ability to start up new The operative operating margin sank to Since 2012 Peab has been working on both 0 percent compared to 2.2 percent last expanding the existing hotel and conference projects, given the requirements for pre- year. Adjusted for the previously mentioned facility Gothia Towers and building a completely sales at the start of production. The hous- project adjustments and write-downs of new tower with 500 hotel room. This will make ing demand is affected by several factors it the largest hotel in Sweden. The project is SEK 675 million, the operating margin was such as demography, the economy, interest being carried out at the same time daily rates and access to housing loans. All in all 2.4 percent (2.2). This shows a stable activity in the hotel and conference facility development during the year but nonethe- continues as usual, and work hours are strin- these factors indicate a good demand in the less underlying earnings are too low. gently regulated to disturb the hotel environ- long-term for housing with different kinds of mental as little as possible. Completion of the ownership forms and we have noticed the An action plan in progress will new hotel tower is projected for the year-end demand for apartment buildings with rentals restore profitability 2014/2015. continues to be strong. Our expansion over the past few years, The number of repurchased homes on together with a wave of retirements, has 31 December 2012 was 191 compared to entailed a great number of new employees internal processes. This will, among other 183 per 31 December 2011. and operations, and this requires more of things, lead to a greater focus on profita- our organization and leadership. We have bility when choosing projects, ensure the ORDERS RECEIVED AND initiated an action plan aimed at improving Group has the right resources for the ORDER BACKLOG profitability by methodically developing our projects we take on and that follow-up and Orders received for 2012, which included leadership, project organization and control of ongoing projects functions well. Peab’s single largest project ever - the Mall

Business area Construction in summary

The business is run in five geographic divi- usually local although we have some nation- Nordic Choice Hotels. Some new customers in sions in Sweden, one division in Norway, one wide Group contracts. construction maintenance for the year are in Finland and a new Nordic division, Special Housing: Produces all kinds of housing which Scania Real Estate and Volvo. Other large projects that specializes in larger, complex includes apartment buildings with tenant- customers are real estate companies, munici- projects. owners, condominiums and rentals. We also palities, county council and municipal real have a certain amount of single home estate companies, private customers like MARKET SEGMENT construction. Customers are commercial and insurance companies and smaller regional Contract construction: Builds commercial municipal players. We initiate our own projects and local customers. Business area Property and public facilities as well as industrial prem- in housing development that are then sold to Development is also an important customer. ises such as offices, shopping malls, arenas, private homeowners. Project development and schools and hospitals for private, municipal ownership of apartments for rent are handled OTHER IMPORTANT PLAYERS and federal customers. in business area Property Development. Some of the important players on the market Construction maintenance: Works with are Skanska, NCC, JM, Lemminkäinen, YIT maintenance, repairs, insurance claims, CUSTOMERS and Veidekke. service to real estate companies and indus- Peab has a number of Group customers on the tries and smaller contracts. Customers are Nordic market such as IKEA, McDonald’s and

PEAB ANNUAL REPORT 2012 17 BUSINESS AREA CONSTRUCTION

Jesper Göransson, acting Business Area Manager Construction Strategic priorities • Greater focus on profitability such as closely monitoring the action plan initiated in 2012. • Careful selection and prioritization of projects in order to optimize margins. • Continued development of customer concepts, industrial construction and standardization and industrialization of all our processes and systems. • Greater cooperation with customers through, for instance, Trust-based contracts that create value for all parties. • Continued focus on human capital, particularly by continuously improving safety. BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

of Scandinavia in Solna, were lower than the Emil i Lönneberg site in Vimmerby and improving logistics we can make major in 2011. Production of ongoing projects much more. This list clearly demonstrates savings in the environment, costs, time and has been rapid in recent years and order the wide range of Peab’s building produc- more. backlog at the end of the year amounted tion. Continued development to SEK 20,132 million (20,578). Arenastaden in Solna is one of Peab’s of standardized concepts largest worksites and a great deal hap- In line with the strategy for the whole Group COMMENTS ON THE YEAR pened there in 2012. The spectacular inau- to strengthen and develop Peab’s customer The rate of production during the year was guration of Friends Arena generated an relations we have continued to develop our high. We worked in more than half of the enormous amount of attention and we customer concepts during the year: Boly- municipalities in Sweden. The large began construction of the Mall of Scandina- ftet, Peab Småhus and Annehem, and we projects initiated in 2012 were spread all via, a project all Peab’s business areas are launched a new one, Housing for Youths. over our geographic operational area from involved in. Bolyftet is a comprehensive concept the very north to the very south of Sweden, During the year a whole new division for sustainable refurbishment of the hous- in Norway and in Finland. We started was created; Special projects. Here we ing projects from the 60s and 70s. The con- construction on senior housing in Nyköping have collected our top notch expertise in cept balances social, financial, environ- and Sala, stores in Uddevalla, Stockholm, the production of special projects like the mental and energy conservation aspects. In Älmhult, Luleå and Kristianstad. We began Mall of Scandinavia and IKEA department addition to specially designed construction hotel projects in Gothenburg, Malmö and stores. and energy technique solutions, as well as Stockholm, a multi-hall in Vardö in the very Peab has also continued to develop financing alternatives, the concept contains north of Norway, a post office terminal in logistic systems. Not only large projects but measures to make the housing projects in Sigtuna, a facility for traffic safety in Borås, nearly every worksite is affected by this. By need of upgrading safer and nicer, and cre-

Important projects and events Operative net sales

Friends Arena, Sweden’s new national vaara mine. One new project is the con- MSEK arena in Solna was completed and inau- struction of a concentrator. For more 30,000 gurated in October. Demolition of the old information on Northland Resources, 25,000 arena, Råsunda, began after the inaugu- see page 34, Important events after year- 20,000 ration and this area is now being planned end. for housing. Construction of housing in 15,000 Arenastaden and Sweden’s largest shop- 10,000 ping center the Mall of Scandinavia com- Events after the end of menced. the period 5,000 After a revision of the Norwegian operations, 0 Steen & Ström commissioned Peab to 2008 2009 2010 2011 2012 build the new Gallerian in Kristianstad. which resulted in project write-downs and in order to further improve profitability in Busi- The first stage of the technically compli- ness Area Construction, leadership in the cated laboratory Max IV in Lund was com- business area has been reinforced. As of 1 Operative operating profit and margin pleted and a new contract for the second January 2013 Tore Hallersbo is responsible for stage was signed. MSEK the further development of divisions Norway, % 1,200 6 Peab was commissioned by Nyköping Finland and Special Projects. With its Municipality to build 146 apartments for specialist expertise Division Special Projects 1,000 5 senior and sheltered housing in Nyköping. will support operations in Norway throughout 800 4 The unit will also contain an assembly the entire production process. As of 8 April 600 3 room, workshops for day activities, a res- 2013 Roger Linnér is the operative manager taurant with a kitchen and personnel and for the Swedish construction divisions and 400 2 office space. business area staff. As of March 2013 Jesper 200 1 Together with Peab’s other business Göransson is acting Business Area Construc- 0 0 areas Construction will continue to work tion Manager. 2008 2009 2010 2011 2012 for Northland Resources in the Kaunis- Operating proﬁt Operating margin, %

18 PEAB ANNUAL REPORT 2012 BUSINESS AREA CONSTRUCTION ate jobs there. Two examples of projects projects are: Sheltered Home “Översten” in that were initiated during the year were Västerås, the rental apartments “Pippi” in Vallby in Västerås and Rosengård in Malmö. Malmö and the tenant-owned apartments Peab Småhus is a concept for terrace “Eklyckan” in Mölnlycke. houses, link houses and single homes. Based on a common technological platform THE MARKET the house models are developed with cus- Developments in Swedish building tomers in mind. Prefabricated houses with construction start-ups were slow in 2012, low energy consumption are built efficiently despite a relatively strong start at the begin- and safeguarded from dampness. Thou- ning of the year. This is primarily due to the sands of single homes are in the planning weak development in start-ups in private stage within a 5-7 year horizon. During the and public premises during the second half year two projects were initiated, one in Ale of the year. We can already see that municipality and one in Västerås. housing production does not meet the need Annehem is a concept for Senior, for new homes. This leads to a growing Sheltered and Nursing Home housing housing shortage, which hampers develop- where Peab, together with our partners who Efficient logistics ment on the labor market and can even REPORT DIRECTORS’ OF BOARD are municipalities and real estate compa- affect economic growth. A large part of the Modern, customized logistics are key to effi- nies, offer turnkey senior housing including investments made over the next few years cient construction projects. Well thought-out associated facilities for services and activi- logistics with clear and specific demands on will in all probability be in maintenance and ties in the buildings. During the year 63 times, places and methods are exacting but repair. apartments in Kristianstad were built based they are also good for profits and the environ- Norwegian building construction start- on PGS (Peab General System). ment. Peab’s concept for efficient logistics ups have had stable growth in 2012, A new customer concept was also initi- requires real commitment from everyone on a although not at the same high rate as previ- ated during the year called “Housing for worksite. Every project tailors its model based ous years. on plain common sense. An example of a Youths”. The idea is to make it possible for project where logistics functioned well is As a result of a dramatic drop in build- large numbers of young people to move Stockholm Waterfront which Peab built next ing construction start-ups in Finland during away from home by building apartments to Kungsbron in Stockholm. the third quarter developments in 2012 with cost-efficient production. The methods were slightly down from the previous year. are many and include rationalizing living Maintenance and repairs have devel- space and smart interior solutions. A pre- construction components that are manufac- oped stably in Sweden, Norway and cursor to the concept is being built in Are- tured in a factory and mounted on site into a Finland. This market is less sensitive to nastaden in Solna. Almost 60 percent of complete apartment building. In other ups and downs in the economy. those who have booked an apartment are words, PGS entails industrial construction born in the 1980s or 90s. Many of them are from fabrication to finished building. The first-time buyers. result is shorter construction times and PGS (Peab General System) is a high, uniform quality in attractive, ener- module-based construction system. PGS gy-saving and environmentally friendly develops and delivers a flexible system of housing. Some of our ongoing and future

Operative net sales 2012 per type of Key ratios 2012 2011 operations Operative net sales, MSEK 27,992 27,822 Construction Other, 2% (3%) Operative operating profit, MSEK –13 600 maintenance, 10% (11%) Operative operating margin, % 0.0 2.2 Orders received, MSEK 27,185 27,841

Order backlog on 31 December, MSEK 20,132 20,578 Renovation, New construction, Number of employees 7,384 8,169 24% (24%) 64% (62%)

Own housing development production 2012 2011 Number of housing starts during the year 1,679 1,711 Number of homes sold during the year 1,738 1,531 Total number of homes under construction, at year end 3,134 3,470 Share of sold homes, at year end 72% 73% Number of repurchased tenant-owned rights/shares in Finnish companies in the balance sheet, at year end 191 183

PEAB ANNUAL REPORT 2012 19 BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

Business area Civil Engineering – infrastructure production and maintenance

Peab is a major player in civil engineering in Sweden, Norway and Finland. The business area builds and maintains roads and railroads, bridges and other infrastructure. Civil Engineering works with operation and maintenance in more than half of Swedish municipalities as well as with road maintenance in many operational areas.

FORSBACKABRON 20 PEAB ANNUAL REPORT 2012 Söderhamn BUSINESS AREA CIVIL ENGINEERING Continued growth with improved margins

NET SALES AND RESULTS where demand is the most at the moment. Net sales for 2012 rose from SEK 11,554 In the short-term this means better capacity million to SEK 12,643 million, which is an utilization. In the long-term it makes it eas- increase of 9 percent. Even after adjust- ier to retain our employees, which is crucial ments for acquired units the increase was to consistent and sustainable profitability. 9 percent. This growth is primarily due to public and private investments. ORDERS RECEIVED AND The Local market shows positive devel- ORDER BACKLOG opments in net sales as a result of a highly The level of orders received increased by active construction market. The increase in 12 percent in 2012 to SEK 12,729 (11,350). net sales combined with improved produc- Due to an intense production of new orders REPORT DIRECTORS’ OF BOARD tivity affected the operating result positively. the outgoing order backlog only grew Net sales also increased in Operation marginally and at the end of 2012 it was and maintenance. Nonetheless operating SEK 8,610 million (8,526). profit was lower than last year. This is pri- Collaboration marily a result of a weak start at the begin- creates effective COMMENTS ON THE YEAR ning of the year and tougher competition solutions During the year work on analyzing the from other players which led to low prices tendering process and project management on the market. Peab is expanding Fagernes terminal for intensified. Procedures in connection with Net sales and operating profit in Infra- Northland Resources in the Port of Narvik in tenders on new projects have been over- Norway. The work includes building a pier, a structure and heavy construction were heated loading facility for freight cars, a hauled to ensure that calculations are lower than last year. This business is storage building and facilities for loading correct and that there is enough suitable dependent on political decisions which ships. Under the Cliffton brand Peab is also competence and other resources available means net sales can vary from year to year. trucking the iron ore mined in Kaunisvaara to for the project. In other words, we will not the reloading terminal in Pitkäjärvi outside take on projects that do not have the There were relatively few new projects in Svappavaara. There the iron ore is reloaded 2012. The lower level of activity affected onto freight trains and transported on the prerequisites to generate a satisfactory operating profit negatively which was also Malmbanan railroad to Narvik. profit. charged by write-downs in some ongoing Our collaboration with Northland shows Operation and maintenance is an how three cooperating business areas under projects. important area for Peab. In order to clarify the leadership of Peab Civil Engineering can The business area’s operating profit for build up an infrastructure in a cost-efficient and draw attention to Peab’s offer in the the year increased from SEK 390 million to and environmentally friendly way that is bene- area of road maintenance and showcase SEK 440 million and the operating margin ficial to the community. that we are an important player, a new increased to 3.5 percent (3.4). national brand, Peab Operation & Mainte- This means that the trend of higher net nance, was created in 2012. We make and sales and improved margins in the past few tivity in the entire business area. Another take care of parks, places to swim, play- years continues. Two forces behind this are contributing factor is the broad range of ser- grounds, locks and harbors, keep traffic the positive developments in the market vices the business area offers which makes flowing, keep places clean, clear snow and our systematic work to improve produc- it possible to shift resources to the sectors away and sweep sand all over Sweden.

Business area Civil Engineering in summary

MARKET SEGMENTS Operation and maintenance: Operation and OTHER IMPORTANT PLAYERS Local market: Does landscaping and pipe- maintenance of national and municipal Local market: Local companies and big lines, foundation work and builds different highway and street networks, parks, outdoor companies with local presence such as kinds of facilities. property caretaking as well as the operation of Skanska, Svevia and NCC. sewage and water supply networks. Infrastructure and heavy construction: Infrastructure and heavy construction: Builds roads, railroads, bridges, tunnels Skanska, NCC, Veidekke, Lemminkäinen and ports as well as industrial plants. CUSTOMERS and Svevia. In addition, international, mostly Local market: Customers are usually municipal- European, companies such as Strabag and Net sales per business segment, 2012 ities, local businesses and energy companies. Hochtief are involved in certain market Infrastructure and Infrastructure and heavy construction: segments. heavy construction 29% (32%) Customers are usually national traffic adminis- Operation and maintenance: Skanska, NCC, trations, municipalities and industrials. The Svevia, Mesta and others. mining industry, with companies like LKAB, Local Northland Resources and Boliden, is another market 51% large customer group. (48%) Operation and maintenance: Customers are Operations and usually national traffic administrations, munici- maintenance 20% (20%) palities and property owners. PEAB ANNUAL REPORT 2012 21 BUSINESS AREA CIVIL ENGINEERING

Roger Linnér, Business Area Manager Civil Engineering Strategic priorities • Continued work on improving profitability through stricter cost control, regular reviews of our offer and better tendering procedures. • Higher personal responsibility for making sure regulations for a safe work environment, which also has a direct effect on profitability, are followed. • Better cost efficiency through specialization in selected market segments and tailored, effective support functions. • Greater flexibility to better handle variations in demand. BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

The Norwegian operations have developed THE MARKET AND FORECASTS well during the year. The Swedish business Civil engineering construction in Sweden model has been implemented and the has gone against the trend in building exchange of experience has intensified. construction and developed well in 2012. Among other things, Swedish production This is due to private and government management has worked in Norway. Two investments in developing and maintaining important projects during the year have public infrastructure. been the extension of the harbor in Narvik Civil engineering for Civil engineering construction in Norway and major road construction outside Trond- developed favorably in 2012 as well. heim for Statens Vegesen. growing transportation In Finland the total volume of civil engi- Capacity in Finland has been adjusted For years now necessary railroad extensions neering in 2012 was unchanged compared have not been made even though the advantages to current demand. Implementation of the of this form of transportation are many, particu- to the previous year. Swedish model has also been prioritized. larly in regards to sustainability, and therefore Roger Linnér who has worked at Peab investments in railroads are expected to pick up. Peab has been commissioned by the Swedish since 1996, mostly in Civil Engineering, Transport Administration to build a new double- took over after Tore Nilsson, who was track stretch of the railroad between Motala and previously Business Area Manager, on Mjölby that will augment the capacity and punctu- ality of trains. This includes building bridges and 1 January 2013. developing the station area.

Important projects and events Key ratios 2012 2011 Handling iron and granite as well as Net sales, MSEK 12,643 11,554 goods at LKAB’s mine Gruvberget in Operating profit, MSEK 440 390 Svappavaara will continue until September Operating margin, % 3.5 3.4 2014. Orders received, MSEK 12,729 11,350 Construction of a test facility for traffic Order backlog on 31 December, MSEK 8,610 8,526 safety at AstaZero outside Borås. Number of employees 3,553 3,664 Several major highway projects were underway during the year: Two stages of E6 in Bohuslän as well as Österleden in Development 2012 vs 2011 Net sales Operating profit Helsingborg, E4 Sundsvall, Väg 22 Local market between Rolsberga and Fogdarp in Skåne and the first major road project in Norway Operations and maintenance - E6 outside Trondheim. Infrastructure and heavy construction Several contracts were signed with the Swedish Transport Administration for the Net sales Operating profit and margin operation and maintenance of roads in some fifty different operational areas in MSEK MSEK % the middle of Sweden. 15,000 500 5

Peab Operation & Maintenance, a new 12,000 400 4 national brand, was created to clarify and draw attention to Peab’s offer in the area 9,000 300 3 of road maintenance. 6,000 200 2 Peab was commissioned by the Swedish Transport Administration in February 2013 3,000 100 1 to extend the railroad line Barkaby–Kallhäll 0 0 0 which is part of the Mälarbanan project. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Operating proﬁt Operating margin, %

22 PEAB ANNUAL REPORT 2012 BUSINESS AREA INDUSTRY BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

Business area Industry – a strategic resource for the construction and civil engineering industries

We deliver material, equipment and services to external customers and internally to Peab’s construction and civil engineering projects. Thanks to our well known brands, industrialized operations, strategically placed gravel and rock quarries and production units we are leaders on the Nordic market.

PEAB ANNUAL REPORT 2012 23 BUSINESS AREA INDUSTRY High capacity utilization

NET SALES AND RESULTS developing of new quarries. During the year business area last year. This led to a reor- Net sales in 2012 increased from SEK eight new quarries were opened. ganization of operations so that the entire 10,404 million to SEK 10,723 million, which Significant investments in better business area can take advantage of our is an increase of 3 percent. After adjust- machines such as new tower cranes and collective competence. ments for acquired and divested units the machines for the mining industry continued The construction and civil engineering increase was 2 percent. in 2012. We also invested in a new con- sectors are being standardized and ration- Operating profit for the year increased crete factory and several mobile factories. alized to reduce costs and environmental from SEK 693 million to SEK 788 million Several companies were acquired in impact. Industrialization of the business and the operating margin increased thereby 2011 and they were integrated into the area’s processes therefore continued. to 7.3 percent (6.7). Sustainability work is essential to

BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD Due to the high level of activity in the attracting both customers and new employ- construction and civil engineering markets, ees. A program to minimize energy con- net sales increased in almost all the busi- sumption and reduce environmental impact ness segments, with the exception of and thereby make operations more cost- Asphalt and Gravel and rock. Gravel and efficient was launched in 2012. rock was hit by fewer infrastructure projects More foreign players on the Norwegian and Asphalt struggled on a market weighed market do not just mean more competition. down by overcapacity, which had a nega- They also give rise to new business oppor- tive effect on Peab’s volumes. tunities. During the year we began develop- Thanks to high capacity utilization ing comprehensive solutions for interna- results were higher in all the business seg- tional companies using Industry’s entire ments except Concrete compared to last New gravel and rock range of products and services. We have year. The lower result in Concrete is due to quarries open up for bolstered our expertise in certain technol- a shrinking market where greater competi- ogy during the year in order to meet cus- tion led to lower prices. expansion tomers’ demands in areas like solidification, During the year several new quarries, among additives and binders as well as logistics. COMMENTS ON THE YEAR them one in Hästeryd in Alingsås, were opened. Opening a new quarry is always Having gravel and rock quarries close to preceded by years of work that includes THE MARKET growth regions is important for the business extensive environmental testing. Strategically The outlook for business area Industry is area’s continued expansion, which is why placed quarries next to growth regions is the pretty much the same as for the construc- we continue to prioritize the planning and foundation of local expansion. tion and civil engineering sectors.

. Business area Industry in Summary

MARKET SEGMENT Foundation work: Foundation work, pile Transport Administration, Norwegian Public Asphalt: Manufactures and lays asphalt. production, pile-driving, tonguing, drill plinths. Roads Administration, municipalities, heavy Concrete: Works with ready-mixed concrete Rentals: Offers a broad range of rentals of industry and other construction companies. A and pumping concrete. construction machines, work wagons, scaf- number of international companies that want Gravel and rock: Production and delivery of folding, construction cranes, mobile cranes, to start up in the Nordic region have also ballast material as well as raw materials for crane trucks, construction elevators, tempo- shown interest in our products and services. asphalt and concrete production. rary installations, electrical material and Big mining companies like LKAB and North- land Resources as well as smaller mines in Transportation and machines: Rental and generators as well as provides services in supply of transportation and machine services. energy technology. the middle of Sweden are also customers. A new unit was started up in Transportation Industrial construction: Delivers prefabri- and machines: Mining which supplies the cated concrete elements OTHER IMPORTANT PLAYERS mining industry with material and services in Asphalt, Gravel and rock: NCC, Skanska, connection with establishing and running MAJOR CUSTOMERS Svevia, Lemminkäinen, Veidekke. Some of our major customers are the Swedish mines. Concrete: Betongindustri, Färdigbetong Skanska, Sydsten, Finja and Strängbetong. Net sales per business segment, 2012 Share of net sales, 2012 Foundation work: Per Aarsleff, Hercules, Skanska and Kynningsrud. Industrial construction, 4% (3%) Transportation and machines: BDX and Rental, Asphalt, 16% (16%) 25% (26%) DSV along with a number of local contractors Internal sales External and trucking companies. 38% (37%) sales Foundation 62% (63%) Rentals: Cramo, Ramirent, Skanska Maskin, work, 8% (7%) BDX, Havator, Nordic Crane Group, ED Knutsen Maskin and a number of smaller, Concrete, local players. 13% (13%)

Transport and Gravel and rock, machines, 27% (27%) 7% (8%)

24 PEAB ANNUAL REPORT 2012 BUSINESS AREA INDUSTRY

Karl-Gunnar Karlsson, Business Area Manager Industry Strategic priorities • Increase cost-efficiency by regularly adjusting our business and production structure to the current demand. • Continue to establish strategically placed gravel and rock quarries. • Greater investment in technological development in selected areas. • Stronger focus on sustainability work. • More concept sales with a wider range. BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

The past few years’ strong housing IMPORTANT BRANDS construction in Sweden, Norway and To a certain extent Peab has built its industrial operations on the acquisition of competent Finland declined in all three countries in companies with strong, local brands that complement the Peab brand, for example: 2012. The market in other building construction weakened in Sweden in 2012 while there was some growth in Norway. Civil engineering investments increased throughout the Nordic region in 2012 due to significant needs in energy and communications. The mining industry also developed well with the start up of several new mines.

. Important projects and events in 2012 Net sales

Start up of a new unit, Mining, in Transportation and machines to meet the demand MSEK in the mining industry. 12,000 Several new rock and gravel quarries were opened, among them in Växjö and 10,000 Södertälje. A new concrete factory was established in Helsinki and several mobile concrete 8,000 factories were started, among them one in Narvik. 6,000

4,000 Key ratios 2012 2011 2,000 Net sales, MSEK 10,723 10,404 0 Operating profit, MSEK 788 693 2008 2009 2010 2011 2012 Operating margin, % 7.3 6.7

Number of employees 2,944 2,953 Operating profit and margin

MSEK % 1,200 12 Development 2012 vs 2011 Net sales Operating profit 1,000 10 Asphalt 800 8 Concrete 600 6 Gravel and rock 400 4 Transport and machines 200 2 Foundation work 0 0 Rental 2008 2009 2010 2011 2012 Operating proﬁt Operating margin, % Industrial construction

PEAB ANNUAL REPORT 2012 25 BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

Business area Property Development – develops commercial property

Property Development is responsible for the Group’s acquisitions, development and sales of commercial property and rentals in the Nordic region.

MEDIA EVOLUTION CITY 26 PEAB ANNUAL REPORT 2012 Varvsstaden, Malmö BUSINESS AREA PROPERTY DEVELOPMENT An active first year

NET SALES AND RESULTS MARKET AND OUTLOOK Net sales and operating profit from opera- We believe the demand for property devel- tions is derived from running our wholly opment projects in the Nordic region from owned property, shares in the profit from local and international players will continue partly owned companies and joint ventures to be good. However, a necessary prereq- as well as capital gains from the divestiture uisite for being able to make these deals is of completed property and shares in partly that potential buyers will be able to get owned companies and joint ventures. The financing. unit is also charged by costs for running the business area. During 2012 net sales were SEK 345 REPORT DIRECTORS’ OF BOARD million (189) and operating profit amounted to SEK 51 million (31). This includes capital gains of SEK 76 million (-) from property sales and other income of SEK 42 million (-). During the year profit has been charged with negative profit contribution in development projects from partly owned companies Point Hyllie, as well as a higher level of costs for organ- Malmö’s latest izing a new business area. city district under development COMMENTS ON THE YEAR This first year was intense. Not only did we Point Hyllie is one of the areas being devel- establish the business area we also traded oped by Peab’s Property Development. Its close proximity to Malmö C, Kastrup Airport in shares and made a number of property and central Copenhagen has made Point deals. Some development projects were Hyllie a favorite with customers who want divested, among them two finished proper- office space. Peab has already built two office ties and four housing projects under buildings there and they are fully rented. A Tomas Anderson, Business Area third office building and a hotel are now in the production to Willhem AB, four housing Manager Property Development works. The hotel will be run by one of Peab’s projects to Domestica and an office building Nordic customers, Nordic Choice Hotels. in Hyllie. The divestitures freed resources They are developing this 18 floor building Strategic priorities for new project investments. together with Peab. The hotel, which is 45,000 Some of the acquisitions made during m2, will be the third stage of Peab’s ongoing • Extending our Nordic presence. investment in Point Hyllie. the year were Vasallen with 135,000 m2 • Continued investments in projects in office space in the middle of Sweden and new areas as well as existing ones like Point Hyllie, Arenastaden, Varvstaden the military area Almnäs outside Södertälje. and Ulriksdal. We also invested in the Inspi project, which Catena and Brinova were divested. • Continued divestments of finished is developing a health center in Malmö, and Property Development has together projects and other assets in order to a hotel in Malmö which Nordic Choice with Peab’s other business areas devel- free resources for new development Hotels will rent and run. oped various projects within the domain of projects. During the year the listed holdings in their respective businesses.

Business area Property Development in Summary

BUSINESS SEGMENTS SIGNIFICANT PARTNERS AND Listed holdings: Listed holdings during the OTHER PLAYERS year have primarily consisted of shares in These are renters, investors, municipalities, Catena and Brinova. Both holdings were and leading Nordic real estate companies. divested in 2012. Partly owned companies: Peab’s holding in Tornet that manages rentals and Centur that manages and develops retailing property. Also included are companies connected to Arenas- taden in Solna and some other holdings. Key ratios 2012 2011 Wholly owned companies and projects: Net sales, MSEK 345 189 A large number of holdings that include Operating profit, MSEK 51 31 everything from land for development where Operating margin, % 14.8 16.4 zoning is underway to finished projects ready Number of employees 81 – to be sold.

PEAB ANNUAL REPORT 2012 27 RISK AND RISK MANAGEMENT Risk and risk management

MATERIAL RISKS AND UNCERTAINTY FACTORS linked to changes in debt and interest rate levels. There are also Peab’s business is exposed both to operational and financial risks. risks connected to financial reporting. Since Peab uses the The affects of risks on Peab’s results and position depend on how percentage of completion method in most of our ongoing projects well we handle daily operations in the company. In addition, as a erroneous project forecasts mean that reporting and follow-ups construction and civil engineering company Peab is vulnerable to will be misleading. A number of balance items are valued based on external risks such as developments in the economy and changes estimations and assessments and this value can be affected by, for in circumstances due to amendments in laws and regulations, and example, the current market and customers` preferences. other political decisions. For further information on financial risks, see note 37. The parent company is indirectly affected by the risks described in this section. SENSITIVITY ANALYSIS BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD Peab’s operations are sensitive to changes in, among other things, RISK MANAGEMENT volumes and margins. The sensitivity analysis below describes how The management of operational risks is a continuous process pre-tax profit is affected by changes in some of the important Group considering the large number of projects the company has in variables. different phases of started up, carried out and completed. Opera- tional risks are managed in the line organization in the business areas. Financial risks are associated with capital tied up in the Sensitivity analysis company and its capital requirements primarily in the form of Calculation Pre-tax interest risks and refinancing risks. Financial risks are handled on MSEK basis Change profit effect Group level. The table below describes the most important risks Operative and how they are handled. Volume (operating margin constant) 47,000 +/– 10% +/– 108 OPERATIONAL RISKS Operating margin Peab’s business is largely project related. Operational risks in (volume constant) 2.3% +/– 1% +/– 470 day-to-day business are connected to tenders where erroneous Material and calculations can lead to incorrect tenders, which can then lead to subcontractors 24,000 +/– 1% –/+ 240 losses in projects. With margins so low in the industry it can take several profitable projects to compensate for the losses in one Financial project. Peab minimizes this risk through a well developed process Net debt and system support for following up projects. (interest rate constant) 6,470 +/– 10% – /+ 19 Price risks primarily refer to prices for input goods moving in a Average effective int.rate1) direction that was not foreseen. Other operative risks are wrong (net debt constant) 2.9% +/– 1% –/+ 39 product and method choices and access to competent personnel. 1) The calculation is based on the assumption that SEK 3,884 million of the total net debt of SEK 6,470 million, has a fixed interest period shorter than one year and is FINANCIAL RISKS AND RISKS CONNECTED thereby affected almost at once by a change in market interest rates. TO FINANCIAL REPORTING The Group is exposed to financial risks, such as interest rate risks

Risk Risk management Tenders Structured risk assessment is crucial in the construction business to ensure Erroneous tenders and cost estimates can lead to significant losses in that risks are identified, correctly priced in tenders submitted and that the projects as well as the loss of an order. right resources are available. Percentage of completion A prerequisite for percentage of completion is reliable forecasting. Well Peab applies percentage of completion in most of its projects. Miscalculation developed procedures and system support for the monitoring and fore of percentage of completion can result in external accounting being seriously casting of each project is crucial to limiting risks of erroneous percentage misleading or that strategic decisions are based on incorrect information. of completion. Price risks Methods of limiting price risks include rationalising construction processes For Peab, price risks refer to aspects like unforeseen price hikes for materials, and purchasing procedures and always endeavouring to procure materials subcontractors and wages. Risks vary according to the type of contract. Fixed and subcontractors back in the tender stage or as early as possible in the price contracts also involve the risk of incorrect tender calculations and the process. risk that price hikes deteriorate profits because the company cannot demand compensation from the customer for them. Circumstantial risk Customers’ and suppliers’ credit worthiness is assessed and handled in the The uncertainty in the world around us and the financial markets can cause businesses. A prerequisite for contract project initiation is that the client financing difficulties for customers, suppliers and subcontractors. This can in has found financing for the project. turn lead to postponement of planned investments as well as difficulties in meeting existing obligations.

28 PEAB ANNUAL REPORT 2012 SUSTAINABILITY Sustainability

Peab’s vision of being a Nordic Community Builder means we have an obligation to contribute to a sustainable society. As community builders Peab can and wants to influence the society we and future generations will live in.

UN’S GLOBAL COMPACT AND GRI CODE OF CONDUCT In the autumn of 2012 Peab signed the Peab’s Code of Conduct is the overriding BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD Global Compact, a UN initiative for respon- steering document for our sustainability sible business which includes principles work. This document is integrated into our concerning human rights, labor rights company policy and is based on the princi- issues, the environment and anticorruption. ples in the UN’s Global Compact. The Code More detailed information concerning of Conduct clarifies how Peab’s employees Peab’s work on sustainable development is should behave towards each other and given in Peab’s sustainability report which suppliers and it is also included in contract follows the international guidelines laid texts to ensure that suppliers and contrac- down by the GRI (Global Reporting Initia- tors will behave in the same manner. In tive). The report is available on Peab’s addition to the Code of Conduct there are a website www.peab.com. number of underlying policies and guide- 95 percent recycling lines, such as Peab’s ethical guidelines, STRATEGIC SUSTAINABILITY WORK at Seinäjoki which are fundamental to Peab’s sustaina- Peab started up a sustainability council in bility work. The Itikanmäki district is an important devel- 2012 and gave it responsibility for producing opment project for the expansive city Seinä- goals and action plans for Peab’s continued joki in Finland. Peab is tearing down the old SUSTAINABILITY DIALOGUES sustainability work. The council handles the factory buildings located just a kilometer from AND OVERRIDING PRIORITIES Group’s day-to-day sustainability issues as the city center and creating new blocks Peab has a long tradition of cooperating well as prepares matters that need to be complete with housing, offices, restaurants with stakeholders in different forums in and other cultural spots. This is the largest order to strengthen relationships and be decided on by the executive management. demolition project in Peab’s history and we Peab endeavors to integrate sustainability will recycle enough demolition waste to fill a receptive to demands and expectations. In into every part of our business. Responsi- thousand trucks. A mere five percent of the 2012 Peab initiated stakeholder dialogues bility and authority has been delegated out waste will be sent to a waste disposal site. All focused on sustainability. The eight over- in all some 17,000 tons of cement and 13,000 to our line managements and they are riding priorities in Peab’s work on sustaina- tons of brick waste will be collected from the supported by special competence in the site. Some of the waste will be crushed on bility produced were based on internal and environment, ethics and social matters on location and reused to build courtyard walls external prioritizations in sustainability. different levels in the organization as well and noise barriers. Sustainability matters will be com- as a number of steering and supportive pletely integrated into operations. documents. Peab’s management system, ments in the Swedish Work Environment comprising quality, the work environment Authority’s Provisions, AFS 2001:1 as well Peab must be considered an ethical and the environment meets the require- as in ISO 9001 and ISO 14000. and transparent company.

Number of accidents per million man hours Sick leave

Number % 60 2012 6 2012 50 2011 5 2011 2010 2010 40 4 30 3 20 2 10 1 0 0 Sweden Norway Finland Sweden Norway Finland

The statistics from Finland as of 2012 are for all business areas, which explains the higher figure for 2012. In 2010 and 2011 the statistics were based only on construction operations. The comparable figure for 2012 for construction operations is 29.

PEAB ANNUAL REPORT 2012 29 SUSTAINABILITY BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD

Peab must have competent and clear system for reporting and registering acci- declined in Norway and Finland but risen leadership which is responsible for dents and incidents called OTR (Accident slightly in Sweden compared to 2011. sustainability. and incident registration). Norway uses a Equal treatment similar Web-based system called RUH Employees must have good knowledge Peab believes all people have the right to (Registration of Undesired Events) and in of, and a strong commitment to, sus- be themselves without being discriminated. Finland incidents and accidents are tainability matters. We have an equal treatment plan for our reported directly to the head of work envi- Peab has a vision of zero workplace employees, students, trainees, temporary ronment. During the year two mortal acci- accidents. personnel and job applicants to hinder dents occurred. Peab’s crisis organization, discrimination and support equal opportuni- Peab will take responsibility for sustain- trained by MSB, the Swedish Civil Contin- ties for all, regardless of gender, age, ability aspects in the value chain. gencies Agency, is called in when serious sexual preference or ethnicity. Peab has Peab will continually reduce its environ- accidents occur. zero tolerance of harassment or degrading mental impact by choosing the right The work environment is prioritized at treatment. If such a situation arises we take material, more efficient use of Peab. In 2012 we invested heavily to further forceful measures in line with our equal resources and minimizing waste and improve the work environment in the com- treatment plan to stop it. emissions. pany through communication programs to increase risk awareness on our worksites Peab will support and contribute to Employee questionnaire and revision of our safety regulations. developing the communities we are The Handshake is Peab’s personnel ques- Executive management and management active in. tionnaire and it is distributed every other groups in the business areas visited many year in the form of an anonymous question- workplaces in order to emphasis the impor- OUR EMPLOYEES naire. The purpose of the Handshake is to tance of a good work environment. Preventive work at our workplaces identify areas where Peab can improve by Peab has a vision of zero workplace acci- Health promoting work finding out how our employees view their dents. In order to prevent accidents Peab Peab is constantly working on being the work environment, leadership and Peab as provides safety equipment, quality assured best working place in the Nordic region. an employer. The last questionnaire was work methods and training in this area. The Our goal is to have the healthiest and most sent out in 2011 and 87 percent answered, statistics for workplace accidents are based content employees in the industry and we which was a 1 percent increase since it on accidents that lead to at least 8 hours work systematically with prevention and was carried out in 2009. The Handshake absence. The Finnish application of sick rehabilitation and promotional health care. showed that, for instance, 77 percent of our leave rules in relation to occupational inju- In Sweden human resource consultants employees would happily recommend ries differs from that in Sweden and Norway have been hired to support and develop a others to work at Peab and 63 percent which explains the higher figures in the workplace perspective that promotes believe the environment is taken into diagram on page 29. health. All our employees are invited to consideration in their workplace, which is All incidents and accidents are followed partake in activities in the healthcare organ- an increase of three percent from the up. In Sweden this is done on a Web-based ization in their country. Sick leave has measurement in 2009.

30 PEAB ANNUAL REPORT 2012 SUSTAINABILITY

Profit-sharing The natural material left over after blasting struction is completed. We are constantly Peab has always endeavored to get our and excavations is used as filler in areas working on reducing energy consumption employees to understand the mechanics of nearby. and developing energy solutions. In 2012 a profitable company and share in Peab’s Peab tries to minimize the amount of we launched the development project success. With this in mind we created a waste that ends up at the waste disposal Energy Smart Production which is run profit-sharing foundation. Another purpose site through optimal resource use, recycling jointly by the business areas Civil Engineer- of the foundation is to stimulate our and sorting more. All hazardous waste is ing and Industry. The purpose of the project employees’ interest in staying with the handled correctly. The Swedish business is to chart the initiatives that generate company and to create a better financial has measured sorting levels for quite some results in practice, such as energy saving situation for our personnel after they retire. time and the sorting level rose from 63 start-ups and efficient fuel use.

percent in 2010 to 68 percent in 2011 and Environmentally certified THE ENVIRONMENTAL AND ENERGY 71 percent in 2012 in Peab’s Swedish con- construction Important environmental aspects struction operations. The trend to environmentally certify build- Peab continually identifies and analyses In our endeavor to minimize the use of ings has exploded in recent years. There is the environmental aspects of our business environmentally and health hazardous also an environmental certification system from a life cycle perspective. substances Peab uses trade systems and for entire city districts and civil engineering REPORT DIRECTORS’ OF BOARD Environmental aspects are the basis for tools. BASTA and Byggvarubedömningen projects but the application of these has not Peab’s continuous work on minimizing our (BVB) are used in Sweden. In Finland we come as far as the system for buildings. environmental impact. Five important envi- use TUKES safety data sheet and in Nor- Peab decided some time ago that all our ronmental aspects have been targeted for way we use the CoBuilder/BASS system. own property developments would be envi- business areas Construction and Civil Engi- Peab works on several fronts to reduce ronmentally certified. Peab has also been neering: use of resources and material, transportation and CO2 emissions. In 2012 active in developing environmental certifi- waste, environmentally and health hazard- Peab was one of the first companies in cation systems and the national adaptation ous substances, transportation and energy. Sweden to use electric vans. All our of them. Peab has contributed with two of Important environmental aspects in the employees are encouraged to minimize the four construction projects being used to business area Industry are identified in travel by choosing video, telephone or web test the Swedish manual of BREEAM, and each company since the companies run conferences over meeting in person. In a civil engineering project to test CEEQUAL different kinds of operations. Sweden we have even introduced eco- (a certification system for land and civil Our work with resource and material nomic incentives for employees to choose engineering projects). consumption means choosing products company cars with lower environmental Operations required to have with as little environmental impact as possi- impact through a vehicle environment fee. permits or submit reports ble and reducing the total amount of mate- Energy efficiency is in focus in our core Peab runs operations required to have rial we use. For example, we recycle con- operations but also in the houses and build- permits and submit reports in Sweden and siderable amounts of excavated material. ings we turn over to customers after con- Finland. They are gravel and rock quarries,

CO2 emissions Energy sources purchased directly in Sweden and Norway CO2 emissions in Sweden and Norway, Liters MWh Giga Joules 148,416 tons (112,867) 2012 2011 2012 2011 2012 2011 Electricity, 32 tons E85, 47 tons District heating, 651 tons Oil 11,532,882 9,485,336 108,795 89,480 391,663 322,127

Oil, 33,445 tons Gasoline 848,405 1,226,986 7,971 11,528 28,696 41,502 Diesel 16,834,813 18,189,061 165,140 178,424 594,504 642,328 (Cars) Gasoline, Diesel 25,066,604 12,248,128 245,889 120,147 885,201 432,530 1,927 tons (Bulk) E85 136,371 283,565 902 1,875 3,246 6,750 Total 54,419,075 41,433,076 528,697 401,454 1,903,310 1,445,237

Diesel, 112,314 tons

Energy sources purchased indirectly Sweden Norway Finland All countries 2012 2011 2012 2011 2012 2011 2012 2011 Electricity MWh 118,623 122,663 1,840 2,620 10,750 11,600 131,213 136,883 Giga Joules 427,043 441,587 6,623 9,433 38,700 41,760 472,367 492,780 District heating MWh 21,432 29,489 489 134 5,450 8,500 27,371 38,123 Giga Joules 77,155 106,161 1,759 482 1,962 30,600 98,536 137,243

PEAB ANNUAL REPORT 2012 31 SUSTAINABILITY

water operations, transportion of waste and promoting community contributions, societal hazardous waste, asphalting units, cement development, belonging and team building. manufacturing and ballast operations. Another example of Peab’s commit- Renewal and supplementation of permits is ment to the community is Peab’s role as the continuous. The operations required to principle partner of Mentor, a non-profit have permits represent about 2 (3) percent organization that works to prevent violence of Group net sales in 2012 and operations and drug abuse among the young. Peab that must submit reports represent about also works with AUF – Arbeidernes Ung- 6 (6) percent. domsfylking – to build the new Utöya. In Södertälje our subsidiary Telge-Peab gives COMMITMENT TO THE COMMUNITY the unemployed, people receiving employ- Peab’s ambition is to be an active and ment aid and refugees a chance to receive responsible player in society and contribute an education, training and work while build- with engagement, experience and resources ing housing. Dredged material is in situations that promote sustainable BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD development. Activities aimed at young BUSINESS ETHICS AND solidified and reused people are particularly close to our hearts. ANTI-CORRUPTION WORK in Gävle Harbor The Peab School was opened in Goth- Peab’s ethical guidelines summarize how Peab worked together with Gävle Hamn AB employees should behave in the company, enburg in 2012.This is the fifth Peab School in a partnering project to extend Gävle in Sweden where theory is mixed with prac- society and in business. The steering Harbor. In recent years the harbor has tice in the secondary school Construction document with our ethical guidelines is experienced considerable growth and and Civil Engineering program. There are regularly updated and adopted by execu- therefore needs new piers, larger and tive management to make sure it is current broader port space and greater capacity to currently Peab schools in Ängelholm, further expand. Dredged material is polluted Malmö, Gothenburg, Solna and Upplands- and written in a language everyone can with heavy metals and must be transported Väsby with some 440 students in total. All understand. The most recent update was to land to be encapsulated (solidified). In the schools are quality certified as a Trade in August 2012. Peab’s specially built construction – ProSol 2010 – binders are mixed with the dredged Recommended School by BYN (the Swed- As part of our work against corruption material so that the pollutants are solidified and transgressions against Peab’s ethical ish Construction Industry Training Board) and the material is stabilized. The material except for the new school in Gothenburg guidelines we started the educational pro- can then be reused in the harbor extension. and an application will be sent in soon for gram The Ethics Round in 2009. Since then This alternative is cheaper and entails less that school as well. Read more about the over 3,500 white-collar workers in Sweden, environmental impact than hauling the material to a waste disposal site. Peab school at page 33. Norway and Finland have gone through the A new sponsorship policy was adopted program which teaches Peab’s stance on in 2012 in which sponsoring focuses on ethics, the law and what is right. The course is tailored to Peab’s needs and contains follow an international standard. Peab’s situations that illustrate different ethical project Mandolin received the housing dilemmas that can occur in operations. trade’s highest SCI rating in 2012. Peab’s ethical council answers ques- A high level of productivity in Peab is tions concerning ethics from our opera- important to internal and external stake- tions, internally and externally communi- holders since it saves money and cates Peab’s stance on ethical issues and resources. In order to raise productivity prepares and decides on matters where Peab is moving towards a more standard- laws or ethical guidelines have been trans- ized construction model based on tried and gressed. At Peab, if an employee does not true methods and knowledge-sharing. PGS want to or cannot bring up a matter with (Peab General System) develops high their closet supervisor they may turn to their quality pre-fabricated buildings at competi- supervisor’s boss. They can also contact tive prices. In BIM modeling 3D models are the ethical council though a form where connected to the tools used in construction they can submit their views anonymously or processes, which also ensures they will be Tervapääskynen openly. efficient. in Helsinki wins Several pilot projects aimed at identify- LASTING FINANCIAL ing the best way to utilize logistical possibil- Sustainable Stone VALUE CREATION ities have been carried out. In 2012 a Building Award Peab’s operations affect many different Group logistic project which was run aspects of economic development in together with four selected suppliers was Tervapääskynen in Helsinki won the society such as contributing to innovation, Sustainable Stone Building Award 2012. concluded. The purpose of the project was technical development and creative solu- The prize is awarded annually to people and to find effective logistic solutions in projec- companies that have participated in projects tions that are good for the entire industry. tion, calculation, purchasing and produc- built with bricks and cement on site. Cost-efficient and sustainable construction. Peab intends to continue to work with Tervapääskynen comprises 65 apartments tion is achieved through long-term plan- rationalizing our logistics and will succes- as well as cellars and attics. One of the chal- ning, good relations with customers and an lenges was that the frame of the building sively implement logistic solutions in work and its façade had different shapes. Another economic lifecycle perspective. In order to procedures and processes. was to merge the old and new façade styles ensure good relations with customers Peab into a functioning unity. According to the jury measures customer satisfaction in both Tervapääskynen was surprising but yet housing and business customers via SCI harmonious architecturally. surveys (Satisfied Customer Index) which

32 PEAB ANNUAL REPORT 2012 Participation, security and confidence at the Peab School

With a wave of retirements on the horizon Peab felt the need to ensure access to future employees. This factor, together with a deep concern for elementary students that do not have all the grades they need to go forward, was the foundation of the Peab School, launched in 2006.

The Peab School offers the secondary school Construction and Civil Engineering program and is based on a pedagogic where focus is just as much on students becoming secure, aware community members as becoming skilled workers. The key to this is participation, security and confidence. Theory is mixed with

practice at Peab’s own worksites and around 70 percent of students who get their diploma have begun to REPORT DIRECTORS’ OF BOARD work at Peab.

The Peab School’s pedagogic methods are based on four cornerstones:

Actively working with everyday values – Ethics and values are cemented in a person’s teens. We educate both community members and community builders and we take this responsibility seriously.

An education in reality – All possible professional know-how that can be taught at a workplace will be taught there - in real life situations.

Comprehensive view and context – All the subjects are connected together and integrated into projects.

The individual in focus – Goals and demands are the same for everybody but the way to reach and meet them is different depending on circumstances. Everyone is challenged to achieve their full potential.

This innovative pedagogic has generated good results. The majority of students leave the school with a job and a complete set of secondary school grades – even the students that came with almost nothing from elementary school.

There are currently Peab schools in Ängelholm, Malmö, Gothenburg, Solna and Upplands-Väsby with some 450 students in total. All the schools are quality certified as a Trade Recommended School by BYN (the Swedish Construction Industry Training Board) except for the new school in Gothenburg and an application will be sent in soon for that school as well.

PEAB ANNUAL REPORT 2012 33 OTHER INFORMATION AND APPROPRIATION OF PROFITS

RESEARCH AND DEVELOPMENT Göransson is acting Business Area Con- Peab’s R&D is an important part of our struction Manager. day-to-day production, in part to be able to Peab’s business areas Construction, offer our customers improved products and Civil Engineering and Industry are carrying services, and in part to boost Peab’s out several major projects for Northland competitiveness. The individual business Resources connected to the iron ore mine areas run their own R&D. in Kaunisvaara outside Pajala. As a result One of the development projects that of the information released on 8 February has been in progress awhile in business 2013 by Northland Resources regarding area Construction is PGS (Peab General the business reconstruction, Peab has System). PGS develops and supplies a 30 percent lower declared that outstanding accounts receiv- flexible system of pre-fab building compo- 2 able to companies in the Northland group nents that are assembled to make up a CO emissions with amount in total to around SEK 160 million, complete apartment building. PGS entails low-temperated of which around SEK 70 million are industrial building all the way from design to included in the reconstruction. No write- final assembly. The first PGS concept build- asphalt downs are deemed necessary. During the BOARD OF DIRECTORS’ REPORT DIRECTORS’ OF BOARD ings were constructed in 2009 and today Over the last ten years Peab Asphalt has reconstruction period Peab will receive reg- PGS houses are constructed from southern worked intensively to develop asphalt with a ular payments for work performed. Peab Sweden up to the Mälardalen region in the lower environmental impact and which is has a close dialogue with the company middle of Sweden. energy efficient to manufacture. Achieving this regarding its financial development. has made it possible to improve the quality of In certain cases business areas Indus- the finished pavement, lower working temper- try and Civil Engineering develop products atures even more and increase recycling. THE PEAB SHARE together. One example is the Vinnova Lowering the paving temperature by around At the end of the year Peab’s share capital financed innovation project; “Sustainable 30 degrees reduces energy consumption by amounted to SEK 1,583,866,056 divided production of fine grained products from 20 percent, CO2 emissions by 30 percent and among a total of 296,049,730 shares, rock”. The object of the project is to substi- flue gases and dust particles by all of 65 resulting in a nominal value of SEK 5.35 percent. This reduces the environmental tute natural sand with industrially produced per share. Of the shares, 34,319,957 are impact and improves the work environment for A shares with ten votes per share, and fine grained products from rock. The project our employees. is expected to be concluded in September 261,729,773 are B shares with one vote 2014. Several innovation projects are also per share. All shares carry equal rights to participation in the company’s assets, run by the Swedish Construction Industry been working in Peab since 1996 primarily profits and dividends. There are no Development Fund (SBUF), among them in Civil Engineering. restrictions in the articles of association non-destructive asphalt, cement and stabi- Peab has redeemed its futures for the concerning transferring shares or votes at lized soil testing. purchase of 940,000 shares in Lemminkäi- the AGM. nen Oyj, which is equivalent to 4.78 percent On 31 December 2012 there were of the company’s shares and votes. This IMPORTANT EVENTS IN 2012 approximately 31,800 shareholders in means Peab directly owns 2,080,225 Peab was divided into four business areas Peab. Mats Paulsson with companies rep- shares in Lemminkäinen Oyj, corresponding on 1 January 2012; Construction, Civil Engi- resents the largest single shareholder with to 10.59 percent of both shares and votes. neering, Industry and Property Develop- 15.9 percent of the capital and 22.3 percent Peab has issued bonds amounting to ment. In keeping with this, executive of the votes. Erik Paulsson with family and SEK 1,000 million in the MTN program, management has been expanded to include companies was previously the second which was established in February 2012. the managers of each business area. largest shareholder with 8.1 percent of the The maturity of the bonds varies from 1.5 Tina Hermansson Berg has been capital and 22.2 percent of the votes. years up to a term of 4 years. appointed Head of Human Resources. She During 2012 via his company Backahill Erik Peab has divested its holdings in took up her new position on 1 June 2012 Paulsson sold most of his shares in Peab. Brinova Fastigheter AB and Catena AB. and became a member of executive man- All his A shares were sold to Sara Karlsson agement. Tina Hermansson Berg was pre- and Svante Paulsson via companies and IMPORTANT EVENTS viously Executive Vice President of Human the B shares have been purchased by, AFTER YEAR-END Resources & Corporate Communication at among others, Mats Paulsson via compa- In March 2013 CEO and President Jan Mölnlycke Health Care AB. nies. The joint ownership related to the Johansson chose to step down and Jesper Niclas Winkvist has been appointed company’s founders Mats and Erik Pauls- Head of Strategy and Business Support Göransson was appointed CEO and acting son with families and companies amounted and a member of executive management. President. The Board has initiated the to 29 percent of the capital and 65 percent He will keep his responsibilities for M&A, process of finding a new ordinary CEO. of the votes at year-end. and he will also take on the overall respon- In connection with the revision of the The company has no knowledge of any sibility for the Group’s strategy work. Niclas Norwegian operations, and in order to agreements between shareholders that can was previously CFO for Peab Industri. increase focus on improved profitability in result in restriction of the right to transfer Mats Johansson, Executive Vice Business Area Construction, there has shares. President responsible for Business Ethics been a division of responsibility. Deputy In 2007, Peab established a profit- and Safety and Security, has left his posi- CEO Tore Hallersbo is, as of 1 January sharing foundation. In accordance with its tion in accordance with his pension agree- 2013, responsible for the further develop- investment policy the assets of the founda- ment. Responsibility for these issues has tion must be placed mainly in Peab shares. ment of divisions Norway, Finland and Spe- been handed over to Head of HR Tina As of 31 December 2012 the foundation cial Projects. With its specialist expertise Hermansson Berg. owns 7,803,432 B shares in Peab. Division Special Projects will support oper- Roger Linnér was appointed the new The articles of association specify that Business Area Manager Civil Engineering ations in Norway throughout the entire pro- the Board members are elected at the and he is a member of Peab’s executive duction process. As of 8 April 2013 Roger AGM. The articles of association do not management as of 1 January 2013. Roger Linnér is the operative manager for the include any stipulation regarding the dis- succeeds Tore Nilsson as Peab’s Business Swedish Construction divisions and busi- missal of Board members or changes to the Area Manager Civil Engineering. Roger has ness area staff. As of March 2013 Jesper articles of association.

34 PEAB ANNUAL REPORT 2012 OTHER INFORMATION AND APPROPRIATION OF PROFITS

The AGM 2007 resolved to issue and offer will develop in 2013. The level of housing contract but they will turn up slightly again convertibles to all employees. The converti- production is currently too low relative to in 2014. The total volume of civil engineer- bles matured on 30 November 2012. No the need for housing. This leads to a ing investments in 2012 remained conversion to shares has been made and growing housing shortage, which can unchanged and this holds true for the the loan of SEK 598 million was repaid in its hamper development on the labor market forecast for 2013. entirety. and, in turn, even affect economic growth. Renovation and maintenance have his- A large part of the investments made over torically been much more resistant to finan- HOLDINGS OF OWN SHARES the next few years will in all probability be in cial crises and shifts in the economy. The At the beginning of 2012 Peab’s holding of maintenance and repair. The greatest forecast for 2013 is no exception and this own shares was 1,086,984 B shares which decline is expected in the industrial sector area is expected to grow in all three Nordic corresponds to 0.4 percent of the total in 2013. Civil Engineering developed very countries. number of shares. In order to offset any well in 2012. The volume of investments is, dilution effects from the convertible however, expected to level off in 2013 and PARENT COMPANY programs, to use in the financing of acquisi- end up on the same level as in 2012. The activities of the parent company tions etc. as well as adjust the Group’s Norwegian building construction start- consist of executive management and capital structure, Peab’s Annual General ups have had stable growth in 2012, shared Group functions. Meeting on 15 May 2012 resolved to although not at the same high rate as previ- Net sales in 2012 amounted to SEK 96 REPORT DIRECTORS’ OF BOARD authorize the Board to, during the period ous years and a hefty negative turn is million (99) and primarily consisted of inter- until the next AGM, acquire shares so that expected in building construction start-ups nal Group services. Operating profit 2012 the company would have at most 10 in 2013. In 2012 civil engineering devel- amounted to SEK -54 million (-46). Shares percent of the total shares in Peab. No own oped very well and this is expected to in subsidiaries have been written down dur- shares were purchased nor divested during continue in 2013. ing the year by SEK 346 million (122), of 2012. See note 30. Building construction start-ups in Fin- which SEK 294 million refer to shares in land were slightly down from the previous Peab AS. The result after net financial year. The assessment for 2013 is that build- items was SEK -227 million (1,573). CORPORATE GOVERNANCE ing construction volumes will continue to For a detailed description of the work of the Board of Directors, corporate governance and system for internal control, see page Proposed appropriation of profits 86, Corporate Governance Report. The following amounts in SEK are at the disposal of the Annual General Meeting: Share premium reserve 2,308,208,948 REMUNERATION FOR SENIOR OFFICERS Special reserve 55,000,000 The Board will propose to the Annual Fair value reserve –120,624,942 General Meeting on 14 may 2013 that the Profit brought forward 3,319,001,557 remuneration policy remain unchanged. Profit for the year –226,843,827 For more information about adopted guide- Total 5,334,741,736 lines regarding the salaries and other remunerations to the Chief Executive Officer and other members of executive management, The Board of Directors propose the following appropriation of disposable profits and non-restricted reserves: see note 9. Dividend, 296,049,730 shares at SEK 1.60 per share 473,679,568

1) ANTICIPATED FUTURE Carried forward 4,861,062,168 DEVELOPMENT Total 5,334,741,736 Total building construction contracted in 1) Of which to share premium reserve 2,308,208,948 Sweden during 2012 compared to 2011. Of which to special reserve 55,000,000 There is a large degree of uncertainty about how the construction and property markets Of which to a fair value reserve –120,624,942

PEAB ANNUAL REPORT 2012 35 A Nordic Community Builder: A new mining project in the north

Kaunisvaara-gruvan, Pajala, October 2012: The picture shows Sweden’s newest mining project in Kaunisvaara where Northland Resources began test deliveries of iron ore in October 2012. Peab has paved the way for the coming operations, built a concentrator, offices and housing. Peab will even be responsible for transportion from the mine in Kaunisvarra to the shipping port in Narvik. This is a Nordic project that enlists Peab’s entire expertise and know-how in all our business areas. This is one example of Peab’s role as a Nordic Community Builder. For more information about Northland Resources, see page 34 under “Important events after the balance sheet date”. Read more about our mining projects at www.peab.se/kaunisvaara.

KAUNISVAARA GRUVAN Pajala

36 PEAB ANNUAL REPORT 2012 INCOME STATEMENT AND REPORT ON COMPREHENSIVE INCOME FOR THE GROUP

Income statement for the Group

MSEK Note 2012 2011 Net sales 3,4 46,840 43,539 Production costs –43,541 –39,842 Gross profit 3,299 3,697 Sales and administrative expenses –2,378 –2,265 Profit from participation in associated companies and joint ventures 18,19 18 24 FINANCIAL REPORTS FINANCIAL Other operating income 6 128 58 Other operating costs 7 –12 –9 Operating profit 4,8,9,10,11,38 1,055 1,505

Financial income 239 158 Financial expenses –443 –466 Profit from participation in joint ventures 19 –38 –2 Net finance 12 –242 –310

Pre-tax profit 813 1,195

Tax 14 –88 –252 Profit for the year 725 943

Profit for the year attributable to: Shareholders in parent company 729 943 Non-controlling interests –4 0 Profit for the year 725 943

Profit per share 15 before dilution, SEK 2.47 3.26 after dilution, SEK 2.47 3.26

Statements of comprehensive income for the group

MSEK Note 2012 2011 Profit for the year 725 943

Other comprehensive income Translation difference for the year when translating foreign operations –12 0 Profit/loss from exchange risk hedging in foreign operations –2 1 Translation differences transferred to profit for the year – –1 Change for the year in fair value of financial assets available-for-sale –87 –17 Change for the year in fair value of cash flow hedges 34 –204 Change in fair value of cashflow hedges carried over to profit for the year –17 – Share in associated companies' other comprehensive income –1 –2 Tax attributable to components in other comprehensive income 14 15 16 Other comprehensive income for the year –70 –207

Total comprehensive income for the year 655 736

Total comprehensive income for the year attributable to: Shareholders in parent company 659 736 Non-controlling interests –4 0 Total comprehensive income for the year 655 736

PEAB ANNUAL REPORT 2012 37 BALANCE SHEET FOR THE GROUP

MSEK Note 2012 2011 Assets Intangible assets 16 2,126 2,231 Tangible assets 17 4,443 4,580 Participation in associated companies 18 – 88 Participation in joint ventures 19 1,279 1,235 Other securities held as fixed assets 22,36,37 442 885

FINANCIAL REPORTS FINANCIAL Interest-bearing long-term receivables 21,36,37 1,157 1,314 Deferred tax recoverables 14 231 158 Other long-term receivables 23 108 359 Total fixed assets 9,786 10,850

Project and development property 24 6,239 5,180 Inventories 25 465 416 Work-in-progress 26 1,106 1,689 Accounts receivable 27 7,095 6,535 Interest-bearing current receivables 21,36,37 567 237 Tax assets 105 75 Recognized but not invoiced income 28 5,240 4,580 Prepaid expenses and accrued income 823 352 Other current receivables 23,37 208 465 Current holdings 36,37 10 9 Liquid funds 36,37 429 961 Total current assets 22,287 20,499 Total assets 32,073 31,349

Equity 30 Share capital 1,584 1,584 Other contributed capital 2,576 2,576 Reserves –152 –82 Profit brought forward included profit for the year 3,976 3,869 Equity attributable to shareholders in parent company 7,984 7,947 Non-controlling interests 1 0 Total equity 7,985 7,947

Liabilities Interest-bearing long-term liabilities 31,36,37 6,772 7,399 Other long-term liabilities 34,36 142 110 Deferred tax liabilities 14 444 376 Provisions for pensions 32,36 7 13 Other provisions 33 394 310 Total long-term liabilities 7,759 8,208

Interest-bearing current liabilities 31,36,37 1,854 1,735 Accounts payable 36,37 4,534 4,508 Income tax liabilities 114 289 Invoiced income not yet recognized 28 5,246 4,269 Accrued expenses and deferred income 3,176 2,641 Other current liabilities 34,36 1,232 1,619 Provisions 33 173 133 Total current liabilities 16,329 15,194 Total liabilities 24,088 23,402 Total equity and liabilities 32,073 31,349 See note 40 for information about the Group’s pledged assets and contingent liabilities.

38 PEAB ANNUAL REPORT 2012 REPORT ON CHANGES IN GROUP EQUITY

Equity attributable to shareholders in parent company Profit brought Other forward contri- Transla- Fair including Non- Share buted tion value Hedging profit for controlling Total MSEK capital capital reserve reserve reserve the year Total interests equity Opening balance equity 2011-01-01 1,584 2,576 39 – 86 3,388 7,673 0 7,673

Total comprehensive income for the year FINANCIAL REPORTS FINANCIAL Profit for the year 943 943 0 943 Other comprehensive income for the year –1 –17 –189 –207 –207 Total comprehensive income for the year – – –1 –17 –189 943 736 0 736

Transactions with Group owners Dividends –746 –746 –746 Acquisition of own shares –16 –16 –16 Sales of own shares 300 300 300 Total transactions with Group owners – – – – – –462 –462 0 –462 Closing balance equity 2011-12-31 1,584 2,576 38 –17 –103 3,869 7,947 0 7,947

Opening balance equity 2012–01–01 1,584 2,576 38 –17 –103 3,869 7,947 0 7,947

Total comprehensive income for the year Profit for the year 729 729 –4 725 Other comprehensive income for the year –10 –87 27 –70 –70 Total comprehensive income for the year – – –10 –87 27 729 659 –4 655

Transactions with Group owners Dividends –620 –620 –620 Acquisition of non-controlling interests, previous controlling interests –2 –2 –2 Changes in participation in subsidiaries, new issue 5 5 Total transactions with Group owners – – – – – –622 –622 5 –617 Closing balance equity 2012-12-31 1,584 2,576 28 –104 –76 3,976 7,984 1 7,985

PEAB ANNUAL REPORT 2012 39 CASH FLOW STATEMENT FOR THE GROUP

MSEK Note 2012 2011

Current operations 44 Pre-tax profit 813 1,195 Adjustments for non-cash items 739 1,021 Income tax paid –286 –24 Cash flow from current operations before working capital changes 1,266 2,192 FINANCIAL REPORTS FINANCIAL Cash flow from changes in working capital Increase (–)/Decrease (+) project and development properties –989 –682 Increase (–)/Decrease (+) inventories 526 –413 Increase (–)/Decrease (+) current receivables –1,344 –1,721 Increase (+)/Decrease (–) current liabilities 1,044 684 Cash flow from changes in working capital –763 –2,132

Cash flow from current operations 503 60

Investment operations Acquisition of subsidiaries, net effect on liquid funds –406 –329 Sale of subsidiaries, net effect on liquid funds 135 77 Acquisition of intangible fixed assets – –1 Acquisition of tangible fixed assets –758 –529 Sale of tangible fixed assets 106 244 Acquisition of financial assets –615 –818 Sale of financial assets 2,009 225 Cash flow from investment operations 471 –1,131

Cash flow before financing 974 –1,071

Financing operations Repurchases of own shares – –16 Withdrawal of own shares – 300 Repayment of convertible promissory notes -598 – Raised bonds 997 998 Change of loans –1,272 691 Dividend distributed –620 –746 Cash flow from financing operations –1,493 1,227

Cash flow for the year –519 156 Cash at the beginning of the year 970 810 Exchange rate differences in cash –12 4 Cash at year-end 439 970

40 PEAB ANNUAL REPORT 2012 INCOME STATEMENT AND REPORT ON COMPREHENSIVE INCOME FOR THE PARENT COMPANY

MSEK Note 2012 2011 Net sales 3 96 99 Administrative expenses 9,10 –150 –145 Operating profit –54 –46

Result from financial investments 12 Result from participations in Group companies –88 1,862 FINANCIAL REPORTS FINANCIAL Result from participations in associated companies 27 6 Result from securities and receivables recognized as fixed assets 97 –23 Interest expenses and similar loss items –209 –226 Profit after financial items –227 1,573

Appropriations 13 0 –156 Pre–tax profit –227 1,417

Tax 14 0 –125 Profit for the year –227 1,292

Report on comprehensive income for the parent company MSEK 2012 2011 Profit for the year –227 1,292

Other comprehensive income Change for the year in fair value of financial assets available–for–sale –99 –21 Other comprehensive income for the year –99 –21 Total comprehensive income for the year –326 1,271

PEAB ANNUAL REPORT 2012 41 BALANCE SHEET FOR THE PARENT COMPANY

MSEK Note 2012 2011 Assets Fixed assets Tangible assets Machinery and equipment 17 2 2 Total tangible assets 2 2

Financial assets

FINANCIAL REPORTS FINANCIAL Participations in Group companies 42 12,547 11,525 Participations in associated companies 18 – 133 Receivables from Group companies 20,36 1,586 1,447 Interest-bearing long-term receivables 21,36,37 105 – Other securities held as fixed assets 22,36 277 709 Other long-term receivables 23,36 1 1 Total financial assets 14,516 13,815

Total fixed assets 14,518 13,817

Current assets Current receivables Receivables from Group companies 36 46 37 Other current receivables 23 2 – Prepaid expenses and accrued income 29 5 7 Total current receivables 53 44

Liquid funds 36 3 2 Total current assets 56 46 Total assets 14,574 13,863

Equity and liabilities Equity 30 Restricted equity Share capital 1,584 1,584 Statutory reserve 300 300

Non-restricted equity Share premium reserve 2,308 2,308 Special reserve 55 55 Fair value reserve –120 –21 Profit brought forward 3,319 2,646 Profit for the year –227 1,292 Total equity 7,219 8,164

Untaxed reserves 43 156 156

Long-term liabilities Liabilities to Group companies 36 7,122 4,794 Convertible promissory note 36,37 – 590 Deferred tax liabilities 14 – 2 Total long-term liabilities 7,122 5,386

Current liabilities Accounts payable 36 55 11 Liabilities to Group companies 36 2 2 Tax liabilities 1 120 Other current liabilities 34,36 3 6 Accrued expenses and deferred income 35 16 18 Total current liabilities 77 157 Total equity and liabilities 14,574 13,863

Pledged assets and contingent liabilities for parent company Pledged assets – – Contingent liabilities 40 20,760 18,195

42 PEAB ANNUAL REPORT 2012 REPORT ON CHANGES IN THE PARENT COMPANY’S EQUITY

Restricted capital Non-restricted capital

Share Profit/loss Profit Share Statutory premium Special Fair value brought for the Total MSEK capital reserve reserve reserve reserve forward year equity Opening balance equity, 1 January 2011 1,584 300 2,308 55 – 1,498 1,610 7,355

Profit for the year 1,292 1,292 Other comprehensive income for the year –21 –21

Total comprehensive income for the year – – – – –21 – 1,292 1,271 REPORTS FINANCIAL

Allocation of profits 1,610 –1,610 0 Cash dividend –746 –746 Acquisition of own shares –16 –16 Withdrawal of own shares 300 300 Closing balance equity, 31 December 2011 1,584 300 2,308 55 –21 2,646 1,292 8,164

Opening balance equity, 1 January 2012 1,584 300 2,308 55 –21 2,646 1,292 8,164

Profit for the year –227 –227 Other comprehensive income for the year –99 –99 Total comprehensive income for the year – – – – –99 – –227 –326

Allocation of profits 1,292 –1,292 0 Cash dividend –619 –619 Closing balance equity, 31 December 2012 1,584 300 2,308 55 –120 3,319 –227 7,219

PEAB ANNUAL REPORT 2012 43 CASH FLOW STATEMENT FOR THE PARENT COMPANY

MSEK Note 2012 2011

Current operations 44 Pre-tax profit –227 1,573 Adjustments for non-cash items 73 –1,638 Income tax paid –122 –8 Cash flow from current operations before working capital changes –276 –73 FINANCIAL REPORTS FINANCIAL

Cash flow from changes in working capital Increase (–) /Decrease (+) current receivables –8 –10 Increase (+) /Decrease (–) current liabilities 40 –5 Cash flow from changes in working capital 32 –15

Cash flow from current operations –244 –88

Investment operations Acquisition of financial assets –679 – Sale of financial assets 1,583 1,596 Cash flow from investment operations 904 1,596

Cash flow before financing 660 1,508

Financing operations Repurchase of own shares – –16 Withdrawal of own shares – 300 Repayment of convertible promissory notes -598 – Change of loans 558 –1,047 Dividend distributed –619 –746 Cash flow from financing operations –659 –1,509

Cash flow for the year 1 –1 Cash at the beginning of the year 2 3 Cash at year-end 3 2

44 PEAB ANNUAL REPORT 2012 CONTENTS NOTES

Note 1 Accounting principles 46 NOTES Note 2 Important estimates and assessments 53 Note 3 Income distributed by type 53 Note 4 Operating segment 54 Note 5 Business combinations 55 Note 6 Other operating income 56 Note 7 Other operating costs 56 Note 8 Government grants 56 Note 9 Employees, personnel costs and remuneration to senior officers 56 Note 10 Fees and cost remunerations to auditors 58 Note 11 Operating costs divided by type 58 Note 12 Net financial income/expense 59 Note 13 Appropriations 59 Note 14 Taxes 59 Note 15 Earnings per share 61 Note 16 Intangible fixed assets 62 Note 17 Tangible fixed assets 63 Note 18 Participation in associated companies 64 Note 19 Participation in joint ventures 65 Note 20 Receivables from Group companies 66 Note 21 Interest-bearing receivables 66 Note 22 Other long-term securities holdings 66 Note 23 Other receivables 66 Note 24 Project and development properties 66 Note 25 Inventories 66 Note 26 Work-in-progress 66 Note 27 Accounts receivable 66 Note 28 Construction contracts 67 Note 29 Prepaid expenses and accrued income 67 Note 30 Equity 67 Note 31 Interest-bearing liabilities 68 Note 32 Pensions 69 Note 33 Provisions 69 Note 34 Other liabilities 70 Note 35 Accrued expenses and deferred income 70 Note 36 Valuation of financial assets and liabilities at fair value 71 Note 37 Financial risks and financial policy 73 Note 38 Operational lease contracts 76 Note 39 Investment obligations 76 Note 40 Pledged assets, contingent liabilities and contingent assets 76 Note 41 Related parties 77 Note 42 Group companies 78 Note 43 Untaxed reserves 81 Note 44 Cash flow statement 81 Note 45 Events after the balance sheet day 82 Note 46 Information on parent company 82

PEAB ANNUAL REPORT 2012 45 NOTES Note1 Accounting principles SEK –14 million after taking deferred tax into consideration. The translation effect on the Group result is expected to amount to SEK 1 mil- 1 Compliance with standards and legislation lion and SEK 7 million on the comprehensive result for 2012. Equity The consolidated accounts have been drawn up in accordance with at the end of the year is expected to be affected by SEK –6 million 2 the International Financial Reporting Standards (IFRS) issued by the taking deferred tax into consideration. 3 International Accounting Standards Board (IASB) and interpretations The amended IAS 1 Presentation of financial statements means from IFRS Interpretations Committee (IFRIC) which have been adopt- that items in other comprehensive income must be separated into two 4 ed by EU. In addition, the Swedish Financial Reporting Board recom- categories and presented in other comprehensive income based on whether the items will at a later date be reported as income or not. 5 mendation RFR 1 Supplementary accounting rules for groups has also been applied. The amendment, now approved by the EU, will be applied from the 6 The accounting principles given below for the Group have been financial year 2013 and retroactively. Group presentations are affected applied consequently for all the periods presented in the consolidated by the fact that translation differences will belong to the category that 7 financial reports, if not otherwise stated. The Group’s accounting prin- can be reversed whereas actuary gains and losses on defined benefit 8 ciples have been applied consequently for reports and the consolida- pension plans (see the above) will belong to the category that can tion of the parent company, subsidiaries, associated companies and never be reversed to profit/loss. Items that can be reclassified are, for 9 joint ventures in the consolidated financial reports. example, translation differences and profit/loss on cash flow hedges. Items that are not reclassified are, for example, actuary gains and 10 The parent company applies the same accounting principles as the Group except in the cases stated below in the section on the parent losses. 11 company accounting principles. IFRS 13 Fair value measurement will be applied onward from the The Annual Report and the consolidated accounts have been financial year 2013 and is only expected to affect Group disclosures. 12 approved of by the Board and CEO for publication on 3 April 2013. IFRS 13 is approved for application by the EU. 13 The consolidated income statement and balance sheet and the parent Amendments to IAS 32 Financial instruments: Classification regard- company’s income statement and balance sheet will be presented for ing the rules for when financial assets and financial liabilities may be 14 adoption by the AGM on 14 May 2013. offset. The amendments to IAS 32 are approved for application by the 15 EU and will be applied from the financial year 2014 and retroactively. Valuation basis applied for preparation of the parent New disclosure requirements in IFRS 7 Financial instruments: Dis- 16 company and Group financial reports closures regarding the offset of financial assets and financial liabilities will be applied from the financial year 2013. Disclosures will also be 17 Assets and liabilities are reported at historical acquisition values except for certain financial assets and liabilities which are assessed made retroactively. The amendments to IFRS 7 are approved for appli- 18 at fair value. Financial assets and liabilities valued at fair value consist cation by the EU. of derivatives and shares and holdings that are not reported as sub- IFRS 10 Consolidated financial statements, IFRS 11Joint arrange- 19 sidaries/associated companies or joint ventures. ments and IFRS 12 Disclosure of interests in other entities deal with 20 when entities must be consolidated, how joint ventures and joint oper- Functional currency and reporting currency ations should be presented as well as which disclosures must be 21 The parent company’s functional currency is the Swedish crown, made regarding these investments. At the same time the consequen- tial amendments in IAS 27 called Separate financial reports will be 22 which is also the currency in which the accounts of the parent company and the Group are reported. Thus the financial reports are pre- applied. IAS 28 has been revised as well and is called Investments in 23 sented in Swedish crowns. Unless otherwise indicated all amounts are associates and joint ventures. When EU approved the above stand- rounded off to the nearest million. ards obligatory application was put off until 2014 with a requirement 24 for retroactive application. The new standards and amendments 25 Estimates and assessments in the financial reports above are not expected to affect Group accounting other than in Preparing the financial reports in accordance with the IFRSs requires certain disclosures. 26 that the company management make estimates and assessments and IFRS 9 Financial instruments, will replace IAS 39 Financial instruments: Recognition and measurement as of 2015. IASB has pub- 27 make assumptions which affect the application of the accounting policies and the recognized amounts with regard to assets, liabilities, rev- lished the first two of at least three parts which will together form IFRS 28 enues and costs. The actual outcome may vary from these estimates 9. The first two parts deal with classification and valuation of financial and assessments. assets and financial liabilities. IFRS 9 has not yet been approved for 29 Estimates and assumptions are regularly reviewed. Changes to esti- application by the EU and approval is not expected until EU can take 30 mates are entered in the accounts of the period the change is made a position on all three parts of IFRS 9. Peab has therefore chosen to and, where applicable, in future periods. wait before making a consequence analysis. 31 Assessments made by the company management when applying Other new or amended IFRSs together with interpretations are not expected to have any effect on Group accounting. 32 the IFRSs which have a significant impact on the financial reports and assessments made, which could result in substantial adjustments to 33 following years’ financial reports, are described in more detail in note 2. Operating segments An operating segment is an entity in the Group that engages in busi- 34 Changed accounting principles ness activities from which it may earn revenues and incur expenses 35 Group accounting principles are the same as in the Annual Reports and for which discrete financial information is available. An operating 2011. The amendments of IFRSs applied from 2012 have not had any segment’s results are reviewed by the company’s highest decision 36 significant effect on Group accounting. maker in order to assess its performance and to be able to allocate 37 resources to the segment. Segment information is provided for the New IFRSs and interpretations that have not yet been applied Group only. 38 The Group has chosen not to prematurely apply new standards or 39 interpretations when preparing these financial reports and plans no Classification etc. premature application in the coming years. Fixed assets, long-term liabilities principally consist of amounts which 40 Amended IAS 19 Employee benefits eliminates the current rules may be expected to be recovered or defrayed later than 12 months that make it possible to even out actuary gains and losses over time. after the balance sheet date. Current assets and current liabilities 41 Instead actuary gains and losses will be recognized in the compre- principally consist of amounts which may be expected to be recov- 42 hensive income statements as they occur. The yield on plan assets in ered or defrayed within 12 months of the balance sheet date. the result is recognized for an amount calculated on the discount rate 43 used when calculating employee benefit obligations. The difference Consolidation principles 44 between the real and calculated yield of plan assets is recognized in Subsidiaries the other comprehensive income statement. The amendments will be Subsidiaries are entities over which Peab AB exercises a controlling 45 applied from the financial year 2013 and retroactively. EU has influence. The term controlling influence refers to a direct or indirect approved the application of the amendments. Amendments in IAS 19 right to mould the company’s financial and operating strategies in 46 are expected to affect Group equity per 1 January 2012 by around order to obtain financial benefits. When assessing whether a con-

46 PEAB ANNUAL REPORT 2012 trolling interest is involved, potential share voting rights which can be solidated profit for the year as Participations in profit of joint ventures. NOTES exercised immediately or can be converted must be taken into Only equity earned after the acquisition is recognized in the consoli- account. dated equity. Dividends received form joint ventures reduce the 1 Business combinations are recognized using the purchase account- accounting value of the investment. ing method, under which acquisitions of subsidiaries are regarded as Upon acquisition, any differences between the acquisition value of 2 transactions through which the Group indirectly acquires the assets the holding and the owner company’s participation in the net fair val- 3 of the subsidiary and takes over its liabilities. The consolidated acqui- ue of the joint venture’s identifiable assets, liabilities and contingent sition value is calculated in an acquisition analysis in conjunction with liabilities is recognized primarily according to the same principles as 4 the acquisition. The analysis establishes the acquisition value of the for subsidiaries with the difference that acquisitions costs are activat- participations or the business, the fair value on acquisition date of the ed in the acquisition value of the shares and that changes in owner- 5 acquired identifiable assets and the liabilities taken over. ship while maintaining joint control are reported as separate partial 6 From 1 January goodwill in business combinations is calculated as acquisitions respectively partial disposals of shares proportional to the sum of transferred reimbursement, any non-controlling interest the groupwise value. 7 and the fair value of previously acquired shares (in step acquisitions) The equity method is applied until the time the joint controlling influ- 8 less the fair value of the subsidiary’s identifiable assets and overtaken ence ceases. liabilities. Where the difference is negative this is recognized directly 9 in profit/loss for the year. Goodwill from acquisitions before 2010 is Associated companies calculated as the sum of transferred reimbursement and acquisition Associated companies are those companies in which the Group has a 10 expenses less the fair value of acquired identifiable net assets from significant but not controlling influence over operating and financial 11 each acquired share after which the acquisition value of goodwill control usually through shareholdings of between 20 and 50 percent. from all the separately acquired shares is aggregated. Acquisition From the date on which the significant influence is assumed, partici- 12 costs for business combinations from 2010 on are expensed but are pations in affiliated companies are recognized in consolidated 13 included in goodwill in acquisitions made before that date. accounts in accordance with the equity method. For a description of Conditional consideration from 2010 on is measured at fair value at the equity method, see Joint Ventures above. 14 the time of acquisition and subsequent changes in fair value are rec- 15 ognized in profit and loss as they occur. For acquisitions before 2010 Transactions which must be eliminated upon consolidation conditional consideration is only reported when it is possible to calcu- Intra-group receivables and liabilities, revenues or costs or unrealised 16 late a probable and reliable amount and any adjustments thereafter gains or losses stemming from intra-group transactions between are recognized in goodwill. Group companies are eliminated completely when preparing the 17 In subsidiaries acquired from 2010 on where there are owners with consolidated accounts. 18 a non-controlling interest the Group reports net assets attributable to Unrealised gains arising from transactions with joint ventures are owners of non-controlling interests either as the fair value of all net eliminated to the extent these refer to the Group’s ownership partici- 19 assets excluding goodwill or the fair value of all assets including pation in the company. Unrealised losses are eliminated in the same 20 goodwill. The choice is made individually for each acquisition. way as unrealised gains but only to the extent there is no write-down Increased ownership in companies in stages is reported as step requirement. 21 acquisitions. In step acquisitions from 2010 on that lead to control the previously acquired shares are remeasured based on the fair value of Foreign currency 22 the latest acquired share and the resulting profit or loss is recognized Transactions in foreign currency 23 in the income statement. Step acquisitions before 2010 are reported Transactions in foreign currency are converted to the functional cur- as an aggregation of the acquisition-date values and any remeasure- rency at the exchange rate on the transaction date. The functional cur- 24 ment when control is achieved is recognized in the remeasurement rency is the currency of the primary financial surroundings where the 25 reserve in equity. company operates. Monetary assets and liabilities in foreign currency When control has been achieved the change in ownership is report- are converted to the functional currency at the exchange rate apply- 26 ed as a transfer in equity between the parent company and the ing on the balance sheet day. Exchange rate differences arising dur- non-controlling interests, without remeasuring the subsidiary’s net ing translation are recognized in profit/loss for the year. Non-monetary 27 assets. In changes in ownership while maintaining control prior to assets and liabilities which are recognized at historical acquisition 28 2010 the difference between payment and the acquisition’s share of value are converted at the exchange rate applying at the time of the booked identifiable assets were recognized in goodwill. transaction. Non-monetary assets reported at fair value are recalculat- 29 From 1 January 2010 partial disposal of an investment in a subsidi- ed to the functional currency at the exchange rate current at the time 30 ary that results in loss of control triggers remeasurement of the resid- of valuation at fair value. ual holding to fair value. Any difference between fair value and carry- 31 ing amount is recognized in profit or loss for changes in ownership. The financial reports of foreign businesses 32 No such remeasurement was performed on residual holdings that Assets and liabilities in foreign entities including goodwill and other formed a joint venture or associated company prior to 2010. Group deficit and surplus values are converted from the foreign com- 33 When acquisitions of subsidiaries involve the acquisition of net pany’s functional currency to the Group’s reporting currency, Swedish assets which do not comprise operations, the acquisition cost of each crowns, at the exchange rate applying on balance sheet day. Earnings 34 identifiable asset and liability is divided based on its relative fair value and costs in a foreign entity are converted to Swedish crowns at an 35 at the time of acquisition. average rate approximating to the rates applying on the respective The financial reports of subsidiaries are recognized in the consoli- transaction dates. Translation differences arising when converting the 36 dated accounts from the date the controlling influence arises and currency of foreign companies are recognized in other comprehen- 37 remain in the consolidated report until the date it ceases. sive income and are accumulated in a separate component in equity as a translation reserve. 38 Joint ventures 39 For accounting purposes, joint ventures are entities where the Group Net investment in a foreign company through co-operation agreements with one or more partners exercises Translation differences arising from the translation of a foreign net 40 a joint controlling influence over operational and financial manage- investment are recognized via other comprehensive income in the ment. From the date on which the joint controlling influence is translation reserve in equity. Translation differences also comprise 41 assumed, participations in joint ventures are recognized in consolidat- exchange rate differences from loans which form a part of the parent 42 ed accounts in accordance with the equity method, whereby the value company’s investment in foreign subsidiaries (so-called extended of participations in joint ventures recognized in the consolidated investment). When a foreign subsidiary is divested, the accumulated 43 translation differences attributable to the company are reclassified accounts corresponds to the Group’s participation in the equity of 44 joint ventures and Group goodwill and other possible residual Group from equity to profit/loss for the year. deficit and surplus values. The Group’s participations in joint ventures Accumulated translation differences attributable to foreign compa- 45 after tax and minorities adjusted for depreciation, write-downs or dis- nies are presented as a separate capital class and contain translation persal of acquired deficit and surplus values are recognized in con- differences accumulated from 1 January 2004 onwards. Accumulated 46

PEAB ANNUAL REPORT 2012 47 NOTES translation differences before 1 January 2004 are divided into other interest rate for the debt accounted in the respective period is recog- own capital classes and are not recognized separately. nized in each accounting period. Contingent rents are carried as 1 expenses in the periods it occurs. Income 2 Construction contracts Financial income and expenses 3 Current construction contracts are reported in accordance with IAS Financial income and expenses consist of interest income on cash at 11, Construction contracts. Under IAS 11 income and expenses must bank, receivables and interest-bearing securities, interest expenses 4 be recognized as the contract is completed. This principle is known on loans, dividend revenues, realised and unrealised gains and losses 5 as the percentage of completion method. Income and expenses are on financial investments and derivatives used within the financial recognized in profit and loss in proportion to the percentage comple- business. 6 tion of the contract. The percentage completion of the contract is Interest income on receivables and interest expenses on liabilities determined based on the defrayed project costs compared to the are calculated in accordance with the effective interest rate method. 7 project costs corresponding to the project income for the whole The effective interest rate is the discount rate for estimated future 8 contract. The application of the percentage of completion method is payments and disbursements during the expected life of a financial prerequisite on it being possible to calculate the outcome in a reliable instrument to the financial asset’s or liability’s net book value. Interest 9 manner. In case of contracts where the outcome cannot be reliably income and interest expenses include accrued transaction costs and 10 calculated, income is calculated in proportion to the costs defrayed. possible discounts, premiums and other differences between the Feared losses are charged to income as soon as they become known. original value of the receivable or liability and the amount received 11 In the balance sheet, construction contracts are entered project by when it falls due. project either as Recognized but non-invoiced income under current Dividend income is recognized when the right to payment is estab- 12 assets or as Invoiced income not yet recognized under current liabili- lished. 13 ties. Those projects with higher accumulated income than invoiced are The results of sales of financial investments are recognized when recognized as assets whilst those projects which have been invoiced the risks and benefits associated with ownership of the instrument 14 in excess of the accumulated income are recognized as liabilities. are materially transferred to the buyer and the Group no longer has 15 Swedish tenant-owned housing projects are reported according to control of the instrument. IAS 11, Construction contracts, which entails applying the percentage Interest costs are charged to income during the period to which 16 of completion method as the project progresses based on expenses they refer except to the extent that they are included in that asset’s that have occurred in relationship to the project’s calculated total cost. acquisition value. An asset for which interest can be included in the 17 A contract is drawn up which regulates the sales of land and con- acquisition price is an asset which must necessarily require consider- 18 struction of the property with the tenant-owned association, which is able time to prepare for the intended use or sale. Interest costs are an independent legal entity. capitalised according to IAS 23, Borrowing costs. Interest rate swaps 19 are used to hedge against interest risks connected to Group loans. Own developed housing projects for sale 20 Interest rate swaps are valued at fair value in the balance sheet. The Since Peab has housing projects in Finland and Norway as well as our coupon rate part is recognized on a current basis in profit/loss for the 21 own home developments in Sweden Peab does not have an external year as a correction of the interest expense. Unrealised changes in independent other party at the start of a project, which means that the fair value of rate swaps are recognized in other comprehensive 22 the projects are reported according to IAS 18 Revenue and income income and are part of the hedging provision until the hedged item 23 from these projects is recognized first when the projects are handed affects profit/loss for the year and as long as the criteria for hedge over to the buyer. Expenses are recognized as work-in-progress in the reporting is met. 24 balance sheet. On account invoices to customers are reported as non-interest-bearing liabilities, and loans to finance housing projects Taxes 25 are reported as interest-bearing liabilities. Income tax consists of current tax and deferred tax. Income tax is 26 Other income recognized in profit/loss for the year except when the underlying 27 Other income excluding construction contracts is recognized in transaction is recognized in equity, in which case the relevant tax is accordance with IAS 18 Revenue. Income from the sale of goods is recognized in other comprehensive income or equity. 28 recognized in profit/loss for the year when the material risks and ben- Current tax is tax that must be paid or will be received during the 29 efits associated with ownership of the goods has been transferred to current year. This also includes current tax attributable to earlier peri- the buyer. Crane and machinery hire income is recognized linearly ods. Current and deferred tax is calculated applying the tax rates and 30 over the hiring period. tax rules resolved upon or in practice resolved upon on the balance 31 sheet day. Government grants Deferred tax is calculated according to the balance sheet method 32 Government grants are recognized in the balance sheet as government based on temporary differences between the accounted and tax val- receivables when it is reasonably certain that the contribution will be ues of assets and liabilities. Temporary differences are not taken into 33 received and that the Group will meet the requirements for the grant. account for the difference generated by the recognition of groupwise 34 Grants are amortised systematically in profit/loss for the year as cost goodwill and nor for difference that occurred at first recognition of reductions in the same way and over the same periods as the costs that assets and liabilities which are not business combinations and which 35 the grants are intended to offset. Government grants related to assets at the time of the transaction did not affect either recognized or taxa- are recognized as a reduction in the recognized value of the asset. ble profits. Further are not temporary differences attributable to par- 36 ticipations in subsidiaries and joint ventures, which are not expected 37 Leasing to be written back in the foreseeable future, taken into account. Valua- Operational leasing agreements tion of deferred tax is based on how the underlying value of assets or 38 Expenses for operational leasing agreements where the Group is the liabilities is expected to be realised or regulated. 39 lessee are recognized linearly in profit/loss for the year over the leas- When companies are acquired such acquisition either refers to ing period. Benefits obtained from the signing of an agreement are business combinations or asset purchase. Asset purchase refers to, 40 recognized linearly in profit/loss for the year over the term of the leas- for example, the acquired company only owning one or more proper- 41 ing agreement. Variable costs are expensed in the periods they occur. ties with tenancy agreements but the acquisition not comprising pro- Revenues relating to operational leasing agreements where the cesses required to operate property business. When recognising 42 Group is the lessor are recognized in a straight line over the life of the asset purchase no deferred tax is recognized separately. The fair lease agreement. Costs arising from leasing agreements are recog- value of deferred tax liabilities is instead deducted from the fair value 43 nized as they arise. of the acquired asset. 44 Deferred tax receivables relating to deductible temporary differenc- Financial leasing agreements es and loss carry-forwards are only recognized to the extent it is likely 45 Minimum leasing charges are divided between interest costs and they can be exercised. The value of deferred tax receivables is 46 amortization of the outstanding debt. Interest costs are distributed reduced when it is no longer assessed they can be utilised. over the leasing term such that an amount corresponding to a fixed

48 PEAB ANNUAL REPORT 2012 Financial instruments with fixed payments or with payments which can be determined and NOTES On the assets side, financial instruments entered to the balance sheet which are not listed in an active market. These assets are valued at include liquid funds, current investments, accounts receivable, securi- amortized cost. The amortized cost is determined based on the 1 ties holdings, loan receivables and derivatives. On the liabilities side, effective interest rate which is calculated at the time of acquisition. they include accounts payable, borrowing and derivatives. Accounts receivable are recognized at the estimated impact amount, 2 i.e. after deduction of distressed debts. 3 Recognition in and removal from the balance sheet Financial assets and financial liabilities are entered to the balance Financial liabilities valued at fair value via profit/loss 4 sheet when the company becomes involved in accordance with the Financial liabilities in this category are valued at fair value with the instrument’s contractual terms. Accounts receivable are reported changes in value reported in profit/loss for the year. 5 when the company has performed and the other party has a contrac- The category consists of two sub-groups: financial liabilities which 6 tual responsibility to pay, even if the invoice has not yet been sent. are held for trading and other financial liabilities which the company Accounts receivable are entered into the balance sheet when the initially chose to place in this category with the support of the so 7 invoice has been sent. Liabilities are recognized when the counter- called fair value option. The first sub-category includes derivatives 8 party has performed the service and there is a contractual payment with negative fair value except for derivatives which are identified and obligation even if the invoice has not been received. Accounts payable in effect hedge instruments. The Group has not included any financial 9 are recognized when the invoice is received. liabilities in the second sub-category. Financial assets are removed from the balance sheet when the 10 rights of the agreement have been realised, fall due or the company Other financial liabilities 11 loses control of them. The same applies to parts of financial assets. Loans and other financial liabilities, e.g. accounts payable, are includ- Financial liabilities are removed from the balance sheet when contrac- ed in this category. Liabilities are recognized at accrued acquisition 12 tual obligations are discharged or have been otherwise extinguished. value. 13 The same applies to parts of financial liability. Financial assets and financial liabilities are offset and recognized at Derivates 14 a net amount in the balance sheet only where there is a legal right to The Group’s derivatives consist of interest rate, exchange rate and 15 offset the amounts and it is intended to adjust the items with a net share derivatives utilised to hedge risks of changes in exchange amount or to at the same time capitalise the asset and adjust the liability. rates, interest rate changes and changes in the fair value of shares. 16 On-demand acquisitions and on-demand sales of financial assets Derivatives not used for hedge accounting are classified as financial 17 are reported on the transaction date, which is the date the company assets or financial liabilities held for trading and are valued at fair val- undertakes to acquire or sell the asset. ue. Value changes are recognized in profit/loss. The valuation method 18 involves the discounting of future cash flows. Classification and valuation Derivatives are initially recognized at fair value, and consequently 19 Financial instruments which are not derivatives are initially recorded at transaction costs are charged to profit/loss for the period. After first 20 acquisition value corresponding to the instrument’s fair value with the recognition derivatives are recognized as described below. If the addition of transaction costs for all financial instruments except for derivative is used for hedge accounting and to the extent this is effec- 21 those classified as financial assets, which are recognized at fair value tive, the value change to the derivative is recognized on the same line 22 in profit for the year which are recorded at fair value minus transaction in profit/loss for the year as the hedged item. Even if hedge account- costs. Financial instruments are classified upon first recognition ing is not applied, the value gain or reduction to the derivative is rec- 23 based on the purpose for which the instrument was acquired. Classi- ognized as income or expenses in operating profit or in net financials fication determines how financial instruments are valued after first items depending on the purpose for which the derivative is used and 24 recognition as described below. whether its use relates to an operating item or a financial item. In 25 Liquid funds consist of cash and immediately available balances at hedge accounting, the non-effective part is recognized in the same banks and equivalent institutes and current liquid investments with way as value changes to derivatives that are not used in hedge 26 maturities from the acquisition date of less than three months and accounting. If hedge accounting is not applied to the use of interest 27 which are exposed to only insignificant value fluctuation risks. rate swaps, the coupon rate is recognized as interest and the remaining value change of the interest rate swap is recognized as other 28 Financial assets valued at fair value via profit/loss financial income or other financial costs. Financial assets in this category are constantly valued at fair value The exchange rate contracts used to hedge future cash flow is rec- 29 with value changes recognized in profit/loss for the year. This category ognized applying the rules for hedge accounting. These hedge instru- 30 consists of two sub-groups: financial assets held for trading and other ments are recognized at fair value in the balance sheet. The value financial assets which the company initially chooses to place in this changes for the period are recognized in other comprehensive 31 category with the support of the so called fair value option. The first income and the accumulated value changes in a separate component 32 sub-group includes derivatives with positive fair value except for deriv- of equity (the hedging reserve) until the hedged flow matches profit/ atives which are identified and in effect hedge instruments. The Group loss for the year whereupon the accumulated value changes of the 33 has decided to include listed shares which the executive manage- hedge instrument are reclassified to profit/loss for the year when the ment’s risk management and investment strategy manages and values hedged transaction matches profit/loss for the year. 34 based on fair value in the second sub-group. Loans to foreign subsidiaries (extended investment) through invest- 35 ments in foreign subsidiaries have been to some extent financially Financial assets available-for-sale hedged through forward contracts. Hedge accounting has not been 36 Included in the category financial assets available for sale are finan- applied. These loans are recognized at the price on balance sheet 37 cial assets not classified in any other category or financial assets that day and derivatives are recognized at fair value according to the above. the company has chosen to initially classify in this category. Share- Holdings of shares noted in foreign stock exchanges that are classi- 38 fied as financial assets available for sale have been hedged through holdings and participation not recognized at fair value via profit and 39 loss, and which are not subsidiaries, associated companies or joint forward exchange contracts. Hedging accounting has been used for ventures, are reported in this category. Assets in this category are these hedges by recognizing the translation effect from the translation 40 valued at fair value with the changes in value for the period reported of shares to the functional currency in profit/loss for the year instead in other comprehensive income. Accumulated changes in value are of other comprehensive income. The translation effect is offset to the 41 reported in a separate component of equity, with the exception of extent the hedge is effective by the changes in the fair value of the 42 changes in value stemming from write-downs. Received dividends are hedging instrument, which is also recognized in profit/loss for the reported in profit/loss for the year. When the asset is divested the year. 43 accumulated profit/loss, which was previously reported in other 44 comprehensive income, is reported in profit/loss for the year. Hedge accounting of net investments To a certain extent measures have been taken to reduce exchange 45 Loans and receivables risks connected to investments in operations abroad. This has been Loans and receivables are financial assets which are not derivatives done by taking out loans in the same currency as the net investments. 46

PEAB ANNUAL REPORT 2012 49 NOTES These loans are recognized at the translated rate on balance sheet not recognized as tangible fixed assets since the risks and opportuni- day. The effective part of the period’s exchange rate changes in rela- ties connected to ownership of the assets are transferred to the lessee. 1 tion to hedge instruments is recognized in and the accumulated A financial receivable referring to future minimum leasing fees is changes in a separate component of equity (the translation reserve), reported instead. 2 in order to meet and partly match the translation differences that 3 affect other comprehensive income concerning net assets in the Future expenses hedged operations abroad. In the cases where the hedge is not Future expenses are only added to the acquisition value if it is likely 4 effective, the ineffective part is recognized directly in profit for the that the future financial benefits associated with the asset will benefit year as a financial item. the company and the acquisition value can be reliably estimated. All 5 other future expenses are recognized as costs as they arise. 6 Holdings of convertible certificates of claim Convertible certificates of claim may be converted to shares through Borrowing costs 7 the exercise of the option to convert the claim to shares. The option to Borrowing costs which are directly attributable to the purchase, con- 8 convert a convertible certificate of claim to shares is not closely relat- struction or production of an asset and which require considerable ed to the claim right and therefore it is separated as an “embedded time to complete for the intended use or sale are included in the 9 derivative” belonging to the valuation category financial assets held acquisition value of the asset. Borrowing costs are activated provided 10 for trading. Therefore the derivative part is initially valued and subse- that it is probable that they will result in future financial benefits and quently on an ongoing basis according to a valuation model at fair the costs can be reliably measured. 11 value. Value changes are recognized in profit for the year as financial income and expenses. The claim part is ascribed to the loan and Depreciation principles 12 accounts receivable category and initially valued as the difference Depreciation is based on the original acquisition value minus the 13 between the acquisition value of the convertible and the initial fair calculated residual value. Depreciation is made linearly over the value of the option. Subsequently the claim part is valued at accrued assessed useful life of the asset. 14 acquisition value based on the derived implicit interest rate which Buildings (operating buildings) 25–100 years gives an even return over the contractual life of the claim. 15 Land improvements 25–50 years 16 Issued convertible promissory notes Asphalt and concrete factories 10–15 years Convertible promissory notes can be converted to shares if the coun- Vehicles and construction machinery 5–6 years 17 terparty exercises the option to convert the claim to shares and are PCs 3 years 18 recognized as a compound financial instrument divided into a liability part and an equity part. The fair value of the liability at the time of Other equipment and inventories 5–10 years 19 issue is calculated by discounting future payment flows at the current The useful life and residual value of assets are assessed annually. Gravel and rock quarries are written down based on substance 20 market rate for similar liabilities without conversion rights. The value of the equity capital instrument is calculated as the difference between depletion, i.e. the amount of gravel and rock removed in relation to 21 the issuing funds when the convertible promissory note was issued the calculated total amount of substance deemed recoverable in the and the fair value of the financial liability at the time of issue. Deferred gravel and rock quarry. 22 tax attributable to liabilities at the issue date is deducted from the 23 recognized value of the equity instrument. Interest expenses are rec- Real estate ognized in profit for the year and are calculated applying the effective Group real estate holdings are divided as follows: 24 interest rate method. – Buildings and land entered under tangible fixed assets 25 Tangible fixed assets – Project and development properties as inventories among 26 Owned assets current assets Tangible fixed assets are recognized in consolidated accounts at Properties used in the Group’s own operations consisting of office 27 acquisition value minus accumulated depreciation and amortization buildings and warehouses (operational buildings) are entered as 28 and any write-downs. The acquisition value consists of the purchase buildings and land under tangible fixed assets. Valuation is made in price and costs directly attributable to putting the asset in place in the accordance with IAS 16, Tangible fixed assets, at acquisition value 29 condition required for utilisation in accordance with the purpose of deducted for accumulated depreciation and possible write-downs. 30 the acquisition. Borrowing costs are included in the acquisition value Direct and indirect holdings of undeveloped land and redeveloped of internally produced fixed assets according to IAS 23. The account- tracts for future development, developed investment properties for 31 ing principles applying to impairment loss are listed below. project development, improvement and subsequent sale and which 32 The value of a tangible fixed asset is derecognized from the bal- are expected to be realized during our normal operational cycle are ance sheet upon scrapping or divestment or when no future financial entered as project and development property under current assets. 33 benefits are expected from the use or scrapping/divestment of the Valuation is made in accordance with IAS 2, Inventories, at the lowest asset. Gains and losses arising from divestment or scrapping of an of either acquisition value or net sales value. 34 asset consist of the difference between the sale price and the asset’s 35 booked value minus direct costs of sale. Intangible assets 36 Leased assets Goodwill 37 Leasing is classified in the consolidated accounts either as financial Goodwill refers to the difference between the acquisition value of a or operating leasing. Financial leasing applies in circumstances business and the fair value of acquired identifiable assets and 38 where the financial risks and benefits associated with ownership are assumed liabilities. substantially transferred to the lessee. Where such is not the case, Goodwill is value at acquisition value minus any accumulated write- 39 operating leasing applies. downs. Goodwill is divided between cash-generating units and is test- 40 Assets which are rented under financial leasing agreements are ed at least once a year for write-down needs. Goodwill stemming from recognized as assets in the consolidated balance sheet. Payment the acquisition of joint ventures and affiliated companies is included 41 obligations associated with future leasing charges have been recog- in the recognized value of participations in joint ventures and affiliated 42 nized as long-term current liabilities. The leased assets are depreciat- companies. ed according to plan while leasing payments are entered under inter- In the case of business acquisitions which are less than the net 43 est and amortisation of liabilities. value of the acquired assets and the assumed liabilities, the differ- Assets which are rented under operational leasing agreements have ence is recognized directly in profit for the year. 44 not been recognized as assets in the consolidated balance sheet. 45 Leasing charges for operational leasing agreements are charged to Research and development income in a straight line over the life of the lease. Research costs intended to acquire new scientific or technological 46 Assets which are rented out under financial leasing agreements are knowledge are reported as costs as they arise. Development costs

50 PEAB ANNUAL REPORT 2012 where the results of research or other knowledge is applied to the cost of sale. When calculating utility value, future cash flows are dis- NOTES production of new or improved products or processes are reported counted with a discount factor that takes into consideration the risk-free as an asset in the balance sheet if the product or process is techni- interest rate and the risks which are associated with the specific asset. 1 cally or commercially useful and the company has adequate resources for completing development and then applying or selling the intangi- Impairment test for financial assets 2 ble asset. The recognized value includes all directly attributable Each time reports are drawn up the company assesses whether there 3 expenses, including for materials and services, payroll costs, the are objective indications that a financial asset or a group of financial registration of legal rights, depreciation of patents and licences, assets need to be written down. Objective indications partly consist of 4 borrowing costs. Other development costs are reported in profit for occurred observable circumstances which have a negative impact on the year as costs as they arise. Development costs are recognized in possibilities of recovering the acquisition value and partly on signifi- 5 the balance sheet at acquisition value minus accumulated deprecia- cant or lengthy decreases in the fair value of an investment in a finan- 6 tion and possible write-downs. cial placing classified as a financial asset available for sale. Accounts receivable that need to be written down are reported as 7 Other intangible assets the present value of the anticipated future cash flows. Current receiv- 8 Other intangible assets acquired by the Group are recognized at ables are, however, not discounted. Write-downs charge profit for the acquisition value minus accumulated depreciation, amortization and year. 9 write-downs. Costs defrayed for internally generated goodwill and Equity instruments classified as financial instruments available for internally generated brands are reported in profit for the year as the sale are written down if the fair value is significantly lower than the 10 costs arise. acquisition value, or when the decline in value has been a long, drawn 11 out process. Depreciation policies When an equity instrument classified as a financial instrument avail- 12 Depreciation is linearly recognized in profit for the year over the esti- able for sale is written down, previously reported accumulated profit 13 mated useful life of the intangible asset provided the useful life can be or loss in equity via other comprehensive income is reclassified to determined. Goodwill and other intangible assets with an indetermi- profit/loss for the year. The amount of accumulated loss that is reclas- 14 nate useful life is tested for the need for write-down annually or as sified from equity via other comprehensive income to profit/loss for the 15 soon as there are indications that the asset in question has declined year consists of the difference between the acquisition cost and the in value. Depreciable intangible assets are depreciated from the date current fair value after reductions for any write-downs on a financial 16 when the asset became available for use. asset which has already been reported in profit/loss for the year. The estimated useful lives are: 17 Brands 10 years Reversed write-downs 18 A write-down is reversed if there are both indications that write-down Customer relations 3–5 years requirements no longer exist and assumptions upon which the calcu- 19 Agency agreements 2–7 years lation of the recovery value were based have changed. However, 20 write-downs of goodwill are never reversed. Reversing is only per- Site leasehold agreements During the term of the agreement formed to the extent that the recognized value after reversing of the 21 The useful life and residual value of assets are assessed annually. asset does not exceed the recognized value which would have been recognized deducted for depreciation where necessary if write-down 22 Inventories had not been made. 23 Inventories are valued at the lowest of acquisition value and net sale Write-downs of investments held to maturity or loans and receiva- value. The acquisition value of stocks are calculated using the first-in, bles recognized at amortized cost are reversed if a subsequent rise in 24 first-out method and include expenses arising with the acquisition the recovery value may objectively be attributed to a circumstance 25 of the stock assets and their transport to their current location and occurring after write-down was made. condition. For manufactured goods the acquisition value includes a Write-downs of equity instruments classified as financial instru- 26 reasonable share of the indirect costs based on a normal capacity. ments available for sale are reversed via other comprehensive income The net sale value is the estimated sale price in the current business and not via profit/loss for the year. All revaluations that follow are 27 minus estimated costs of completion and bringing about the sale. based on the written down value and are reported in other compre- 28 hensive income. Impairment loss 29 The recognized value of Group assets is checked each balance sheet Share capital 30 day to assess whether there is a write-down requirement. IAS 36 is Repurchase of own shares applied to the testing of write-down requirements for other assets Holdings of own shares and other equity instruments are recognized 31 besides financial assets which are tested in accordance with IAS 39, as a reduction in equity. Liquid funds from the divestment of such 32 assets for sale and divestment groups recognized which are tested in equity instruments are recognized as an increase in equity. Any trans- accordance with IFRS 5, inventories, plan assets used for financing of action costs are charged directly to equity. 33 remuneration to employees and deferred tax receivables. The recognized value of the above-mentioned excepted assets is tested apply- Dividends 34 ing the respective standards. Dividends are entered as liabilities after they have been approved by 35 the AGM. Impairment test of tangible and intangible assets and participa- 36 tion in subsidiaries, joint ventures, associated companies etc. Earnings per share 37 If write-down requirements are indicated, the recovery value of the The calculation of earnings per share is based on consolidated profit asset is estimated in accordance with IAS 36. Moreover, the recovery for the year attributable to the shareholders of the parent company 38 value of goodwill, other intangible assets of indeterminate useful life and on the weighted average number of outstanding shares during and intangible assets which are not yet ready for use is estimated the year. When calculating earnings per share after dilution, profit and 39 each year. If it is not possible to establish materially independent cash the average number of shares are adjusted to allow for the effects of 40 flows for a certain asset, when testing for write-down needs the assets the diluting potential of shares which in the reported periods stem are grouped at the lowest level where it is possible to identify materi- from convertible certificates of claim and options issued to the 41 ally independent cash flow – a so-called cash-generating unit. employees. Earnings per share after dilution are calculated by 42 Write-downs are recognized when the book value of an asset or a increasing the number of shares with the total number shares the con- cash generating unit exceeds the recovery value. Write-downs are vertibles represent and increasing profit with the reported interest 43 expensed in profit for the year. Write-downs of assets attributable to a cost after tax. cash-generating unit (group of units) are firstly allocated to goodwill, 44 followed by the proportional write-down of the other assets in the unit Employee benefits 45 (group of units). Defined contribution pension plans The recovery value is the highest of utility value and fair value minus Pension plans are only classified as defined contribution pension 46

PEAB ANNUAL REPORT 2012 51 NOTES plans where the company’s obligations are limited to the contributions ble obligation attributable to events occurred, the occurrence of the company has undertaken to pay. In such cases the size of an which can only be confirmed by one or more uncertain future events, 1 employee’s pension depends on the contributions the company pays or when there is an undertaking not recognized as a liability or provi- to the plan or to the insurance company and the return on capital sion because it is not likely that the use of resources will be required. 2 produced by the contributions. Consequently, the employees bear the 3 actuarial risk (that payments will be lower than expected) and the The parent company’s accounting principles investment risk (that the invested assets will not be adequate to pro- The parent company has prepared its annual report in accordance 4 duce the expected return). The company’s obligations concerning with the Swedish Company Accounts Act (1995:1554) and Swedish contributions to defined contribution plans are expensed in profit for Financial Reporting Board recommendation RFR 2 Accounting rules 5 the year as they are earned by the employee performing work for the for legal entities. The Swedish Financial Reporting Board statements 6 company during the period. concerning listed companies are also applied. RFR 2 requires that the parent company, in the annual report for the legal entity, use all EU 7 Defined benefit pension plans adopted IFRSs and interpretations as far as possible within the frame- 8 The Group’s defined benefit plans consist of the Swedish ITP Plan for work of the Swedish Company Accounts Act, the Job Security Law Salaried Staff which is managed through insurance with Alecta, pen- and with due regard for the relationship between accounting and 9 sion plans for a small number of executive personnel in Norway and taxes. The recommendation states which exceptions and additions the AFP pension in Norway. must be made to the IFRSs. 10 The Group’s recognized net obligations relating to defined benefit The parent company accounting principles are unchanged in 2012 11 plans refer to Norwegian pension plans and are calculated separately compared to 2011. for each plan through an assessment of the future payments which 12 employees have earned through their employment both during the Differences between the Group’s and parent company’s 13 present and previous periods. Such payment is discounted to a net accounting principles present value deducted for the fair value of any plan assets. Differences between the Group’s and parent company’s accounting 14 The discount rate is the market rate of Norwegian government principles are given below. The below stated accounting principles 15 bonds extrapolated to a period equivalent to that of the pension for the parent company have been applied consistently to all periods obligations. Calculations of pension liabilities are performed by a presented in the parent company’s financial reports. 16 qualified actuary. The so-called corridor rule is applied. The corridor rule involves that Classification and design types 17 part of the accumulated actuarial gains and losses which exceeds 10 The parent company’s income statement and balance sheet are 18 per cent of the greatest of the obligation’s net present value and the presented in accordance with the design in the Swedish Company plan asset’s fair value being recognized in the income statement over Accounts Act. The difference to IAS 1 Design of financial reports 19 the expected average remaining working life of the employee covered which is applied to the design of the consolidated financial reports is 20 by the plan. Otherwise account is not taken of actuarial gains and primarily the reporting of financial income and expenses, fixed assets, losses. equity and the presentation of provisions under a separate heading in 21 Net interest on pension liabilities and anticipated returns on associ- the balance sheet. ated plans assets are recognized in net financial items. Other compo- 22 nents are recognized as income or expenses in operating profit. Subsidiaries, joint ventures and associated companies 23 Participation in subsidiaries, joint ventures and associated companies Remuneration upon resignation or dismissal is recognized in the parent company applying the acquisition value 24 A reserve for remuneration relating to the dismissal of staff is only method. This means that acquisition costs are included in the report- 25 established if the company is demonstrably subject to, without any ed value of the holding in the subsidiary. In Group accounting acqui- realistic opportunity for avoidance, a formal detailed plan for the sition costs related to shares in subsidiaries are recognized directly in 26 termination of employment prior to the normal time. profit and loss as they occur. 27 Current remuneration Financial guarantees 28 Current remuneration to employees is calculated without discount and The parent company’s financial guarantee agreements mainly consist are reported as a cost when the related services are received. of personal guarantees to the benefit of subsidiaries and joint ven- 29 A provision is recognized for the expected costs of participations in tures. The parent company recognizess financial guarantee agree- 30 profits and bonus payments when the Group has an applicable legal ments as provisions in the balance sheet when the company has an or informal obligation to make such payments for services received obligation for which payment is likely to be required to adjust the 31 from employees and the obligations can be reliably estimated. obligation. 32 Provisions Forestalled dividends 33 Provisions are entered in the balance sheet when the Group is subject Forestalled dividends from subsidiaries are recognized when the to an actual or informal legal obligation as a consequence of a cir- parent company alone is entitled to decide on the size of the dividend 34 cumstance occurring and it is likely that financial resources will be and the company has taken a decision on the size of the dividend 35 required to meet the obligation and a reliable estimate of the amount before the parent company publishes its financial reports. can be made. 36 Tangible fixed assets 37 Guarantees Tangible fixed assets in the parent company are recognized at acqui- Provisions for guarantees are recognized when the underlying prod- sition value minus accumulated depreciation and any write-downs 38 ucts or services are sold. The provisions are based on historical data in the same way as for the Group but with the addition of possible about the guarantees and a weighing up of the conceivable out- write-ups. 39 comes relative to the probabilities that the outcomes are associated 40 with. Leased assets All leasing agreements in the parent company are recognized accord- 41 Restoration costs ing to the rules for operating leasing. 42 These refer to the estimated restoration costs for rock and gravel quarries after operations are terminated. The provision increases with Employee benefits 43 the quarried amount and is reversed after restoration is completed. Defined benefit pension plans 44 The reserved amount is expected to be utilised successively following The parent company applies different assumptions for the calculation completion of quarrying. of defined benefit plans than those in IAS 19. The parent company 45 complies with the provisions of the Job Security Law and the instruc- Contingent liabilities tions of the Swedish Financial Supervisory, as this is a precondition 46 A contingent liability is recognized in accounts when there is a possi- for tax allowance rights.

52 PEAB ANNUAL REPORT 2012 Taxes interpretation of tax laws can have a considerable impact on the size NOTES Untaxed reserves including deferred tax liabilities are recognized in of recorded deferred taxes. For more information on taxes, see note 14. the parent company. On the other hand, in the Group accounts, 1 untaxed reserves are divided between deferred tax liabilities and Accounting principles equity. Tenant-owner projects in Sweden 2 Tenant-owner associations that Peab signs construction contracts with 3 Shareholders’ contributions are autonomous and from Peab independent legal entities. Tenant- Shareholders’ contributions are recognized directly in the equity of owner associations are tools members of the association can use to 4 the receiver and are activated in shares and participation in the pro- order, construct and manage a property and this is beneficial for the vider wherever write-downs are not required. tenant-owners. Peab signs contracts regarding the sale of land and 5 construction contracts with newly established tenant-owner associa- 6 Group contributions tions as clients. The contracts are signed by the board in the ten- Received and given Group contributions are recognized in net finan- ant-owner association at the start up of construction. No member of 7 cial items as “Profit from shares in Group companies” and are speci- the board in the tenant-owner association represents Peab. Ten- 8 fied in note. ant-owner associations can influence the design of the buildings about to be constructed. A new obligatory financial plan is drawn up 9 if changes are made that significantly affect the financial prerequi- 10 sites. The contract gives the tenant-owner association normal client rights in relation to Peab. Our overall assessment is that the contracts 11 Note 2 Important estimates and meet the definition of a construction contract according to IAS 11. 12 assessments Real estate agents handle the sales of the tenant rights through direct contracts with the tenant-owner associations. The individual 13 Group Management has together with the Board of Directors dis- home purchasers sign sub-contracts with the tenant-owner associa- cussed developments, selections and information regarding the tions. 14 Group’s important accounting principles and assessments, as well as During construction the association finances the land and construc- 15 the application of these principles and assessments. tion with two building loans, one where the association takes out a Certain important accounting estimates made when applying the mortgage for the final financing and one that Peab stands surety for 16 regarding the home purchasers’ deposits. Group’s accounting principles are described below. 17 The sources of uncertainty in the assessments given below refer to The tenant-owner associations carry the entire value risk on the uncertainties that entail a risk that the value of assets or liabilities may property. 18 be significantly adjusted in the coming fiscal year. In addition, Peab guarantees that it will acquire any apartments Peab’s operative business is sensitive to changes in, among other from the tenant-owner associations that remain unsold six months 19 things, volume and margins. The financial risks are connected to the after the building is complete, which is a requirement from the certifi- 20 business’ tied-up capital, capital needs, interest risk and currency risk. ers, i.e. insurance companies and banks. This repurchase obligation For more information about how the changes in important variables is limited since tenant-owner associations do not sign construction 21 affect Group profit after tax, see the sensitivity analysis on page 28. contracts until most of the apartments are under contract with a home purchaser and, in our experience, generally do not represent high 22 Percentage of completion amounts. The few apartments bought by Peab are usually sold within 23 Profit reported for contract projects in progress is calculated through a short period of time without any other costs than a few months of percentage of their completion based on the degree of completion of fees to the tenant-owner association. Reserves are made for possible 24 the project. This requires that project revenue and costs can be calcu- estimated costs. No other guarantees or obligations are given to the 25 lated in a reliable manner. A prerequisite is a well functioning system tenant-owner association than the normal guarantees in conventional for calculation, forecasting and project monitoring. Forecasts of the construction contracts. 26 final outcome of the project are critical estimates crucial to account- Other accounting standards and interpretations 27 ing for the results of operations during the project. There is a risk that New accounting standards and interpretations of existing standards the final results of a project deviate from those that have been suc- 28 can lead to changes that wherein certain transactions in the future are cessively reported. handled differently than according to current praxis. 29 Impairment tests of goodwill 30 Groups’s total goodwill amounts to SEK 1,733 million (1,778). When calculating cash generating units’ recoverable amount in order to 31 assess the need to write-down goodwill, several estimations and 32 assessments about the future have been made. These are presented in note 16. As is apparent in the description in note 16 changes Note 3 Income distributed by type 33 beyond what can reasonably be expected during 2013 of the condi- 34 tions for these estimations and assessments could have a significant Income distributed by main income type effect on goodwill. This risk is, however, very low since the recoverable Group Parent company 35 values are for the most part higher than the reported values in those MSEK 2012 2011 2012 2011 cases where goodwill values are substantial. Income from contracting 41,910 38,946 – – 36 Sale of goods 1,653 1,423 – – 37 Project and development property Sale of property developments 1,045 803 – – 38 Project and development property amounts to SEK 6,239 million Crane, machine and (5,180). The book value has been estimated based on prevailing price vehicle rental 517 619 – – 39 levels per property at the respective location. Changes in supply and Transport services 1,429 1,473 – – demand may alter reported values and write-downs may be required. 40 Administrative services – – 96 99 For more information on Project and development property, see note Other 286 275 0 0 41 24. Total 46,840 43,539 96 99 42 Disputes The actual outcome in disputed amounts may deviate from those, 43 according to the best estimate, recorded. For more information on 44 disputes, see note 33. 45 Taxes Changes in tax legislation and changed praxis with regard to the 46

PEAB ANNUAL REPORT 2012 53 NOTES Note 4 Operating segment Segments The Group consisted during 2012 of following business areas; Group business is divided into operating segments based on how the 1 • Construction: Business area Construction comprises the Group’s company’s highest decision makers, i.e. executive management, fol- construction related services and own housing projects. Operations low the business. From 1 January 2012 the Group has been divided 2 are run in five geografic divisions in Sweden, one division in Norway, 3 into four business areas; Construction, Civil Engineering Industry and one division in Finland and a Nordic division, Special projects, Property Development. The business areas are also operating seg- which is specialized in larger, more complex projects. Production is 4 ments. Comparable figures for 2011 have been translated into the new primarily comprised of housing for external customers and our own business areas. 5 housing developments but also public and commercial premises The Group’s internal reporting is constructed so that executive man- and buildings. Customers are private property owners, municipali- 6 agement follows every business area up to and including operating ties and companies as well as business area Project Development. profit. Capital frameworks for investments and project developments Operations in Construction also include construction related services 7 are decided for each business area, in connection with drawing up the such as construction maintenance and repairs. budget for the year. These are then monitored during the year. Total 8 • Civil Engineering: Business area Civil Engineering works with the assets and liabilities are only followed up on Group level. construction of larger infrastructure and civil engineering projects 9 Segments are reported according to the percentage of completion and smaller projects on the local market. Civil Engineering also in projects since that reflects the way executive management and the operates and maintains roads and municipal facilities. The opera- 10 Board monitors operations. Peab applies IFRIC 15, Agreements for the tions are run in geographical regions in Sweden, Norway and construction of real estate, in legal accounting. IAS 18, Revenue, are 11 Finland. Customers are the Swedish Transport Administration, applied for housing projects in Finland and Norway as well as our own municipalities and local businesses. 12 home developments in Sweden. Revenue from these projects are rec- • Industry: Business area Industry is run in seven product segments; 13 ognized first when the home is handed over to the buyer. A bridge has therefore been created in segment reporting between operative report- Asphalt, Concrete, Gravel and Rock, Transportation and Machines, 14 ing according to percentage of completion method and legal report- Rentals, Foundations and Industrial Construction. All of them work on the Nordic construction and civil engineering markets. Custom- 15 ing. For more information regarding principles for housing production, see note 1. ers are mainly the Nordic Construction and Civil engineering companies. Most of the business is generated on the Swedish market. 16 Construction of our own development projects booked as an asset in our own balance sheet is presented in segment reporting accord- • Property Development: Group operations revolving around acqui- 17 ing to the percentage of completion method. Unrealized internal sitions, development and divestiture of commercial property and 18 profits and net sales are eliminated within the Group. When our own rental property in the Nordic region are run in business area Proper- development projects are divested these effects are returned to the ty Development. During the year the business has been followed up 19 Group and the capital gains from the sales are reported in business in three areas; Listed holdings, Partly owned companies and Wholly 20 area Property Development. owned subsidiaries and projects. Listed holdings during the year Internal pricing between Group segments is based on the“arm’s has primarily consisted of shares in Brinova and Catena. Both 21 length” principle, in other words, between well informed parties who holdings were divested in 2012. Partly owned companies and joint ventures consists of, for instance, Peab’s ownership in Tornet, in 22 are independent of each other and interested in the realisation of the transactions. Centur, in companies connected to the development of Arenastaden 23 Segment’s operating profit include attributable items which can be in Solna as well as other holdings. Wholly owned subsidiaries and reasonably and reliably allocated to the segments. Non-allocated projects consists of a number of holdings that include everything 24 items consist of financial income and expenses, and taxes. Assets from land for development where zoning is being worked out to completed projects ready for sale. 25 and liabilities are not divided into segments since they are only followed up on Group level. Other operations are reported under “Group functions”. 26 27 28 Group 2012 Civil Property Total Adjustment for different Con Engi Develop Group operative for accounting principles 29 MSEK struction neering Industry ment funcions Elimination the Group for housing production Group External sales 27,601 11,448 6,623 321 4 45,997 843 46,840 30 Internal sales 391 1,195 4,100 24 105 –5,815 0 0 31 Total income 27,992 12,643 10,723 345 109 –5,815 45,997 843 46,840 32 Operating costs –28,056 –12,203 –9,990 –324 –338 5,782 –45,129 –790 –45,919 33 Profit from participation in associated companies and joint ventures 13 16 –12 1 18 18 34 Other operating income 47 42 42 –3 128 128 35 Other operating costs –9 –3 –12 –12 Operating profit –13 440 788 51 –232 –32 1,002 53 1,055 36 Financial income 239 37 Financial expenses –443 38 Profit from participation in joint ventures –38 39 Pre-tax profit 813 Tax –88 40 Profit for the year 725 41 Other comprehensive income for the year –70 42 Total comprehensive income for the year 655 43 Depreciation –61 –51 –718 –15 –3 –848 –848 44 Write-downs –67 –6 –36 –13 –109 –122 Significant non-cash items in addition to 45 depreciation and write-downs that are not 46 related to payments 53 –27 118 144 144

54 PEAB ANNUAL REPORT 2012 Group 2011 Civil Property Total Adjustment for different NOTES Con Engi Develop Group operative for accounting principles MSEK struction neering Industry ment funcions Elimination the Group for housing production Group 1 External sales 26,855 10,397 6,576 168 19 44,015 –476 43,539 Internal sales 967 1,157 3,828 21 113 –6,086 0 0 2 Total income 27,822 11,554 10,404 189 132 –6,086 44,015 –476 43,539 3 Operating costs –27,213 –11,163 –9,763 –189 –342 6,065 –42,605 498 –42,107 4 Profit from participation in associated companies and joint ventures –9 –1 3 31 24 24 5 Other operating income 58 58 58 6 Other operating costs –9 –9 –9 Operating profit 600 390 693 31 –210 –21 1,483 22 1,505 7 Financial income 158 8 Financial expenses –466 9 Profit from participation in joint ventures –2 Pre-tax profit 1,195 10 Tax –252 11 Profit for the year 943 12 Other comprehensive income for the year –207 13 Total comprehensive income for the year 736 14 Depreciation –49 –64 –676 –10 –4 –803 –803 Write-downs –38 –17 –58 –113 –113 15 Returned write-downs 7 1 8 8 16 Significant non-cash items in addition to depreciation and write-downs that are not 17 related to payments –51 0 92 – –56 –15 –15 18 19 20 Geografic areas 21 Income från external customers are grouped in geographic areas according to where customers are located. Information concerning intangible and tangible assets is based on geografic areas grouped according to where assets are located. 22

Group Sweden Norway Finland Other markets Total 23 MSEK 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 24 External sales 37,289 35,923 6,532 4,387 2,988 3,193 31 36 46,840 43,539 Intangible and tangible fixed assets 5,421 5,752 857 815 291 244 – – 6,569 6,811 25 26 Parent company Group functions Sweden 27 MSEK 2012 2011 2012 2011 Net sales 96 99 96 99 28 29 30 31 32 33 Note 5 Business combinations 2011 34 In 2011 Peab aquired a further 50 percent of Kokpunkten Fastighets 35 2012 AB, 65 percent of Terje Hansen AS, 90 percent of K. Nordang AS, 91 In 2012 Peab aquired a further 50 percent of Fastighets AB Bryggeriet percent of Telemark Vestfold Entreprenör AS, 100 percent of Norweigan 36 Aggregates AS, 100 percent of Hagström i Nås AB, 100 percent of and 100 percent of P. Arvidssons Entreprenad AB. These acquisitions 37 individually do not have any material acquisition effect from a Group Mora–Orsa Byggtjänst AB, 100 percent of Gryttby Grus & Sand AB, perspective. 100 percent of Bjurholms Lastbilcentral Ekonomisk Förening and 38 Total transferred compensation amounted to SEK 31 million. operations at Ängelholm Airport. The aquisitions are part of Peab’s In the period after acquisition the above subsidiaries contributed vision to become the Nordic Community Builder through the strategy 39 SEK 3 million to Group income and SEK 1 million to profit after tax in of investing in profitable growth in the Nordic region. 40 2012. If the acquisitions had taken place on 1 January 2012, the com- The above acquisitions in 2011 individually do not have any material bined effect of these acquisitions on Group income would have been acquisition effect from a Group perspective and the information on 41 SEK 7 million and on profit for the year after tax by SEK 5 million. acquisition effects is therefore given collectively. During the year, the acquisition of assets occurred through the In the period after acquisition the above subsidiaries contributed 42 acquisition of shares (asset acquisitions which are not operational) SEK 607 million to Group income and SEK 8 million to profit after tax 43 which resulted in a cash flow of SEK -380 million. in 2011. If the acquisitions had taken place on 1 January 2011, the combined effect of these acquisitions on Group income would have 44 Acquisition after the balance sheet date been SEK 824 million and on profit for the year after tax by SEK –18 45 There have been no acquisitions of importance in 2013. million. 46

PEAB ANNUAL REPORT 2012 55 NOTES Effects of acquisitions in 2011 Note 7 Other operating costs The acquisitions’ preliminary effects on Group assets and liabilities 1 are shown below. Group 2 The acquired companies’ net assets at the time of acquisition: MSEK 2012 2011 2011 Loss from sale of fixed assets –2 –5 3 MSEK Exchange loss on receivables/liabilities relating to 4 Intangible fixed asset 70 operations –3 –1 Tangible fixed assets 148 Other –7 –3 5 Financial fixed assets 15 Total –12 –9 6 Deferred tax receivables 56 Project and development property 73 7 Inventories 19 8 Accounts receivable and other receivables 308 Liquid funds 50 Note 8 Government Grants 9 Interest–bearing liabilities –149 Group Accounts payable and other current liabilities –371 10 Goverment grants received as compensation for operating costs 11 Deferred tax liabilities –37 amounted in 2012 to SEK 25 million (24), and have reduced costs in Net identifiable assets and liabilities 182 the income statement. 12 Previous holdings –31 13 Negative goodwill recognized as income –12 14 Group goodwill 59 Consideration transferred 198 15 Note 9 Employees, personnel costs and 16 Goodwill consists of, among other things, human resources and future remuneration to senior officers 17 synergy effects regarding common systems and shared resources which do not meet the criteria for recognition as intangible assets at Payroll costs for employees 18 the time of acquisition. Goodwill value amounting to SEK 21 million Group 19 provides a fiscal depreciation deduction. MSEK 2012 2011 Transaction costs connected to acquisitions amount to SEK 1.3 Wages and remuneration 6,243 5,906 million and relate to consulting fees concerning due diligence. 20 Pension expenses, defined benefit plans 3 7 Transactions costs are reported in the income statement as sales and 21 administrative expenses. Pension expenses, defined contribution plans 504 449 22 Acquired receivables amount to SEK 308 million and consist mainly Social insurance costs 1,815 1,709 of accounts receivables. Total 8,565 8,071 23 24 Consideration transferred Average number of employees MSEK No. of Of were No. of Of were 25 Paid in cash 192 employees men 2012 employees men 2011 2012 percent 2011 percent Conditional purchase sum 6 26 Parent company Total consideration transferred 198 27 Sweden 33 58 31 58 During the year, the acquisition of assets occurred through the Subsidaries 28 acquisition of shares (asset acquisitions which are not operational) Sweden 12,611 91 12,512 92 which resulted in a cash flow of SEK –182 million. 29 Norway 1,335 90 1,192 90 The anticipated acquisition method has been used on acquisitions 30 that are short of 100 percent of equity when there is a put/call option Finland 846 88 822 89 for the acquisition of the rest of the shares. The method means that Poland 3 67 3 67 31 the companies are consolidated to 100 percent and the calculated Total in subsidaries 14,795 91 14,529 92 32 purchase price for the rest of the shares is reported as a liability. Total in Group 14,828 91 14,560 92

33 Gender distribution in the Board of Directors 34 and executive management 2012 2011 35 Percentage Percentage 36 of women of women Note 6 Other operating income Parent company 37 The Board of Directors 18% 18% Group Other senior officers 20% 0% 38 MSEK 2012 2011 Group total 39 Capital gains from shares sold in Group companies/ joint ventures/ associated companies 54 – The Board of Directors 18% 18% 40 Insurance compensation 21 – Other senior officers 13% 0% 41 Profit from sale of fixed assets 45 36

42 Exchange gains on receivables/liabilities relating to operations 3 1 43 Negative goodwill – 12 44 Other 5 9 Total 128 58 45 46

56 PEAB ANNUAL REPORT 2012 Salaries and other payments divided between senior officers Benefits for senior officers NOTES and other staff, and social security costs Remuneration and other benefits in 2011 1 Parent company 2012 Board of Basic salary/ Variable Directors and Board remu remu Other Pension 2 senior officers Other Thousands, SEK neration neration benefits costs Total (13 persons) 1) employees Total MSEK Chairman of the Board, 3 Salary and remuneration 20 21 41 Göran Grosskopf 510 510 4 (of which variable (–) (0) (0) Vice Chairman of the remuneration etc.) Board, Mats Paulsson 3,000 3,000 5 Social security costs 13 15 28 Other members of 6 – of which pension costs 5 7 12 the Board Annette Brodin Rampe 175 175 7 Board of Group 2012 Directors and Karl-Axel Granlund 235 235 8 senior officers Svante Paulsson 175 175 MSEK (16 persons) 1) Lars Sköld 175 175 9 Salary and remuneration 27 Fredrik Paulsson 175 175 10 (of which variable (–) Anne-Marie Pålsson 175 175 remuneration etc.) Total related to Board 11 Social security costs 18 of Directors from the 12 - of which pension costs 8 parent company 4,620 4,620 CEO until Maj 2011, 13 The Board and senior officers were only registered in the parent company Mats Paulsson 1,680 33 1,713 during 2011. The figures in the table below are the same for the parent 14 CEO, Jan Johansson 2) 4,121 47 91 1,934 6,193 company and the Group and are therefore reported in the same table. Other senior officers 1) 7,834 159 279 3,604 11,876 15 Group and parent company 2011 Board of Total remuneration Directors and 16 senior officers Other from parent company 18,255 239 370 5,538 24,402 MSEK (12 persons) 1) employees Total 1) Comprises the number of persons that during the year received remuneration for the 17 Salary and remuneration 18 21 39 period they were senior officers. During 2012 there were three other senior officers. 18 (of which variable (–) (1) (1) 2) Wages for the period Jan-May 2011 amount to SEK 1,636 thousand, wages for the remuneration etc.) period Jun-Dec 2011 amount to SEK 2,485 thousand. Pension costs for the period 19 Social security costs 13 19 32 Jan-May 2011 amount to SEK 623 thousand, pension costs for the period Jun-Dec 2011 20 – of which pension costs 6 11 17 amount to SEK 1,311 thousand. 21 No variable remuneration was paid to executive management or other Comments on the tables employees of the parent company in 2012 (0). From time to time the CEO and other senior officers may be offered 22 variable remuneration. Other benefits refer to company cars. 23 Pension costs refer to costs charged to the year. See note 32 for Benefits for senior officers additional information about pensions. During the first half year of 24 2012, the group senior officers consisted of seven persons, of which Remuneration and other benefits in 2012 25 Basic salary/ Variable four persons in the parent company. Thereafter the group of senior Board remu remu Other Pension officers consisted of eight persons, of which five persons in the 26 Thousands, SEK neration neration benefits costs Total parent company. Chairman of the Board, 27 Göran Grosskopf 510 510 The Board of Directors 28 Vice Chairman of the The 2012 AGM decided on a remuneration to external members of Board, Mats Paulsson 3,000 3,000 the Board of a maximum of SEK 4,620 thousand (4,620), of which 29 SEK 450 thousand (450) consisted of remuneration to the Chairman Other members of 30 the Board of the Board. A remuneration of SEK 2,765 thousand, like last year, Annette Brodin Rampe 175 175 was decided as a special compensation to the Vice Chairman of the 31 Board for his availability to the Group in matters concerning custom- Karl-Axel Granlund 235 235 ers and the market. Remuneration to all other members of the Board 32 Svante Paulsson 175 175 was a maximum of SEK 4,440 thousand (4,440), and SEK 180 thou- 33 Lars Sköld 175 175 sand (180) for work in the remuneration and finance committees. Fredrik Paulsson 175 175 During the year total remuneration amounted to SEK 4,620 thousand 34 Anne-Marie Pålsson 175 175 (4,620). 35 Total related to Board Remuneration is not paid to members of the Board who are perma- of Directors from the nent employees of the Group. There are no agreements on future 36 parent company 4,620 4,620 pension/retirement remuneration or other benefits either for the CEO, Jan Johansson 4,893 – 91 2,304 7,288 Chairman of the Board of Directors or for other members of the Board. 37 Other senior officers, 38 Principles for the remuneration of senior officers remuneration from the The group other senior officers is comprised of eight senior officers parent company 1) 10,897 – 326 3,167 14,390 39 who are members of executive management. During the first half of Other senior officers, 2012 this group consisted of seven persons. The principles for remu- 40 remuneration from neration of senior officers were adopted by the AGM 2012. subsidiaries 6,239 960 82 2,578 9,859 41 Remuneration to the CEO and other senior officers consists of a Total 26,649 960 499 8,049 36,157 fixed salary, eventual variable remuneration, extra health insurance 42 Remuneration from the and those benefits otherwise enjoyed by other Peab employees as parent company 20,410 – 417 5,471 26,298 well as pension. All pension obligations are defined contribution 43 Remuneration from pensions. The total remuneration paid to each senior officer is based 44 subsidiaries 6,239 960 82 2,578 9,859 on market terms and the responsibilities and qualifications of the 1) Comprises the number of persons that during the year received remuneration for the senior officer. 45 period they were senior officers. During the period January to June there were seven From time to time, senior officers may be offered variable remuner- 46 senior officers and during the period July to December there were eight. ation. Such variable remuneration may not exceed 60 percent of the

PEAB ANNUAL REPORT 2012 57 NOTES regular salary and must above all be based on the pre-tax profit of the Profit sharing foundation Peab Group. Variable remuneration is decided upon each financial In 2007, Peab founded a profit sharing foundation. The object of the 1 year. profit sharing foundation is to create increased participation through Variable remuneration is settled the year after being earned and employee co-ownership and to better our employees’ financial situa- 2 may either be paid out as salary or as a one-off pension premium. If tion after retirement. Individual shares in profits will be proportional to 3 variable remuneration is paid out on a one-off basis, certain adjust- the employee’s working hours. Upon retirement employees can with- ments are made so as to neutralize the total cost for Peab. draw their share in the foundation. Under the foundation’s investment 4 Notice on the part of Peab is a maximum of 24 months and senior policy, its assets must be mainly invested in shares in Peab. officers are required to give a maximum of six months notice. If a sev- Peab has not allocated any funds in 2011 and 2012 for profit sharing. 5 erance pay is paid the total remuneration for salary during the period Senior officers have not been entitled to benefits from the profit 6 of notice and severance pay may not exceed 24 monthly wages. sharing foundation.

7 Variable remuneration Convertible Promissory Notes 2007/2012 8 Variable remuneration for the CEO and other senior officers is related At the AGM 2007 in Peab AB it was decided to issue and offer con- to meeting profit targets for the Group. Variable remuneration for the vertibles to all employees. The convertibles ran from 1 December 9 financial year 2012 was maximized at SEK 2,880 thousand (2,800) 2007 until 30 November 2012 and amounted to a nominal value of for the CEO and a total of SEK 7,326 thousand (6,525) for the other SEK 598 million. There have been no conversions to shares and the 10 senior officers. loan has been paid in full. 11 The CEO 12 The CEO of Peab received a salary including benefits of SEK 4,984 13 thousand (4,212) in total in 2012. No variable remuneration for 2012 was paid (SEK 47 thousand). 14 Pension premiums paid out for the CEO amounted to SEK 2,304 Note 10 Fees and cost remunerations to thousand (1,934) during the year. auditors 15 Pension commitments for the CEO give him the right to pension 16 from the age of 65. There is a supplementary commitment whereby Group Parent company the company or the CEO can trigger early retirement from the age of MSEK 2012 2011 2012 2011 17 62. Annual pension premiums of 47 percent of basic salary are paid KPMG AB for these commitments. These pensions are part of defined contribu- Auditing assignments 17 14 5 3 18 tion plans. 19 Notice on the part of Peab is a maximum of 24 months and the Other audit-related assign- CEO is required to give a maximum of six months notice. If a sever- ments 2 3 1 1 20 ance pay is paid the total remuneration for salary during the period of Other assignments 3 1 1 0 21 notice and severance pay may not exceed 24 monthly wages. Other 22 Other senior officers Auditing assignments 0 1 – – The term other senior officers refers to the seven other persons that Tax advisory services 1 – – – 23 together with the CEO make up Peab’s executive management. Total 23 19 7 4 24 Salary and other remuneration including benefits for other senior officers amounted to SEK 17,544 thousand (8,113). Variable remuner- Auditing assignments refer to examination of the annual accounts, 25 ation for 2012 for two persons that during the year were members of accounting and administration by the Board of Directors and the executive management amounted to SEK 960 thousand. For 2011 26 CEO, other work which it is the business of the company auditor to variable remuneration amounted to SEK 159 for all other senior officers. perform and advice and other assistance stemming from observations Pension premiums paid out for other senior officers amounted to 27 made in connection with such examination of the performance of SEK 5,745 thousand (3,604) during the year. other similar work. 28 There are early retirement pension commitments for other senior 29 officers. All pension benefits are unassailable. Pension commitments for other senior officers give them the right to 30 pension from the age of 65. There is a supplementary commitment 31 whereby the company or the senior official can trigger early retirement from the age of 62. Annual pension premiums of 47 percent of basic Note 11 Operating costs divided by type 32 salary are paid for these commitments. These pensions are part of defined contribution plans. 33 Group If given notice by the company other senior officers are entitled to a MSEK 2012 2011 maximum of two years’ salaries deducted by salaries from new 34 Material 9,975 9,969 employers. The period of notice from senior officers is six months. 35 Subcontractors 13,954 12,075 Personnel expenses 10,135 9,729 36 Long-term incentive program (LTI program) From time to time, senior officers may be offered to the opportunity to Other production costs 10,133 9,040 37 participate in a LTI program. In order to participate in a LTI program Depreciation 848 803 the senior officer must reserve at least 50 percent of their annual vari- Write-downs 122 113 38 able remuneration as a lump sum pension premium. Annual income Other operating costs 752 378 39 from the LTI program may not exceed 40 percent of the fixed annual salary. Income from the LTI program and the provision of at least 50 Total 45,919 42,107 40 percent of the annual variable remuneration are placed in a pension 41 savings connected to the Peab share. During 2011 468 persons, including senior officers, were offered to participate in a LTI program. 42 The LTI program runs until 2014 with annual reviews of targets for the Group. The targets were not met in 2012 and therefore no provisions 43 were made for the LTI program. 44 45 46

58 PEAB ANNUAL REPORT 2012 Note 12 Net financial income/expense Interest expenses and similar profit/loss items NOTES Parent company Group MSEK 2012 2011 1 MSEK 2012 2011 Interest expenses, external 1) –30 –33 2 Interest income 1) 132 131 Interest expenses, Group companies 1) –171 –185 3 Dividend received related to financial assets Other items –8 –8 valued at fair value 34 20 Total –209 –226 4 Net profit related to financial assets valued 1) Interest expenses refer to interest from items valued at accrued acquisition value. at fair value 2) 31 4 5 Change in value of cash flow hedges 6 transferred from equity 17 – Change in value currency swaps (trading) 8 3 7 Other items 17 0 8 Financial income 239 158 9 Interest expenses 3) –418 –358 10 Net loss related to financial assets valued Note 13 Appropriations at fair value 2) – –85 11 Change in value currency swaps (trading) 0 –1 Parent company 12 MSEK 2012 2011 Net exchange rate fluctuation –2 –5 Transfer to tax allocation reserve – –156 13 Other items –23 –17 Change in additional depreciations, machinery 14 Financial expenses –443 –466 and equipment 0 0 4) Profit from participation in joint ventures –38 –2 Total 0 –156 15 Net financial income/expense –242 –310 16 1) Refers to interest from items valued at accrued acquisition value. 2) Of which shareholding in Brinova Fastigheter AB SEK 27 million (–81). 17 3) Refers to interest from items valued at accrued acquisition value except current interest 18 net from the interest coupon portion of interest swaps totaling SEK –11 million (–6). 4) Interest expenses on loans from joint venture companies have been offset against profit 19 from participation in joint venture companies. There is, according to the contracts, a legal right for offsets in the balance sheet accounts between the debt to joint venture 20 companies and holdings of preference shares in joint venture companies. Note 14 Taxes 21

Profit from participation in Group companies Recognized in the income statement 22 Parent company Group 23 MSEK 2012 2011 MSEK 2012 2011 24 Dividends 38 1,150 Current tax expenses/income Paid Group contribution –1,278 –169 Tax expenses for the year –76 –278 25 Received Group contribution 1,484 1,003 Adjustment of tax attributable to previous years –17 40 26 Write-downs 1) –346 –122 –93 –238 Capital gains from sales 14 – 27 Deferred tax expenses/income Total –88 1 862 28 1) For more information about write-downs, see note 42. Temporary differences –81 –9 Capitalised tax value of loss carry-forwards 29 Profit from participation in associated companies during the year 37 16 30 Parent company Utilisation of capitalised tax value of loss carried forwards –63 –41 31 MSEK 2012 2011 Changed tax rates 80 –1 Dividends 4 136 32 Revaluation of reported deferred tax values 32 21 Write-downs – –130 33 5 –14 Capital gains from sales 23 – 34 Total 27 6 Total reported tax expenses in the Group –88 –252 35

Profits from securities and receivables recorded as fixed assets 36 Parent company Parent company MSEK 2012 2011 37 MSEK 2012 2011 Current tax expenses/income 38 Dividends 28 20 Tax expenses for the year –3 –124 1) 39 Interest income, external 2 0 Adjustment of tax attributable to previous years 0 –3 1) Interest income, Group companies 36 39 –3 –127 40 Net profit/loss related to financial assets valued 41 at fair value 2) 31 –85 Deferred tax income Net profit related to financial assets availa- Temporary differences 3 2 42 ble-for-sale 4 – 3 2 43 Exchange rate gain/loss –4 3 Total reported tax expenses/income in the Total 97 –23 parent company 0 –125 44 1) Interest income refers to interest from items valued at accrued acquisition value. 45 2) Refers to shareholdings in Brinova Fastigheter AB SEK 27 million (–81). 46

PEAB ANNUAL REPORT 2012 59 NOTES Reconciliation of effective tax 1 Group Parent company MSEK 2012 2012 (%) 2011 2011 (%) MSEK 2012 2012 (%) 2011 2011 (%) 2 Pre-tax profit 813 1,195 Pre-tax profit –227 1,417 3 Tax with tax rate for the parent Tax in accordance with tax rate company –214 26.3 –314 26.3 for the parent company 60 26.3 –373 26.3 4 Effect of other tax rates for Non-deductible expenses –100 44.0 –94 6.6 5 foreign subsidiaries 4 –0.5 3 –0.3 Tax exempt income 41 –18.1 345 –24.3 6 Non-deductible expenses –116 14.3 –129 10.8 Standard interest on tax Tax exempt income 137 –16.9 88 –7.4 allocation reserve –1 0.4 – – 7 Deductible non profit-influencing Tax attributable to previous years 0 0.0 –3 0.2 8 items 28 –3.4 34 –2.8 Reported effective tax 0 0.0 –125 8.8 Revaluation of previous years 9 reported values of deferred taxes 32 –3.9 21 –1.8 10 Utilized non-capitalised loss carry-forwards 4 –0.5 2 –0.2 11 Tax attributable to previous years –17 2.1 40 –3.3 12 Changed tax rates 80 –9.8 –1 0.1 Increase in loss carry-forwards 13 without corresponding activation of deferred tax –42 5.2 –1 0.1 14 Standard interest on tax 15 allocation reserve –1 0.1 0 0.0 Adjustment of net profit for joint 16 ventures included in pre-tax profit 17 –2.1 5 –0.4 17 Reported effective tax –88 10.8 –252 21.1 18 19 20 Tax attributable to other comprehensive income 21 Group Pre-tax Tax After tax Pre-tax Tax After tax MSEK 2012 2011 22 Translation difference for the year when translating foreign 23 operations –12 4 –8 –1 1 0 Loss from exchange risk hedging in foreign operations –2 1 –1 1 1 24 Financial assets available for sale –87 –87 –17 –17 25 Cash flow hedges 17 10 27 –204 15 –189 Shares in associated companies/JV’s other comprehensive 26 income –1 –1 –2 –2 27 Other comprehensive income –85 15 –70 –223 16 –207 28 29 Reported in the balance sheet Deferred tax recoverables and tax liabilities 30 31 Changes recognized in Group Deferred tax recoverables Deferred tax liabilities Net income for the year 32 MSEK 2012 2011 2012 2011 2012 2011 33 Tangible assets –376 –454 –376 –454 83 Intangible assets –79 –96 –79 –96 11 34 Project and development properties –39 –40 –39 –40 11 35 Work-in-progress 12 7 12 7 5 36 Inventories –8 –5 –8 –5 –2 Accounts receivable 47 7 47 7 40 37 Recognized but not invoiced income –12 –18 –12 –18 7 38 Other receivables 3 2 3 2 1 39 Interest-bearing liabilities 116 145 116 145 –29 Provisions for pensions 2 3 2 3 –1 40 Provisions 61 31 61 31 29 41 Invoiced income not yet recognized 57 –7 57 –7 65 42 Other liabilities 139 100 139 100 39 Loss carry-forwards 197 190 197 190 –5 43 Tax allocation reserve –84 –83 –84 –83 44 Safety reserve –249 –249 –249 45 Tax recoverables/tax liabilities 634 485 –847 –703 –213 –218 5 Offset –403 –327 403 327 0 0 46 Net 231 158 –444 –376 –213 –218 5

60 PEAB ANNUAL REPORT 2012 Deferred Deferred Changes recognized in NOTES Parent company tax recoverables tax liabilities Net income for the year MSEK 2012 2011 2012 2011 2012 2011 1 Interest-bearing liabilities – – – –2 – –2 2 2 – – – –2 – –2 2 3 The specifications in the above tables have been reclassified in comparison with the previous year. 4 5 Ongoing correspondence between the Swedish Tax Authorities as Unreported deferred tax receivables well as assessments made together with external experts on the The fiscal value of loss carry-forwards for which deferred tax receiva- 6 deductability of individual deductions have been taken into consider- bles have not been reported in the balance sheet was SEK 1 million 7 ation when evaluating deferred tax receivables. Deferred tax attribut- (1) on 2012-12-31 and refers to the Polish and Latvian operations. able to deductions where the right to deduct is uncertain has not These deferred tax receivables are due in the years 2013-2017. 8 been reported as an asset. The value of the deferred tax from these Considering the losses in recent years in these operations and the 9 deductions per 2012-12-31 is approximately SEK 355 million (386). very limited business planned for the future it is not likely that the deferred tax receivables can be offset against future taxable profits. 10 Temporary differences between reported and fiscal value of Because the Norwegian operations have in recent years reported participations directly owned by the parent company losses, the loss carry-forwards of 2012 amounting to SEK 147 million 11 Normally there are no temporary differences between reported and have not been activated since part of total loss carry-forward is 12 fiscal values of shares directly owned by the parent company for uncertain if they can be used depending on taxable future sur- business purposes, i. e. neither upon divestment or distribution of plusses. The fiscal value of the unactivated loss carry-forward is 13 dividends, as such transactions are not taxable. Therefore no SEK 41 million. 14 deferred tax has been reported for these holdings. 15 16 17 18 19 20 Note 15 Earnings per share 21 Profit attributable to the parent company’s ordinary Earnings per share 22 Before dilution After dilution shareholders after dilution SEK 2012 2011 2012 2011 MSEK 2012 2011 23 Earnings per share 2.47 3.26 2.47 3.26 Profit attributable to the parent company's ordinary 24 shareholders 729 943 Earnings per share before dilution Interest rate effect on convertible promissory 25 The calculation of earnings per share for 2012 was based on profit for notes (after tax) 30 32 26 the year attributable to the parent company’s ordinary shareholders Profit attributable to the parent company's amounting to SEK 729 million (943) and on a weighted average ordinary shareholders after dilution 759 975 27 number of outstanding shares in 2012 of 294,962,746 (288,929,907). Weighted average number of outstanding ordinary shares 28 Earnings per share after dilution after dilution 1) 29 The calculation of earnings per share for 2012 was based on profit for Thousands of shares 2012 2011 the year attributable to the parent company’s ordinary shareholders 30 Weighted average number of outstanding ordinary amounting to SEK 759 million (975) and on a weighted average shares before dilution 294,963 288,930 number of outstanding shares in 2012 of 302,993,347 (297,729,907). 31 Effect of converting convertible promissory notes 8,030 8,800 Outstanding convertible promissory notes of 8,800,000 shares 32 matured on 30 November 2012 and there was no conversion to shares. Weighted average numbers of outstanding ordinary shares after dilution 302,993 297,730 33 The two components were calculated as follows: 1) Repurchased shares are not included in the calculation. 34 Weighted average numbers of outstanding ordinary shares before 35 dilution 1) 36 Thousands of shares 2012 2011 Total number of outstanding ordinary shares per 37 1 January 294,963 286,742 38 Acquisition/disposal of own shares during the year – 8,221 39 Total number of outstanding shares per 31 December 294,963 294,963 40 Weighted average numbers of outstanding 41 ordinary shares before dilution 294,963 288,930 42 43 44 45 46

PEAB ANNUAL REPORT 2012 61

NOTES Note 16 Intangible fixed assets

1 Intangible fixed Intangible fixed assets, external purchase assets, internally 2 developed Group 2012 Tenancies Other 3 Customer gravel and intangible Industrial 4 MSEK Goodwill Brands relations rock quarries assets construction Total Opening acquisition value 1,840 240 81 202 55 94 2,512 5 Purchases/acquisition of companies 16 16 6 Revaluation –6 –6 Translation differences for the year 1 1 1 3 7 Closing accumulated acquisition value 1,851 241 82 202 55 94 2,525 8 Opening depreciation – –84 –52 –27 –28 –28 –219 Depreciation for the year 1) –23 –12 –8 –9 –10 –62 9 Reclassifications –3 3 0 10 Closing accumulated depreciation – –110 –64 –32 –37 –38 –281 Opening write-downs –62 – – – – – –62 11 Revaluation 4 4 12 Write-downs for the year 2) –59 –59 Reclassifications –1 –1 13 Closing accumulated write-downs –118 – – – – – –118 14 Closing book value 1,733 131 18 170 18 56 2,126 15 16 Intangible fixed Intangible fixed assets, external purchase assets, internally 17 developed Group 2011 Tenancies Other 18 Customer gravel and intangible Industrial MSEK Goodwill Brands relations rock quarries assets construction Total 19 Opening acquisition value 1,775 215 71 202 50 93 2,406 20 Purchases/acquisition of companies 82 25 14 12 1 134 Sales/disposals –15 –4 –19 21 Reclassifications –1 –7 –8 22 Translation differences for the year –1 –1 Closing accumulated acquisition value 1,840 240 81 202 55 94 2,512 23 Opening depreciation – –62 –43 –16 –22 –18 –161 24 Sales/disposals 4 4 Depreciation for the year 1) –22 –13 –11 –8 –10 –64 25 Reclassifications 2 2 26 Closing accumulated depreciation – –84 –52 –27 –28 –28 –219 Opening write-downs –55 – – – – – –55 27 Sales through companies sold 15 15 28 Write-downs for the year 2) –21 –21 Reclassifications –1 –1 29 Closing accumulated write-downs –62 – – – – – –62 30 Closing book value 1,778 156 29 175 27 66 2,231 31 32

33 1) Annual depreciation is reported in the following lines of the income 2) Annual write-downs are reported in the following lines of the income statement: statement: 34 2012 2011 2012 2011 35 Production costs –60 –56 Production costs –59 –21 36 Sales and administrative expenses –2 –8 Sales and administrative expenses – – Total –62 –64 Total –59 –21 37 38 39 40 41 42 43 44 45 46

62 PEAB ANNUAL REPORT 2012

Goodwill impairment testing in cash generating units Investment needs: Assessment of the company’s investment needs are NOTES The balance sheet of the Peab Group 2012-12-31 included total based on the investments required to achieve the initially forecasted goodwill of SEK 1,733 million (1,778). Cash generating units with cash flow, i.e. not including expansion investments. Normally investment 1 significant reported goodwill values compared with the total reported levels are equivalent to the depreciation rate of tangible fixed assets. values of the Group per segment are specified below. 2 Tax burden: The tax rate in forecasts is based on Peab’s anticipated tax situation in Sweden, Norway and Finland in terms of tax rates, loss 3 MSEK 2012 2011 carry-forwards etc. 4 Construction Discount rate: Forecasted cash flows and residual values are discount- Nybyggarna i Nerike AB 22 22 ed to current value applying a weighted average cost of capital 5 Other units in Sweden 62 65 (WACC). Interest rates on borrowed capital has been adjusted to the 6 Peab Oy Group 56 68 market in each country. The required return on equity is based on the Björn Bygg AS Group 58 57 Capital Asset Pricing Model. A pre-tax weighted discount rate has been 7 used in calculating useful value. The discount rate used on cash gener- K Nordang AS 39 22 8 ating units in Sweden is an average of 6.1 percent (6.6), in Norway 7.3 Telemark Vestfold Entreprenör AS 24 24 percent (7.4) and in Finland 6.4 percent (6.7). 9 Other units in Norway 31 60 Civil Engineering 10 Berg & Falk AB 17 17 11 Olof Mobjer Entreprenad AB 15 15 12 Markarbete i Värmland AB 13 13 Other units in Civil Engineering 95 99 13 Industry 14 Peab Industri Group 1,280 1,295 15 Property Development Ängelholms Flygplats AB 21 21 16 Total 1,733 1,778 17 18 Goodwill write-downs Note 17 Tangible fixed assets 19 Group goodwill write-downs in 2012 amounted to SEK 59 million (21). In 2012 write-downs of SEK 43 million (2) stem from Construction oper- Group 2012 20 ations, SEK 13 million (3) are related to Industry and SEK 3 million (16) Buildings Machinery Construc- to Civil Engineering. Most of the write-downs in 2012 are a result of and and tion in 21 low profitability in existing operations. Write-downs from last year were MSEK land equipment progress Total 22 primarily generated from shutting down operations. For the cash gener- Opening acquisition value 2,331 6,540 47 8,918 ating units where the recovery value was calculated and no write-down Purchases 19 843 75 937 23 need was identified, company management has concluded that no Purchases through acquired 24 feasible possible changes in important assumptions would result in a companies 6 35 41 recovery value lower than the recorded value. Sales/disposals –22 –448 –470 25 Method for calculating recovery value Sales through companies sold –13 –13 26 The recovery value of all goodwill values has been based on the calcu- Reclassifications –215 25 –70 –260 27 lation of useful value for the cash generating units. The calculation Translation differences for the model is based on a discount of forecasted future cash flows relative to year 2 2 28 the unit’s reported values. These future cash flows are based on 5 year Closing accumulated 29 forecasts produced by the management of the respective cash gener- acquisition value 2,106 6,997 52 9,155 ating unit. Goodwill impairment tests have an infinite time horizon and Opening depreciation –544 –3,778 – –4,322 30 extrapolation of cash flow for the years after the forecast was calculated on a growth rate of 2 percent from year 6 onwards. Accumulated depreciation in 31 acquired companies –20 –20 Important variables when calculating useful value Sales/disposals 8 396 404 32 The following variables are important and common to all cash generat- Sales through companies sold 5 5 ing units in the calculation of useful value. 33 Reclassifications 8 14 22 34 Sales: The competitiveness of the business, expected changes in the Depreciation for the year –78 –708 –786 construction business cycle, general financial conditions, investment Closing accumulated 35 plans of public and municipal customers, interest rate levels and local depreciation –601 –4,096 – –4,697 market conditions. 36 Opening write-downs –5 –11 – –16 Operating margin: Historic profitability levels and operative efficiency, Sales/disposals 2 2 37 access to key personnel and qualified manpower, the ability to cooper- Write-downs for the year 1) –1 –1 38 ate with customers/customer relations, access to internal resources, Closing accumulated raises in salary, materials and subcontractor costs. write-downs –4 –11 – –15 39 Working capital requirements: Individual case assessment of whether Closing book value 1,501 2,890 52 4,443 40 the working capital reflects the company’s needs or whether it should be adjusted for the forecast period. A reasonable or cautious assump- 41 tion for future development is that it parallels net sales growth. A high 42 level of internally developed projects may entail a greater need for working capital. 43 44 45 46

PEAB ANNUAL REPORT 2012 63

NOTES Group 2011 Note 18 Participation in associated Buildings Machinery Construc- and and tion in companies 1 MSEK land equipment progress Total 2 Opening acquisition value 2,572 5,744 351 8,667 Group MSEK 2012 2011 3 Purchases 80 965 93 1,138 Purchases through acquired Acquisition value carried forward 88 208 4 companies 35 173 208 Disposal of associated companies –83 – 5 Sales/disposals –41 –356 –397 Dividend for the year –5 –136 Sales through companies sold –7 –66 –73 Profit from participation in associated companies 1 18 6 Reclassifications –310 17 –331 –624 Translation differences for the year –1 –2 7 Translation differences for the Book value carried forward – 88 year 2 –3 –1 8 Closing accumulated Specifications of Group’s holdings in associated companies acquisition value 2,331 6,540 47 8,918 9 2012 2011 Opening depreciation –471 –3,332 – –3,803 10 Company Share Book value, Share Book value, Accumulated depreciation in Registered office, Corp.Id.no percent MSEK percent MSEK 11 acquired companies –6 –68 –74 Catena AB Sales/disposals 10 267 277 12 Gothenburg, 556294-1715 – – 19.97 88 Sales through companies sold 17 17 Total – 88 13 Reclassifications –2 1 –1 Depreciation for the year –75 –664 –739 14 Consolidated values regarding the Group’s share of income and Translation differences for the costs, assets and liabilities from participation in joint ventures is spec- 15 year 1 1 ified below. 16 Closing accumulated depreciation –544 –3,778 – –4,322 MSEK 2012 2011 17 Opening write-downs –10 –7 – –17 18 Reclassifications 5 5 Income 6 25 1) Expenses –5 –7 19 Write-downs for the year –4 –4 Closing accumulated Profit 1 18 20 write-downs –5 –11 – –16 Fixed assets – 137 21 Closing book value 1,782 2,751 47 4,580 Current assets – 21 1) Annual write-downs are reported in the following lines of the income 22 Total assets – 158 statement: 23 2012 2011 Current liabilities – 7 24 Production costs 0 –4 Sales and administrative expenses –1 – Long-term liabilities – 63 25 Total –1 –4 Total liabilities – 70 26 Net assets/liabilities – 88 Parent Company Machinery and Associated company participation has been reported in Peab with a 27 equipment MSEK 2012 2011 quarterly delay since Catena is a listed company. Peab has divested 28 its holdings in Catena AB in 2012. Opening acquisition value 8 8 29 Closing accumulated acquisition value 8 8 Parent company 30 Opening depreciation –6 –6 MSEK 2012 2011 31 Depreciation for the year 0 0 Acquisition value carried forward 133 263 Closing accumulated depreciation –6 –6 Disposal of associated companies –133 – 32 Closing book value 2 2 Write-downs – –130 33 Book value carried forward – 133 Group financial leasing 34 Companies in the Group lease vehicles, construction machinery and other production equipment through many different financial leasing Specification of parent company’s direct holding of shares in 35 agreements. The recorded value related to Group financial leasing associated companies 36 amounted to SEK 601 million (582). When the leasing agreements 2012 2011 terminate Peab normally has a liability to buy equipment at its residu- Company Share Book value, Share Book value, 37 al value. The leased assets are owned by the lessors. Registered office, Corp.Id.no percent MSEK percent MSEK 38 Catena AB 39 Gothenburg, 556294-1715 – – 19.97 133 40 Total – 133 41 42 43 44 45 46

64 PEAB ANNUAL REPORT 2012

Note 19 Participation in joint ventures NOTES

Specification of Group holdings of participations in joint ventures 1 Book Book Book Book 2 Share value, Share value, Share value, Share value, Company, percent MSEK percent MSEK Company, percent MSEK percent MSEK 3 Registered office, Corp.ID.no 2012 2011 Registered office, Corp.ID.no 2012 2011 4 TCL S.à.r.l. KB Blåsut Åstorp Luxemburg, 19982401227 45 280 45 279 Stockholm, 969691-9043 50 3 50 2 5 S:t Eriks AB Mälarstrandens Utvecklings AB 6 Staffanstorp, 556203-4750 44.3 250 44.6 239 Västerås, 556695-5414 44 2 44 2 Nyckel 0328 AB Expressbetong AB 7 Stockholm, 556871-6541 33.3 169 30 210 Halmstad, 556317-1452 50 2 50 2 8 Visio Property Ltd Östersund Sport & Eventarena AB 9 Buckingham, 3871355 50 145 – – Östersund, 556707-0239 33.3 1 33.3 1 Mountain Resort Trysil AS Byggutveckling Svenska AB 10 Trysil, 996 284 115 50 54 50 25 Linköping, 556627-2117 50 1 50 1 11 Dockan Exploatering AB Fastighets AB ML4 Malmö, 556594-2645 33 41 33 41 Malmö, 556786-2155 50 1 50 0 12 Sicklaön Bygg Invest AB Trysil Suiter AS 13 Solna, 556911-5479 50 40 – – Trysil, 991 276 068 50 1 – – 14 Fotbollsstadion i Malmö Fastighets AB Trysil Hotellutvikling AS Malmö, 556727-4641 25 39 50 78 Trysil, 987 054 409 50 –17 – – 15 Telemark Vestfold Utvikling AS Fastigheten Preppen HB 16 Skien, 987 208 279 33.4 32 33.4 29 Gothenburg, 969684-0983 – – 50 18 Fastighets AB Centur Råsta Holding AB 17 Stockholm, 556813-6369 50 30 50 16 Solna, 556742-6761 – – 37.5 72 18 Fastighets AB Partille 11 Floodelokka 1 KS Gothenburg, 556518-4354 50 29 50 30 Skien, 955 230 658 – – 45 13 19 Österåkers Näs Fastighets HB Hemsö Gransångaren Fastigheter AB 20 Stockholm, 969723-2107 30 28 30 30 Stockholm, 556591-2994 – – 46 8 21 Log. Tostarp AB Fastighets AB Bryggeriet Helsingborg, 556667-8784 50 23 50 22 Gothenburg, 556141-6115 – – 50 4 22 Ale Exploatering AB Dampskipskaia H-fest AS 23 Gothenburg, 556426-2730 50 16 50 22 Hammerfest, 988 780 499 – – 50 2 Stora Hammar Exploatering AB Floodelokka 1 AS 24 Vellinge, 556763-4216 50 12 50 12 Skien, 995 230 666 – – 50 2 25 Fjällvärme i Lindvallen AB Others no specified items 1 1 Malung-Sälen, 556536-1895 50 12 50 12 Total 1,279 1,235 26 I Tolv AB 27 Eksjö, 556513-2478 35 12 35 5 The items below show Group value of participation in the income and 28 Svenska Fräs & Asfaltsåtervinning costs, assets and liabilities of joint ventures. SFA AB 29 Markaryd, 556214-7354 30 11 30 9 MSEK 2012 2011 Bondistranda Utvikling AS 30 Income 1,017 1,108 Oslo, 992 512 741 50 9 50 0 Expenses –936 –1,102 31 Skiab Invest AB Less: Result from property projects reported Malung-Sälen, 556848-5220 50 8 50 9 32 in gross profit –102 – Kungsörs Grus AB Result –21 6 33 Kungsör, 556044-4134 50 7 50 7 34 Sjökrona Exploatering AB Fixed assets 5,888 2,746 Helsingborg, 556790-5624 25 6 25 6 35 Current assets 1,423 1,871 Skanör Invest AB 36 Båstad, 556713-5743 50 6 50 6 Total assets 7,311 4,617 KB Älvhögsborg 37 Trollhättan, 916899-2734 50 5 50 5 Long-term liabilities 5,136 2,869 38 Hälsostaden i Ängelholm AB Current liabilities 896 513 Ängelholm, 556790-5723 33.3 5 33.3 5 Total liabilities 6,032 3,382 39 Nya Bara Utvecklings AB Net assets/liabilities 1,279 1,235 40 Bara, 556858-4311 50 5 – – 41 Kirkebakken Vest AS Horten, 988 796 174 50 4 50 4 42 Tomasjord Park AS 43 Tromsö, 983 723 853 50 3 50 3 Log. Sunnanå AB 44 Helsingborg, 556699-7788 50 3 50 3 45 46

PEAB ANNUAL REPORT 2012 65

NOTES Note 20 Receivables from Group companies Note 23 Other receivables

1 Parent company Other long-term receivables 2 MSEK 2012 2011 Group Parent company MSEK 2012 2011 2012 2011 Acquisition values carried forward 1,447 1,015 3 Receivables from joint ventures 24 177 – – Added receivables 1,523 814 Other long-term receivables 84 182 1 1 4 Settled receivables –1,384 –382 Total 108 359 1 1 5 Book value carried forward 1,586 1,447 6 Other current receivables 7 Group Parent company MSEK 2012 2011 2012 2011 8 Note 21 Interest-bearing receivables Receivables from joint ventures 2 103 – – 9 Other current receivables 206 362 2 – Interest-bearing long-term receivables Total 208 465 2 – 10 Group Parent company 11 MSEK 2012 2011 2012 2011 Receivables from joint ventures 969 895 – – 12 Other interest-bearing Note 24 Project and development property 13 receivables 188 419 105 – Total 1,157 1,314 105 – Group 14 MSEK 2012 2011 Directly owned project and development property 5,479 4,485 15 Interest-bearing current receivables Participation in Finnish housing companies 333 246 MSEK 2012 2011 2012 2011 16 Repurchased participation in tenant-owner's Receivables from joint ventures 293 31 – – associations and similar 425 437 17 Other interest-bearing Other 2 12 receivables 274 206 – – 18 Total 6,239 5,180 Total 567 237 – – 19 Project and development properties were written down for a total of 20 SEK 22 million (14). 21 Note 22 Other long-term securities holdings Recovery 22 Of book value of project and development property of SEK 6,239 Group million (5,180) approximately SEK 4,800 million (approximately 3,800) 23 MSEK 2012 2011 is expected to be recovered through the start of production or sales 24 Financial assets recognized at fair value through more than 12 months after the balance sheet day. The remaining part the income statement is expected to be recovered within 12 months of the balance sheet 25 Fair value option day. 26 Shares and participation 1) 15 530 27 Available-for-sale financial assets Note 25 Inventories Shares and participation 295 191 28 Loan receivables 132 164 Group 29 Total 442 885 MSEK 2012 2011 30 1) Of the Group holdings in 2011 SEK 491 million refer to shares i in Brinova Raw materials and consumables 88 74 Fastigheter AB. Products in progress 76 56 31 Finished products and goods for resale 301 286 Total 465 416 32 Of which, other long-term securities holdings valued at fair value 33 Parent Company 34 MSEK 2012 2011 Acquisition values Note 26 Work-in-progress 35 Opening balance 1 January 290 290 At the end of the year there was work-in-progress for a total of SEK Acquired assets 1 – 36 1,106 million (1,689) in the Group refering to costs in housing projects 37 Divested assets –272 – reported according to IAS 18, Revenue. Closing balance per 31 December 19 290 38 39 Accumulated change in value through the income statement Note 27 Accounts receivable 40 Opening balance 1 January 211 296 Accounts receivables were written down for factual and feared bad 41 Unrealized change in value through the income statement for the year 31 –85 debts for a total of SEK 35 million (74). Factual bad debts amounted 42 Divested assets –246 – to SEK 37 million (5) in the Group, of which SEK 30 million were written down in 2011. The loss was a result of some of the company’s cus- Closing balance per 31 December –4 211 43 tomers going bankrupt. The parent company had no bad debts. Book value 31 December 15 501 44 45 For additional information about fair value per category and class, see Note 36. 46

66 PEAB ANNUAL REPORT 2012

Note 28 Construction contracts Note 30 Equity NOTES

Recognized income not yet invoiced Shares and share capital 1 Group Group Number of 2 MSEK 2012 2011 issued fully Share capital, A shares B shares paid shares SEK Recognized income on incomplete contracts 37,455 30,682 3 Number of issued Invoicing on incomplete contracts –32,215 –26,102 shares 1 January 4 Total 5,240 4,580 2012 34,319,957 261,729,773 296,049,730 1,583,866,056 5 Total number of Invoiced income not yet recognized issued shares 31 6 Group December 2012 34,319,957 261,729,773 296,049,730 1,583,866,056 MSEK 2012 2011 7 Invoiced sales on incomplete contracting An A share entitles the holder to 10 votes and a B share to 1 vote. The 8 projects 45,433 42,079 par value of all shares is SEK 5.35. 9 Recognized income on incomplete For those shares in the company’s own holding (see below) all rights contracting projects –40,187 –37,810 have been revoked until these shares are reissued. 10 Total 5,246 4,269 Repurchased own shares that have reduced the equity item Profit 11 Recognized income from contracts in progress is reported with the brought forward including profit for the year 12 application of percentage of completion method. The degree of Amount that recognition is calculated on the basis of the project costs incurred at Number of affected equity, 13 shares 1) MSEK 2) the end of the period in relation to the project income corresponding 14 to project costs for the whole project. 2012 2011 2012 2011 Contract assignments are reported in the balance sheet on the Opening repurchased 15 basis of gross project for project, either as Recognized but non-in- own shares 1,086,984 9,308,220 929 1,213 voiced income in current assets or as Invoiced but unrecognized Purchases during the 16 income in current liabilities. Projects that have higher recognized year – 360,000 – 16 17 incomes than the amount invoiced are reported as assets, while Divestments during the projects that have been invoiced for more than recognized income year – –8,581,236 – –300 18 are reported as liabilities. Closing repurchased 19 own shares 1,086,984 1,086,984 929 929

1) A withdrawal of 5,500,000 shares was made in 2007. 20 2) Amount affecting equity refers to the accumulated net sum of acquired and divested 21 Note 29 Prepaid expenses and accrued own shares. income 22 Other contributed capital 23 Parent Company Refers to equity contributed by the owners. Includes premiums paid in MSEK 2012 2011 conjunction with new issues. 24 Accrued interest income 1 2 25 Prepaid overhead expenses 4 5 Reserves Translation reserve Total 5 7 26 The translation reserve comprises all exchange rate differences generated by translating the financial reports from foreign companies 27 prepared in another currency than the one used in Group financial 28 statements. The parent company and the Group present their reports in Swedish crowns (SEK). The translation reserve also consists of 29 exchange rate differences from extended investment in foreign 30 business and re-borrowing from foreign operations. 31 Fair value reserve The fair value reserve incudes the accumulated net change of the fair 32 value of financial assets available-for-sale until the asset has been eliminated from the balance sheet. 33

Hedging reserve 34 The hedging reserve comprises the effective part of the accumulated 35 net changes in fair value in a hedge instrument attributable to a hedged risk in a cash flow which has yet not affected the income statement. 36 37 Profit brought forward including profit for the year Profit brought forward including profit for the year consists of profit in 38 the parent company and its subsidiaries, associated companies and 39 joint ventures. Previous provisions for reserve funds, excluding transferred premium funds, and previous investment funds are included in 40 this equity item. 41 Repurchased shares 42 Repurchased shares comprise the purchase cost minus the sales income for own shares held by the parent company. As of 31 December 43 2012, the Group’s holding of own B shares was 1,086,984 (1,086,984). 44 45 46

PEAB ANNUAL REPORT 2012 67

NOTES Dividend Note 31 Interest-bearing liabilities After the balance sheet day the Board of Directors and the CEO 1 proposed the following dividend; A cash dividend of SEK 1.60 (2.10) Long-term liabilities per share totalling SEK 473,679,568 (621,704,433), calculated on the Group 2 number of registered shares. Total dividends are calculated on out- MSEK 2012 2011 3 standing shares at the time of distribution. The dividend will be proposed for adoption by the AGM on 14 May Bank loans 4,239 5,363 4 2013. Convertible promissory notes – 592 5 Bonds 1,993 998 The parent company Financial leasing liabilities 403 446 Restricted reserves 6 Liabilities to joint ventures 9 – Restricted reserves may not be reduced by the distribution of dividends. 7 Other long-term liabilities 128 – Reserve fund Total 6,772 7,399 8 The purpose of the reserve fund is to retain a part of the net profit 9 which is not allocated to cover balanced losses. The reserve also includes amounts transferred to the share premium reserve before Current liabilities 10 1 January 2006. Bank loans including overdraft facilities 1,143 722 Commercial paper 343 818 11 Unrestricted equity Current part of leasing liabilities 226 195 12 Together with profit for the year the following funds make up unrestricted equity, i.e. the amount available for dividends to the shareholders. Liabilities to joint ventures 100 – 13 Other current liabilities 42 – Premium reserve 14 When shares are issued at a premium, i.e. when more must be paid Total 1,854 1,735 for the shares than their nominal price, an amount equivalent to the Convertible promissory notes 2007/2012 1) 15 amount received in excess of the share’s nominal value is transferred 16 to the share premium reserve. The amount transferred to the share Group premium reserve starting 1 January 2006 is included in unrestricted MSEK 2012 2011 17 capital. Nominal value after issue of 8,800,000 convertible promissory notes – 598 18 Special reserves Original amount classified as equity – –35 19 Refers to allocations to reserves upon the reduction of share capital for use as resolved by the AGM. Capitalized interest – 28 20 Recorded liability on 31 December – 591 Reserve for fair value 21 The company uses the Annual Accounts Act rules for the valuation of 1) The convertible promissory notes ran from 1 December 2007, with settlement day in financial instruments at fair value according to chapter 4 paragraph January 2008, to 30 November 2012 with a coupon interest rate of 5.44 percent. 22 14a-e. A change in value is recognized in the reserve for fair value Convertible promissory notes Peab Industri 2007/2012 2) 23 when it refers to a hedging instrument and the principles applied for hedge accounting allow for a portion or the entire change in value to Group 24 be recognized in equity. A change in value caused by an exchange MSEK 2012 2011 25 rate change on a monetary item which is part of the company’s net Remaining part of the liability, 2007/2012 – 1 investment in a foreign unit is recognized in equity. 26 Recorded liability on 31 December – 1 2) Remaining part of Peab Industri’s personnel convertibles which had not been acquired 27 Profit brought forward per 31 December 2011. Consists of the previous year’s profit brought forward after the distri- 28 bution of profits. Financial leasing liabilities 29 Financial leasing liabilities fall due for payment as follows; 30 Group Minimum Minimum leasing Capital leasing Capital 31 charge Interest amount charge Interest amount 32 MSEK 2012 2012 2012 2011 2011 2011 Within one year 234 8 226 205 10 195 33 Between one and 34 five years 374 13 361 406 19 387 Later than five 35 years 44 2 42 62 3 59 36 Total 652 23 629 673 32 641 37 Variable leasing fees were SEK 9 million (–4).

38 For futher information concerning Group financial leasing, see note 17. 39 40 41 42 43 44 45 46

68 PEAB ANNUAL REPORT 2012

Note 32 Pensions Assumptions for defined benefit plan obligations NOTES The most important actuarial assumptions on balance sheet date 2012 2011 Defined benefit pension plans Discount rate 2.20% 2.68% 1 Group Expected return on plan assets 3.60% 4.08% 2 Future salary increases 3.25% 2.60% MSEK 2012 2011 3 Present value of unfunded obligations 7 15 Future increase in pensions 2.25% 3.00% Present value of fully or partially funded obligations 16 48 4 Historical information Total net present of obligations 23 63 5 MSEK 2012 2011 2010 2009 2008 6 Fair value of plan assets –8 –30 Present value of defined benefit plan obligations 23 63 39 47 37 Net present value of net obligations 15 33 7 Fair value of plan assets –8 –30 –21 –20 –15 8 Unrecognized actuarial gains (+) and losses (–) –8 –20 Plan deficit 15 33 18 27 22 Net reporting of defined benefit plans recognized 9 Retirement pension and family pension obligations for white-collar work- as provisions for pensions 7 13 ers in Sweden are secured through insurance with Alecta. According to 10 a statement from the Swedish Financial Reporting Board, UFR 3, this is Review of defined benefit plans a defined benefit plan that comprises several employers. The company 11 Defined benefit plans consist of the Swedish ITP plan for white-collar did not have the necessary information required to recognize this plan workers which is secured through insurance with Alecta, pension plans as a defined benefit plan in the 2012 financial year. Therefore the -pen 12 for a small number of executive personnel in Norway and the AFP sion plan which is secured through insurance with Alecta is reported as 13 pension in Norway. As Alecta cannot submit the information required a defined contribution plan. Annual charges for pension insurance from to account for the ITP plan as a defined benefit plan, it is reported as Alecta amounted to SEK 149 million (133). Alecta’s surplus may be 14 a defined contribution plan (see below). distributed among the policyholders and/or the insured. At the end of 2012, Alecta’s surplus in the form of collective consolidation level 15 Changes in the current value of obligations for defined benefit amounted to 129 percent (113). The collective consolidation level is 16 plans made up of the market value of Alecta’s assets as a percentage of the insurance undertakings calculated in accordance with Alecta’s insur- 17 MSEK 2012 2011 ance adjustment assumptions, which do not accord with IAS 19. Net obligations for defined benefit plans as 18 of 1 January 63 39 Defined contribution plans 19 Paid out remunerations –8 –3 The Group has defined contribution plans which are entirely paid for Cost for service during the current period by the company. Regular payments are made to these plans accord- 20 and interest expenses 3 5 ing to the rules of each plan. 21 Actuarial gains and losses 3 7 Group Parent company Effect of business acquisitions – 16 MSEK 2012 2011 2012 2011 22 Settlements and curtailments –39 – Cost of defined contribution plans 23 1) 504 448 12 17 Translation differences 1 –1 1) This includes SEK 149 million (133) referring to an ITP plan financed in Alecta, see 24 Obligations for defined benefit plans on 31 above. December 23 63 25

Changes in the recognized fair value of plan assets 26 MSEK 2012 2011 27 Fair value for plan assets as of 1 January 30 21 28 Contributions from employer 1 2 Expected return 0 1 Note 33 Provisions 29 Difference between expected and actual return 0 –1 30 Provisions which are long-term liabilities Settlements and curtailments –23 – 31 Effect of business acquisitions – 7 Group Fair value of plan assets on 31 December 8 30 MSEK 2012 2011 32 Guarantee risk reserve 282 231 33 Expenses charged to income statement Re-establishment costs 72 63 MSEK 2012 2011 Disputes 2 6 34 Cost for service during the current period 3 6 Other 38 10 35 Interest expenses on obligations 0 1 Total 394 310 Expected return on plan assets 0 –1 36 Gains and losses on settlements and curtailments –2 – Provisions which are current liabilities 37 Group Recognized actuarial gains (–) and losses (+) 2 2 38 Total net expense in the income statement 3 8 MSEK 2012 2011 Guarantee risk reserve 85 63 39 Expenses are recognized in the following lines in the Close-down costs 18 13 40 income statement Disputes 65 44 MSEK 2012 2011 Other 5 13 41 Production costs 3 3 Total 173 133 42 Sales and administrative expenses 0 4 Financial expenses 0 1 43 Total 3 8 44

Actual return on plan assets 0 0 45 46

PEAB ANNUAL REPORT 2012 69

NOTES Provisions which are long-term liabilities Note 34 Other liabilities Group 1 2012 Group Re-estab- MSEK 2012 2011 2 Guarantee lishment MSEK risk reserve costs Disputes Other Other long-term liabilities 3 Opening book value 231 63 6 10 Additional purchase price 3 21 4 Provisions set aside during Interest rate swaps 106 57 the year 138 15 1 38 Other long-term liabilities 33 32 5 Amounts requisitioned Total 142 110 6 during the year –85 –6 –5 –10 Reversed unutilized 7 provisions during the year –2 0 Other current liabilities Liabilities to joint ventures – 17 8 Closing book value 282 72 2 38 Additional purchase price 50 23 9 Provisions which are current liabilities Tax at source, social security costs 178 179 Group Value added tax 412 524 10 2012 Re-estab Guarantee lishment On account work-in-progress 379 736 11 MSEK risk reserve costs Disputes Other Other current liabilities 213 140 12 Opening book value 63 13 44 13 Total 1,232 1,619 Provisions set aside during 13 the year 57 16 65 1 Parent company 14 Amounts requisitioned MSEK 2012 2011 during the year –14 –11 –44 –9 Other current liabilities 15 Reversed unutilized Tax at source 1 1 16 provisions during the year –21 Closing book value 85 18 65 5 Other current liabilities 2 5 17 Total 3 6 18 Guarantee risk reserve Refers to the estimated cost of remedying faults and deficiencies in 19 terminated projects that arise while the project is under warranty. Resources are consumed during the guarantee period of the project 20 which is generally two to five years. As the effect of the time point for 21 payment is not significant expected future disbursements are not valued at their current value. Note 35 Accrued expenses and deferred 22 income 23 Close-down costs Refers to costs in business area Construction in Norway and Finland. Parent company 24 MSEK 2012 2011 Re-establishment costs Accrued payroll expenses 9 9 25 Refers to restoration costs for gravel pits and rock quarries after termi- Accrued social security expenses 6 5 26 nation of operations. The provision grows in relation to the amount quarried and is reversed after restoration is complete. The reserved Accrued interest expenses – 3 27 sum is expected to be used successively after operations are termi- Accrued overhead expenses 1 1 28 nated. The estimated restoration time is 1 to 15 years. Total 16 18 29 Disputes Refers to disputes in business area Industry and Construction. 30 31 Others Refers to provisions in business area Construction, Industry 32 and Property Development. 33 34 35 36 37 38 39 40 41 42 43 44 45 46

70 PEAB ANNUAL REPORT 2012

Note 36 Valuation of financial assets and liabilities at fair value NOTES

Under IAS 39, Financial instruments, financial instruments are valued either at accrued acquisition value or fair value depending on which category 1 they belong to. Classification largely depends on the purpose of the holding. Items which have been the object of valuation at fair value are listed shareholdings, different types of derivatives and unlisted funds. 2 The fair value of listed shareholdings and share derivatives are calculated according to the closing price at the end of the accounting period. 3 Market values from the managing financial institution were used to calculate the fair value of unlisted shareholdings. When calculating the fair value of interest-bearing receivables and liabilities and interest rate swaps, future cash flows were discounted to the list- 4 ed market interest for the remaining terms of maturity. Spot rates on the balance sheet date were used to calculate the value of currency swaps. The booked value of non-interest-bearing asset and liability items such as accounts receivable and accounts payable with a remaining maturity of 5 less than six months is believed to reflect their fair value. The adjacent tables show the reported values compared with the estimated fair value per 6 type of financial asset and liability. 7 8

9 10 Financial Financial assets valued liabilities 11 at fair value Financial valued at fair through Derivatives assets Accounts value through Other Total 12 income used in hedge available- and loan income financial recognized Group statement accounting for-sale receivables statement liabilities value Total fair value 13 MSEK 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 14 Financial assets Other securities held as fixed assets 15 1) 530 1) 295 191 132 164 442 885 442 885 15 Interest-bearing long-term receivables 1,157 1,314 1,157 1,314 1,165 1,327 16 Other long-term receivables 1 107 357 107 358 107 358 17 Accounts receivable 7,095 6,535 7,095 6,535 7,095 6,535 Interest-bearing current receivables 567 237 567 237 569 234 18 Prepaid expenses and accrued income 1 2) 1 2) 2 7 17 8 20 8 20 19 Other current receivables 5 82 343 82 348 82 348 20 Current holdings 10 9 10 9 10 9 Liquid funds 429 961 429 961 429 961 21 Total financial assets 16 531 – 8 295 191 9,586 9,937 – – – – 9,897 10,667 9,907 10,677 22

Financial liabilities 23 Interest-bearing long-term liabilities 6,772 7,399 6,772 7,399 6,764 7,407 24 Other long-term liabilities 108 57 34 53 142 110 142 110 25 Provisions for pensions 7 13 7 13 7 13 Interest-bearing current liabilities 1,854 1,735 1,854 1,735 1,854 1,735 26 Accounts payable 4,534 4,508 4,534 4,508 4,534 4,508 27 Accrued expenses and deferred income 8 2 (2 20 20 20 30 20 30 28 Other current liabilities 2 15 244 115 246 130 246 130 Total financial liabilities – – 110 80 – – – – – 2 13,465 13,843 13,575 13,925 13,567 13,933 29

Unrealized profit/loss 10 10 8 –8 30 1) Refers to shares and participations where “fair value option” was applied 31 2) Refers to derivatives classified as “holdings for trading purposes” 32 The effect of valuing financial instruments at fair value was included in the Group’s profit for a total of SEK 39 million (–79), 33 of which SEK 27 million (–81) referred to market valuation of shareholdings in Brinova. Market valuation of interest rates and currency swaps was included for a total of 8 (2). 34 35 36 37 38 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2012 71

NOTES

Financial assets 1 valued at fair value through income Financial assets Accounts and loan Other financial Total recognized 2 Parent company statement available-for-sale receivables liabilities value Total fair value 3 MSEK 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 Financial assets 4 Long-term receivables Group companies 1,586 1,447 1,586 1,447 1,586 1,452 5 Other securities held as fixed assets 15 1) 501 1) 256 191 6 17 277 709 277 709 6 Interest-bearing long-term receivables 105 105 106 Other long-term receivables 1 1 1 1 1 1 7 Current receivables Group companies 46 37 46 37 46 37 8 Prepaid expenses and accrued income 1 1 1 9 Liquid funds 3 2 3 2 3 2 Total financial assets 15 501 256 191 1,748 1,504 – – 2,019 2,196 2,020 2,201 10 Financial liabilities 11 Long-term liabilities Group companies 7,122 4,794 7,122 4,794 7,122 4,794 12 Convertible promissory notes 590 590 595 Accounts payable 55 11 55 11 55 11 13 Current liabilities Group companies 2 2 2 2 2 2 14 Accrued expenses and deferred income 3 3 3 15 Total financial liabilities – – – – – – 7,179 5,400 7,179 5,400 7,179 5,405 16 Unrealized profit/loss 1 5 –5 1) Refers to shares and participations where “fair value option” was applied 17 18 The effect of valuing financial instruments at fair value was included in the parent company´s profit for a total of SEK 31 million (–85), of which SEK 27 million (–81) referred to the market valuation of shareholdings in Brinova. 19 Fair value 20 Measurement of fair value is based on a three level hierarchy. 21 Level 1: prices that reflect quoted prices on an active market for identical assets Level 2: based on direct or indirect observable inputs not included in level 1 22 Level 3: based on inputs unobservable to the market 23 The table below shows the allocated level of financial assets and financial liabilities recognized at fair value 24 in the Group balance sheet. 25 Group Level 1 Level 2 Level 3 Total 26 MSEK 2012 2011 2012 2011 2012 2011 2012 2011 27 Financial assets Other securities held as fixed assets 271 692 39 29 310 721 28 Other long-term receivables 1 1 29 Prepaid expenses and accrued income 1 3 1 3 30 Other current receivables 5 5 Total financial assets 271 692 1 9 39 29 311 730 31 Financial liabilities 32 Other long-term liabilities 108 57 108 57 33 Accrued expenses and deferred income 10 10 Other current liabilities 2 15 2 15 34 Total financial liabilities – – 110 82 – – 110 82 35

36 The table below is a reconciliation between the opening and closing balance for assets included in level 3. 37 Group Other securities held as 38 fixed assets 1) 39 MSEK 2012 2011 Opening balance 29 13 40 Investments during the year 8 18 41 Repayment of investments 0 –4 Reported in net financial items in profit – 2 42 for the year 43 Reported in other comprehensive income 2 – 44 Closing balance 39 29 1) Refers in its entirety to an investment in a unlisted fund. The holding is valued at fair value 45 through other comprehensive income. 46

72 PEAB ANNUAL REPORT 2012

Note 37 Financial risks and financial policy NOTES

Finance and treasury the end of the year, the average loan period for utilised credits was 31 1 The Group is exposed to various types of financial risks through its months (30), for unutilised credits 21 months (23), and for all granted operations. The term financial risk refers to fluctuations in the compa- credits 25 months (28). Peab’s base financing was renegotiated and 2 ny’s profits and cash flow resulting from changes in exchange rates, extended in 2007. The bilateral loan agreements from 2007 amounted 3 interest rates, refinancing and credit risks. Group finance and treasury at the end of the year to SEK 2,950 million (2,950) split between 5 is governed by the financial policy established by Peab’s Board of banks (5). The loan agreements, which are not subject to amortiza- 4 tion, run until September 2014. There are also additional credit facili- Directors. The policy is a framework of guidelines and regulations in 5 the form of a risk mandate and limitations in finance and treasury. The ties of SEK 1,200 million (200). The base financing in Peab Industri, Board has appointed a finance and treasury committee which is which was acquired in December 2008 after the company was distrib- 6 chaired by the Chairman of the Board. It is authorised to take deci- uted to Peab’s shareholders in 2007, is made up of bilateral loan sions that follow the financial policy in between meetings of the agreements totaling SEK 2,300 million divided among four banks. 7 Board. The finance and treasury committee must report any such The loan agreements, which are not subject to amortization, run until 8 decisions at the next meeting of the Board. The Group staff Finance June 2014. The bilateral loan agreements all have the same basic and treasury and the Group’s internal bank Peab Finans AB manage documentation and contain financial covenants in the form of interest 9 coordination of Group finance and treasury. The overall responsibility coverage ratios and equity/assets ratios that the Group must meet, of the finance and treasury function is to provide cost-effective fund- which is standard for this kind of loan. Peab had exceeded these key 10 ing and to minimise the negative effects on Group profit due to the ratios by a broad margin at the end of the year. 11 price of financial risks. Peab set up a lending program for commercial papers in 2004. The liquidity risk refers to the risk of Peab having difficulties in meet- Under the program, Peab can issue commercial papers for a maxi- 12 mum of SEK 3,5 billion. The borrower is Peab Finans AB and the ing its payment obligations as a result of a lack of liquidity or prob- 13 lems in converting or recieving new loans. The Group has a rolling guarantor is Peab AB. At the end of the year, Peab had outstanding one month liquidity plan for all the units in the Group. Plans are updat- commercial papers worth SEK 343 million (818). 14 ed each week. Group forecasts also comprise liquidity planning in the Peab issued convertible bonds to all employees in December 2007. medium term. Liquidity planning is used to handle the liquidity risk Settlement was in January 2008. A total of 8.8 million convertibles 15 and the cost of Group financing. The objective is for the Group to be were issued for a total nominal sum of SEK 598 million. The converti- 16 able to meet its financial obligations in favourable and unfavourable bles of 2007/2012 matured on 30 november 2012. None were con- market conditions without running into significant unforeseen costs. verted to shares and the loans have been paid in full. 17 In 2011 Peab issued unsecured bonds for a nominal value of SEK Liquidity risks are managed centrally for the entire Group by the 18 central Finance and treasury function and at year-end liquid funds 1,000 million that run for three, four and five years. In February 2012 were available as shown below. Peab received FSA approval and registration for the issuance of 19 The financial policy dictates that Group net debt should mainly be Medium Term Notes (MTN) with a loan limit of SEK 3 billion. During covered by loan commitments that mature between 1 and 7 years. At 2012 bonds for SEK 1,000 million have been issued under the MTN 20 program. At the end of the year Peab had outstanding bonds totaling 21 Available liquid funds SEK 2,000 million (1,000). Total credit commitments, excluding unutilized leasing lines, exclud- Group 22 ing that part of the certificate program which has not been utilized MSEK 2012-12-31 2011-12-31 and excluding the unutilized part of the MTN program amounted to 23 Liquid funds and bank holdings 439 1,1221) SEK 13,855 million (12,969) per 31 December 2012. SEK 8,633 million 24 Unutilized overdraft facilities 1,369 1,189 (9,147) was utilized of the total credit commitments. Other unused credit lines 3,853 2,633 25 Total 5,661 4,944 26 1) Of which SEK 200 million are reported as interest-bearing current receivables. 27 28

Age analysis of financial liabilities, undiscounted cash flow including interest 29 Average interest Nominal value, 30 Group 2012 rate on balance original Amount Maturing Maturing Maturing Maturing Maturing Maturing MSEK Currency sheet date, % currency SEK in 2013 in 2014 in 2015 in 2016 in 2017 2018– 31 Bank loans SEK 2.3 5,065 5,065 1,077 3,081 170 94 124 519 32 Bank loans NOK 4.0 359 419 231 23 142 1 1 21 Bank loans EUR 1.4 55 476 44 34 8 4 4 382 33 Commercial paper SEK 2.8 346 346 346 – – – – – 34 Bonds SEK 3.5 2,229 2,229 70 570 555 1,032 2 – 35 Financial leasing liabilities SEK 2.8 492 492 184 157 71 20 43 17 Financial leasing liabilities NOK 4.0 144 168 39 32 25 21 19 32 36 Total interest-bearing financial liabilities 9,195 1,991 3,897 971 1,172 193 971 37 Accounts payable SEK – 3,985 3,985 3,985 38 Accounts payable NOK – 357 416 416 Accounts payable EUR – 15 133 133 39 Other liabilities SEK – 298 298 264 17 4 0 4 9 40 Interest rate swaps – 116 116 31 25 20 17 10 13 41 Total non-interest-bearing financial liabilities 4,948 4,829 42 24 17 14 22 42 Total financial liabilities 14,143 6,820 3,939 995 1,189 207 993 43 44 45 46

PEAB ANNUAL REPORT 2012 73

NOTES Average interest Nominal value, Group 2011 rate as per blance original Amount Maturing Maturing Maturing Maturing Maturing Maturing 1 MSEK Currency sheet day, % currency SEK in 2012 in 2013 in 2014 in 2015 in 2016 2017– Bank loans SEK 3.3 4,664 4,664 1,096 269 2,430 331 190 348 2 Bank loans NOK 3.7 1,019 1,173 467 212 480 14 – – 3 Bank loans EUR 2.0 86 769 113 22 236 11 7 380 4 Commercial paper SEK 3.1 825 825 825 – – – – – Bonds SEK 4.3 1,193 1,193 43 43 243 134 730 – 5 Convertible promissory notes SEK 5.4 622 622 622 – – – – – 6 Financial leasing liabilities SEK 3.3 569 569 196 163 130 24 21 35 Financial leasing liabilities NOK 3.8 109 126 20 25 25 9 21 26 7 Total interest-bearing financial liabilities 9,941 3,382 734 3,544 523 969 789 8 Accounts payable SEK – 3,937 3,937 3,937 – – – – – 9 Accounts payable NOK – 354 407 407 – – – – – Accounts payable EUR – 18 164 164 – – – – – 10 Other liabilities SEK – 183 183 145 2 18 2 1 15 11 Interest rate swaps – 60 60 16 15 10 8 6 5 12 Currency swaps – 10 10 10 – – – – – Total non-interest-bearing financial liabilities 4,761 4,679 17 28 10 7 20 13 Total financial liabilities 14,702 8,061 751 3,572 533 976 809 14 15 Interest rate risk 16 The interest rate risk is the risk that Peab’s cash flow or the value of on total borrowing may not exceed 24 months. Peab has chosen rela- 17 financial instruments may vary with changes in market interest rates. tively short fixed interest periods for outstanding credits. Per 31 Interest rate risk can result in changes in fair values and cash flows. December 2012 there were interest rate swaps in SEK 3,300 million 18 A crucial factor affecting interest rate risk is the fixed interest period. (2,550) with maturity between 3 and 10 years at an effective interest 19 On 31 December 2012, interest-bearing net debt amounted to SEK rate of 2.5 percent (2.6) according to the table below. Peab pays a fixed 6,470 million (6,626). Total interest-bearing liabilities amounted to SEK annual interest rate and receives floating rates (Stibor 3 months) in the 20 8,633 million (9,147), of which SEK 1,854 million (1,735) were short- interest rate swap. The swap agreement is recognized at fair value in term. The financial policy dictates that the average fixed interest period book closing. Per 2012-12-31 this fair value was SEK –108 million (–57). 21 22 Rate derivates 23 Nominal value, Amount Maturing in Maturing in Maturing in Maturing in Maturing in Maturing MSEK Currency Effective rate % original currency SEK 2013 2014 2015 2016 2017 2018– 24 Interest rate swaps 2012-12-31 SEK 2.5 3,300 3,300 450 – 500 600 650 1,100 25 Interest rate swaps 2011-12-31 SEK 2.6 2,550 2,550 450 – 500 600 – 1,000 26 27 As the table below shows, the fixed interest rate period for SEK 5,206 Currency risks million (6,423) of the Group’s total interest-bearing liabilities, including The risk that fair values and cash flows from financial instruments may 28 derivatives, is less than 1 year. Interest-bearing asset items totaling fluctuate with changes in the value of foreign currencies is referred to 29 SEK 1,322 million (1,494) have short fixed interest rate periods, with as a currency risk. the result that the fixed interest rate period for SEK 3,884 million 30 (4,929) of Group net debt, including derivatives, is less than 1 year, Financial exposure making these liabilities directly susceptible to changes in market inter- 31 Group borrowing is done in local currencies to reduce currency risks est rates. Since the majority of the financial liabilities have a short in operations. Assets and liabilities in foreign currency are translated 32 maturity most of the interest rate risk is considered a cash flow risk. at the rate on the balance sheet date. Borrowing in the interest-bearing For further information see the sensitivity analysis on page 28 in the liabilities per 31 December 2012, including leasing but excluding 33 Board of Directors’ report. currency derivatives, was allocated as follows: 34 Local currency Loan period for utilized credit per 31 December 2012 in millions MSEK 35 Average effective Amount, interest rate, Share, SEK 7,642 7,642 36 Fixed interest period MSEK percent percent NOK 465 543 37 2013 8,506 2.6 99 EUR 52 448 2014- 127 4.2 1 Total 8,633 38 Total 8,633 100 39 Internal loans are used to handle temporary liquidity needs in Peab’s foreign operations. Currency swaps are used to eliminate exchange 40 Fixed interest rate period on utilized credits, risks. Currency swaps usually run three months. Currency swaps are including derivates per 31 December 2012 reported at fair value in book closing and value changes are reported 41 Average effective as unrealized exchange rate differences in the income statement and 42 Amount, interest rate, Share, as current receivables and liabilities in the balance sheet. At the end Fixed interest rate period MSEK percent percent of the year, there were EUR 56 million (29) and NOK 293 million (148) 43 2013 5,206 2.9 60 in outstanding currency swaps relating to financial exposure. Of the 44 2014- 3,427 2.8 40 currency swaps referring to financial exposure EUR 31 million (22) are Total 8,633 100 a hedge for the shareholding in Lemminkäinen Oyj. Exchange rate 45 differences in net financials items from financial exposure were SEK 46 –2 million (–5) in 2011. Exchange rate differences in operating profit were SEK 0 million (0).

74 PEAB ANNUAL REPORT 2012

Exposure of net assets in foreign currency receivables should be handled. Bank guarantees or other collateral NOTES The translation exposure arising from investments in foreign net assets are required for customers with low credit ratings or insufficient credit is primarily hedged through loans in foreign currency or forward history. The maximum exposure to credit risk is the reported value 1 exchange contracts. At the end of 2012, hedging through forward presented in the Group balance sheet. Total bad debts in construction exchange contracts and loans in NOK for foreign net assets in Norway operations amounted to SEK 37 million (5). Peab has receivables to the 2 amounted to NOK 200 million (233). Hedges of foreign net assets in Northland Group for a total of SEK 160 million. Northland Resources 3 Finland through forward exchange contracts and loans were in euros is under reconstruction. Write-downs of receivables are not expected for a total of EUR 21 million (16). to be necessary. See also note 45 Events after the balance sheet date. 4 The credit quality in accounts receivable that are not yet due and not Foreign net assets written down is otherwise considered good. 5

Of which Of which 6 Local currency in millions 2012-12-31 hedged 2011-12-31 hedged Age analysis, not written down accounts receivable due NOK 1,119 200 874 233 Book value of recivables 7 not written-down EUR 90 21 87 16 8 MSEK 2012 2011 PLN 6 – 5 – Accounts receivable, not fallen due 5,426 5,201 9 LVL 1 – 1 – Accounts receivable, fallen due 0 – 30 days 527 692 10 Accounts receivable, fallen due 31 – 90 days 313 218 A 10 percent stronger euro rate on 31 December 2012 would entail a 11 positive translation effect on equity of SEK 59 million (63). A corre- Accounts receivable, fallen due 91 – 180 days 299 74 sponding strengthening of the Norwegian crown would generate a Accounts receivable, fallen due 181 – 360 days 260 97 12 positive translation effect on equity of SEK 107 million (74). The trans- Accounts receivable, fallen due > 360 days 324 253 13 lation effects are calculated on that part of foreign net assets which Total 7,149 6,535 are not hedged. The effects on profit for the year of corresponding 14 exchange rate changes are limited. Accounts receivable written down Annual exchange rate differences in equity (net assets in foreign 15 MSEK 2012 2011 subsidiaries) amounted to SEK –14 million (0). 16 Opening balance 79 26 Commercial exposure Reversed write-downs –61 –21 17 Although international purchases and sales of goods and services in Write-downs for the year 35 74 18 foreign currency are currently small, they are expected to increase as Translation difference 1 0 the Group expands and the competition grows in terms of purchasing 19 goods and services. Contracted or forecast currency flows can be Balance carried forward 54 79 hedged for 6 months from the date of the contract. At the end of the There are no mature receivables of significant amounts for other 20 year, there were exchange rate hedges related to forecasted currency financial receivables. 21 flows of NOK 0 million (260), EUR 5 million (26) and 0 MUSD (1). Since anticipated currency flows are hedged there are no transac- 22 Capital management tion or translation effects on equity (other than in the hedged reserve) Peab aims to have a good capital structure and financial stability in or in profit for the year if currency rates change. 23 order to provide a stable basis for continuing business activities,

thereby enabling the company to keep existing owners and attract 24 Market price risk new ones. A good capital structure is also intended to promote the Peab is exposed to market price risk through shareholdings in the 25 development of good relations with the Group’s creditors in a manner listed companies Victoria Park and Lemminkäinen. On closing date which benefits all parties. 26 the total reported value of those holdings was 271 million (201). The Capital is defined as equity and refers to the equity attributable to holdings in Brinova and Catena have been divested during 2012. 27 the owners of shares in the parent company. 28 Credit risk Credit risk refers to the risk of a counterparty failing to meet their Equity 29 obligations. MSEK 2012 2011 30 Share capital 1,584 1,584 Credit risks in financial instrument Other contributed capital 2,576 2,576 31 Credit risks in financial instruments are very limited since Peab only Reserves –152 -82 deals with counterparties with high credit ratings. Counterparty risks 32 Retained earnings including profit for the year 3,976 3,869 are primarily associated with receivables on banks and other counter- 33 parties involved in the purchase of derivatives. The financial policy Equity related to shareholders in parent company 7,984 7,947 contains special counterparty regulations which specify the maximum 34 credit exposure for various counterparties. The framework agreement One of Peab’s targets is an equity/assets ratio (equity divided by the of the International Swaps and Derivatives Association (ISDA) is used balance sheet total) in excess of 25 percent. The Board of Directors 35 with all counterparties in derivative transactions. Peab did not suffer believes that this level is well suited to Peab’s construction and civil 36 any financial instrument losses in 2012. engineering operations in Sweden, Norway and Finland. The target is Total counterparty exposure related to derivative trading calculated a part of the Group’s strategic planning. If the equity/assets ratio is 37 as a net receivable per counterparty amounted to SEK 0 million (0) at expected to exceed this level on a permanent basis, the capital 38 the end of 2012. The estimated gross exposure to counterparty risks should be transferred to the shareholders in the appropriate form. related to liquid funds and current investments amounted to SEK 439 The equity/assets ratio at the end of 2012 was 24.9 per cent (25.4). 39 million (1,170). It is the ambition of the Board of Directors to preserve a balance between a high rate of return on equity, which can be done through 40 Credit risk in accounts receivable increased lending, and the security and benefits associated with a 41 The risk that Group customers cannot meet their obligations, i.e. pay- higher equity ratio. Therefore, one of Peab’s financial targets is a ment is not received from customers, is one customer credit risk. return on equity (profit for the period attributable to holders of partici- 42 Bad debts are very rare in construction since invoicing is continuous pations in the parent company divided by the average equity attribut- 43 during production in most projects. The Group’s customers undergo able to holdings of participations in the parent company) in excess of a credit rating control providing information on customers’ financial 20 percent. The return on equity was 9.2 percent (12.1) at the end of 44 positions from various credit rating companies before a project is 2012, which is a return far from Peab’s goal. The Board believes the undertaken. The Group has established a credit policy for handling target figure is a long-term relevant level for Peab. By way of com 45 customer credit. For instance, it specifies where decisions regarding parison, the Group’s average interest expenses on interest-bearing 46 credit limits of various magnitudes are taken and how uncertain borrowing was 2.9 percent (3.5).

PEAB ANNUAL REPORT 2012 75

NOTES Peab´s goal concerning dividends is an annual distribution of 50 per- Note 40 Pledged assets, contingent cent of profits after tax to shareholders. The level of dividends should liabilities and contingent assets 1 be reasonable in relationships to developments in Peab´s profit and consolidation requirements. An ordinary dividend of SEK 1.60 per 2 share (2.10) is proposed for 2012. Calculated as a share of the Pledged assets Group Parent company 3 Group’s reported profit after tax, the proposed dividend amounts to 65 percent (66). Exclusive of the 1,086,984 B shares owned by Peab MSEK 2012 2011 2012 2011 4 AB on 13 February 2013, which do not entitle to dividend, the pro- For own liabilities and posed dividend is equivalent to a total dividend distribution of SEK provisions 5 472 million (619). Besides the ordinary dividend, extra cash dividends Related to long-term liabilities 6 may be proposed if the Board of Directors finds there are sufficient to credit institutions: funds which are not considered necessary to Group development. Real estate mortgages 854 1,894 7 Extra dividends may also be made in other forms besides cash. Floating charges – 3 At the start of 2012, Peab’s holding of own shares amounted to Assets with attached liens 662 519 8 1,086,984 B shares, corresponding to 0.4 percent of the total number 9 of shares. On 15 May 2012, the Peab Annual General Meeting Other 2 2 authorise the Board of Directors to acquire at the most the number of Related to current liabilities to 10 shares in Peab AB such that after acquisition Peab would hold a max- credit institutions: 11 imum of 10 percent of the registered shares in the company. During Real estate mortgages 604 434 2012 has no repurchases or divestitures have taken place, which Floating charges 3 – 12 means that Peab’s holding of own shares at the end of 2012 amounted Assets with attached liens 353 165 to 1,086,984 B shares, corresponding to 0.4 percent of the total 13 Total related to own liabilities number of shares. The purpose of the purchase of own shares is to and provisions 2,478 3,017 – – 14 improve the capital structure of the company, to be used in the financing of acquisitions. For own contingent liabilities 15 Some of Peab’s loan agreements contain financial covenants in the and guarantees form of interest coverage rate and equity/assets ratio which the 16 Real estate mortgages 6 2 Group must comply with, which is normal for this type of loan agree- 17 ment. At the end of the year, Peab fulfilled these covenants with a Floating charges 9 8 broad margin. Assets with attached lines 106 60 18 Restricted bank balance 0 48 19 Other 42 – – – Total for own contingent 20 liabilities and guarantees 163 118 21 Note 38 Operational lease contracts Other 0 0 22 Total pledged assets 2,641 3,135 – – Expensed leasing payments for the period: 23 Group Contingent liabilities Group Parent company 24 MSEK 2012 2011 MSEK 2012 2011 2012 2011 Minimum leasing payments 393 375 Shared obligations as part- 25 owner in limited partnerships 2 254 – – Total leasing costs 393 375 26 Guarantees and contracting guarantees for Group Interminable leasing payments amount to: 27 companies – – 16,303 16,069 MSEK 2012 2011 Guarantee liabilities for the 28 Within a year 353 309 benefit of joint ventures 1,743 519 1,743 519 29 Between one and five years 560 477 Other guarantees and Later than five years 14 2 contingent liabilities 2,714 1,617 2,714 1,607 30 Total 927 788 Total 4,459 2,390 20,760 18,195 31 Other guarantee and contingent liabilities primarily refer to obligations to Rental of premises and office inventory costs are classified as operat- tenant-owner cooperatives. 32 ing leasing contracts. The main part of the leasing cost refers to rental 33 of premises according to the operational lease contracts. The leasing contracts run without special restrictions and with an option to renew. 34 Other operational leasing agreements are divided among a number of lesser agreements. 35 Leasing income generated by objects that are rented to a third 36 party is marginal. 37 38 39 Note 39 Investment obligations 40 In 2012, the Group signed agreements to acquire tangible fixed 41 assets amounting to SEK 84 million (207). At the end of 2012, the Group had no commitments to invest in 42 joint ventures. At the end of 2011, the Group had commitments of 43 SEK 455 million. Joint venture companies have committed investments of SEK 740 44 million (220). Most of the investment obligations should be regulated in the com- 45 ing financial year. 46 The parent company has not signed any agreements to acquire tangible fixed assets.

76 PEAB ANNUAL REPORT 2012

Note 41 Related parties Summary of transactions with related parties NOTES Group Related parties MSEK 2012 2011 1 The Group is subject to considerable influence by Mats Paulsson, Transactions with joint ventures Fredrik Paulsson, Anita Paulsson, Svante Paulsson and Sara Karlsson 2 Sales to joint ventures 759 147 together with families, children and companies. Their combined votes 3 accounted for some 65 percent of the votes in Peab AB per 31 Purchases from joint ventures 169 188 December 2012. As a result of this significant influence on Peab, Interest income from joint ventures 50 7 4 transactions with the companies below are classified as transactions Receivables from joint ventures 1,375 662 with related parties. 5 Liabilities to joint ventures 111 23 Dividends from joint ventures 127 93 6 Wihlborgs Fastigheter Sara Karlsson is a member of the Board of Directors of Wihlborgs 7 Fastigheter. Sara Karlsson is the daughter of Erik Paulsson who is Transactions with associated companies 8 Chairman of the Board of Directors of Wihlborgs Fastigheter and has Dividends from associated companies 5 136 a significant influence. 9 Transactions with Skistar 10 Skistar Sales to Skistar 21 85 The Skistar Group is subject to significant influence by brothers Mats Purchases from Skistar 1 4 11 and Erik Paulsson with families and companies through their ownership of the company. Erik Paulsson is Chairman of the Board of Receivables from Skistar 2 8 12 Directors and Mats Paulsson is a member of the Board of Directors 13 of Skistar. Transactions with Wihlborgs Sales to Wihlborgs 500 287 14 Fabege Purchases from Wihlborgs 10 9 15 Svante Paulsson is a member of the Board of Directors of Fabege. Svante Paulsson is the son of Erik Paulsson who is Chairman of the Receivables from Wihlborgs 56 51 16 Board of Directors and has a significant influence. Liabilities to Wihlborgs 2 2 17 Backahill Transactions with Fabege 18 Svante Paulsson and Sara Karlsson are members of the Board of Sales to Fabege 794 436 Directors of Backahill. Backahill is under considerable influence by 19 Purchases from Fabege 40 36 them, together with their father Erik Paulsson. During the year Backa- hill founded a new company, Backahill Holding AB, which is 91% Receivables from Fabege 156 111 20 owned by Backahill. Backahill Holding made an offer for all the shares Liabilities to Fabege 4 3 21 of Brinova and the acquisition was carried out in July. Peab’s holding 22 in Brinova was acquired in connection with the offer. Transactions with Backahill Sales to Backahill 181 183 23 Kranpunkten Kranpunkten is subject to significant influence by Fredrik Paulsson Purchases from Backahill 3 2 24 Receivables from Backahill 19 27 with family and companies through their ownership of the company. 25 Fredrik Paulsson is also CEO of Kranpunkten. Liabilities to Backahill 1 – Dividends from Brinova 20 20 26 Gullbergs Sales of shares in Brinova 518 – Fredrik Paulsson was one of the major owners of Gullbergs up to 27 Shareholdings in Brinova, fair value – 491 August 2012 when he sold most of his share of the company. Fredrik 28 Paulsson is a Board member of the Scandinavian Office Group, which is now the parent company of Gullbergs. Transactions with Kranpunkten 29 Sales to Kranpunkten 31 30 30 Subsidiaries Purchases from Kranpunkten 78 68 In addition to the related parties noted above for the Group, the parent Receivables from Kranpunkten 5 5 31 company has a close relationship with its subsidiaries, see note 42. Liabilities to Kranpunkten 14 14 32 33 Transactions with Gullbergs Sales to Gullbergs 6 6 34 Purchases from Gullbergs 74 69 35 Receivables from Gullbergs 1 1 36 Liabilities to Gullbergs 6 15 37 38 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2012 77

NOTES Summary of transactions with related parties Note 42 Group companies Parent company 1 MSEK 2012 2011 Book value in parent company, Transactions with subsidiaries Share of 2 Registered equity MSEK Sales to subsidiaries 96 99 1) 2) 3 Company Corp.ID.nr office 2012 2011 Purchases to subsidiaries 21 18 Peab Finans AB 556552-1324 Båstad 100.0% 1,616 1,616 4 Receivables from subsidiaries 1,632 1,447 Peab Sverige AB 556099-9202 Båstad 100.0% 3,622 3,522 5 Liabilities to subsidiaries 7,124 4,794 Peab Sp.z.o.o 40624 Warszawa 100.0% Kompetenskraft i Solna AB 556737-7683 Solna 100.0% Dividends from subsidiaries 38 1,150 6 Kompetansekraft AS 991687971 Oslo 100.0% KB Muraren 135 916837-9841 Båstad 100.0% 7 Transactions with joint ventures KB Möllevarvet 969639-7877 Båstad 100.0% 8 Receivables from joint ventures 80 – Mölletofta i Klippan AB 556069-3953 Klippan 100.0% KB Snickaren 204 969684-0975 Båstad 100.0% 9 Transactions with associated companies Interoc Projekt AB 556519-7091 Båstad 100.0% 10 Dividends from associated companies 5 136 Torghuset i Värnamo AB 556607-6807 Båstad 100.0% Peab Elevbyggen AB 556101-0355 Alingsås 100.0% 11 Peab Projektutveckling Väst AB 556092-9852 Gothenburg 100.0% Transactions with Skistar 12 S:t Jörgen AB 556341-8887 Gothenburg 100.0% Purchases from Skistar – 3 Peab Trading Väst AB 556594-9590 Gothenburg 100.0% 13 Lambel AB 556577-8890 Gothenburg 100.0% 14 Transactions with Backahill Smögen Exploatering AB 556090-5472 Båstad 100.0% Purchases from Backahill 2 2 Peab Borås Exploatering AB 556651-7727 Båstad 100.0% 15 Dividends from Brinova 20 20 Kreaton AB 556644-5010 Gothenburg 100.0% Peab Holding Väst AB 556900-2586 Gothenburg 100.0% 16 Sales of shares in Brinova 518 – Peab Amhult AB 556830-9925 Gothenburg 100.0% Shareholdings in Brinova, fair value – 491 Undertak- och Fasad 17 556058-5837 Stockholm 100.0% entreprenader Sverige AB Rörman Installation & Service 18 Transactions with Gullbergs 556026-0316 Sundbyberg 100.0% Sverige AB Purchases from Gullbergs 1 0 19 Peab Bostad AB 556237-5161 Stockholm 100.0% Haninge Park KB 916637-2590 Sollentuna 100.0% 20 Executive management Fastighetsbolaget Måsbodarna 556691-9907 Solna 100.0% 21 For information on salaries and other remuneration to the Board of Tre AB Directors and the CEO and senior officers along with information on Upplands- Österhöjdens Garage AB 556753-0240 100.0% 22 costs and obligations relating to pensions and similar benefits and Bro agreements on retirement remuneration, see note 9. 23 Telge Peab AB 556790-5889 Södetälje 51.0% Vilunda Parkering AB 556802-5596 Stockholm 100.0% 24 Transaction terms Peab Trading Öst AB 556778-8749 Stockholm 100.0% Transactions with related parties were priced on general market terms. Fastighets AB Isolatorn 556913-9644 Malmö 100.0% 25 Perioden Fastighets AB 556832-7919 Nyköping 100.0% 26 Enavallens Fastighets AB 556734-0871 Enköping 100.0% Peab Trading Solna AB 556793-1554 Solna 100.0% 27 KB Messingen 916837-9817 Stockholm 100.0% 28 Fastighets AB Spelhagen 556795-0992 Solna 100.0% DGV i Enskede AB 556750-3791 Stockholm 100.0% 29 Messingen AB 556627-1689 Stockholm 100.0% 30 ATS Service AB 556707-9719 Sigtuna 100.0% Huvusta Strand Holding AB 556769-7080 Solna 100.0% 31 Huvusta Strand AB 556109-5323 Solna 100.0% 32 Hanbjelken AB 556699-4306 Stockholm 100.0% Forsen 2 i Eskilstuna AB 556749-4801 Eskilstuna 100.0% Furuspecialen i Nyköping 33 556695-9986 Solna 100.0% Fastighets AB 34 Eldslundfastigheter Sverige AB 556750-2165 Linköping 100.0% 35 Råsta Arenabostäder AB 556789-3002 Solna 100.0% Råsta Köpcenterbostäder AB 556789-2921 Solna 100.0% 36 Peab Hermelinen AB 556872-5633 Stockholm 100.0% 37 Peab Racketen AB 556721-1635 Stockholm 100.0% Ångström & Mellgren AB 556592-6895 Västerås 100.0% 38 Norrvikens Fastigheter AB 556703-1470 Stockholm 100.0% Fastighetsförvaltningsbolaget 916563-4271 Stockholm 100.0% 39 Gasellen 2 HB 40 Olsson & Zarins Baltinvest AB 556439-3592 Uppsala 100.0% Kungsfiskaren Bygg & 556471-2296 Stockholm 100.0% 41 Fastighet AB Kipsala Business Center 40003729343 Riga 100.0% 42 KB Klagshamn Exploatering 916563-4412 Båstad 100.0% 43 Peab Construction Syd AB 556292-2368 Båstad 100.0% Peab Construction 556626-9089 Båstad 100.0% 44 i Göteborg AB Peab Utveckling Nord AB 556341-7228 Båstad 100.0% 45 J Almqvist Bygg i Gnosjö AB 556421-1299 Båstad 100.0% 46 Peabskolan AB 556442-7432 Båstad 100.0%

78 PEAB ANNUAL REPORT 2012

Book value in Book value in NOTES Share of parent company, Share of parent company, Registered equity MSEK Registered equity MSEK 1 Company Corp.ID.nr office 1) 2) 2012 2011 Company Corp.ID.nr office 1) 2) 2012 2011 Telemark Vestfold Peab Byggservice Väst AB 556066-3675 Båstad 100.0% 959 414 572 Skien 91.0% 2 Entreprenør AS Nybyggarna i Nerike AB 556582-1146 Örebro 100.0% 3 Kompligens Fastigheter AB 556691-2555 Båstad 100.0% Hus & Hyttebygg AS 990 347 093 Skien 100.0% BKVA Fastighets AB 556694-4244 Båstad 100.0% K.Nordang AS 936 574 696 Stranda 90.1% 4 Geodells Byggnads AB 556396-4187 Järfälla 100.0% Byggservice & Vedlikehold AS 986 346 384 Oslo 100.0% 88 87 Peab Fastigheter i Växjö AB 556716-6664 Båstad 100.0% Peab Invest AS 981 704 665 Oslo 100.0% 1,332 1,332 5 Peab Ugglarp AB 556094-5072 Båstad 100.0% Peab Industri AB 556594-9558 Båstad 100.0% 2,588 2,588 6 HälsingeBygg i Hudiksvall AB 556624-4025 Hudiksvall 100.0% Peab Industri Våxtorp AB 556232-8368 Båstad 100.0% Värby Fastighets AB 556703-4771 Båstad 100.0% Peab Industri Sverige AB 556594-9624 Ängelholm 100.0% 7 Lambertsson Sverige AB 556190-1637 Båstad 100.0% Peab Exploatering AB 556129-8562 Stockholm 100.0% 8 Berg och Falk AB 556602-3064 Ödeshög 100.0% Lambertsson Kran AB 556543-5293 Båstad 100.0% BEFAB Schakt AB 556555-2287 Mjölby 100.0% KB Muraren 105 916837-9544 Mölndal 100.0% 9 Krantorp KB 969623-0540 Mölndal 100.0% Peab Byggservice Nordost AB 556715-4843 Stockholm 100.0% 10 Peab Filmstaden AB 556773-7506 Båstad 100.0% ATS Kraftservice AB 556467-5998 Båstad 100.0% Henrik Persson Holding AB 556767-1838 Alingsås 100.0% Hagström i Nås AB 556377-1376 Vansbro 100.0% 11 HN Kraftlinjeteknik AB 556411-8585 Vansbro 100.0% Fastighets AB Ekudden 556628-0326 Alingsås 100.0% 12 AB Alingsås Trähus AB 556576-5194 Alingsås 100.0% Swerock AB 556081-3031 Helsingborg 100.0% Västgöta Mark och Swerock Uppsala AB 556031-3289 Uppsala 100.0% 556644-1308 Alingsås 100.0% 13 Entpreprenad AB AB Uppsala Grus 556206-6281 Uppsala 100.0% Husgruppen i Alingsås KB 969728-7887 Gothenburg 100.0% Rådasand AB 556042-8699 Lidköping 100.0% 14 Lappmarken i Malmö KB 916611-9918 Båstad 100.0% Peab Transport & Maskin AB 556097-9493 Örkelljunga 100.0% 15 Peab Sverige AB, dansk filial 1595622 Fredrikshavn 100.0% AB Roler 556100-0729 Örebro 100.0% Peab Sverige AB, norsk filial 976 580 176 Oslo 100.0% Ferdigbetong AS 987 013 117 Tromsö 100.0% 16 Peab Trading Nord AB 556715-4827 Solna 100.0% A-frakt AB 556449-8045 Arvidsjaur 100.0% 17 P Andersson Fastighet 1 Fastighetsbolaget Pollaren AB 556715-5337 Solna 100.0% 556824-5624 Helsingborg 100.0% H2 Helsingborg AB 556544-1986 Båstad 100.0% i Mälardalen AB 18 Bjurholms Lastbilcentral Mora-Orsa Byggtjänst AB 556624-6160 Orsa 100.0% 794000-0123 Bjurholm 100.0% Ekonomisk Förening 19 Byggtjänst i Offerdal AB 556835-9755 Solna 100.0% Gryttby Grus och Sand AB 556846-9323 Uppsala 100.0% Peab PGS AB 556428-5905 Båstad 100.0% P Arvidssons Entreprenad AB 556521-8202 Helsingborg 100.0% 20 Hatteskär AB 556874-6936 Båstad 100.0% Skandinaviska 556034-2148 Helsingborg 100.0% 21 Peab Boarp AB 556715-0247 Båstad 100.0% Byggelement AB Malmöoket AB 556709-6713 Båstad 100.0% Lättklinkerbetong AB 556239-1721 Alingsås 100.0% 22 Malmöoket Ekonomisk 769614-7821 Båstad 100.0% Peab Asfalt AB 556098-8122 Båstad 100.0% Förening Asfaltbeläggningar i Boden AB 556279-8768 Boden 100.0% 23 Malmöoket nr 2 Ekonomisk 769619-1829 Båstad 100.0% Förening Pionjären Fastighets AB 556114-9773 Boden 100.0% 24 KB Brämaregården 18:4 969638-3364 Kristianstad 100.0% Asfalt & Väg i Strängnäs AB 556545-6034 Strängnäs 100.0% Kvalitetsasfalt i 25 Peab Infra Oy 2303725-2 Helsingfors 100.0% 556537-5432 Västerås 100.0% Mellansverige AB Peab Anläggning AB 556568-6721 Båstad 100.0% – 348 26 Peab Asfalt Norge AS 994 628 577 Oslo 100.0% Berg & Väg Maskin AB 556130-4972 Salem 100.0% Terje Hansen AS 930 969 451 Frogner 100.0% 27 Skillingenäs AB 556587-0192 Båstad 100.0% Peab Grundläggning Peab Drift & Underhåll 556554-1587 Båstad 100.0% 556569-4386 Stockholm 100.0% Norden AB 28 i Stockholm AB Peab Grundläggning AB 556154-7364 Båstad 100.0% Stockholm 29 556036-9133 Stockholm 100.0% Hamnentreprenad AB Nordisk Fundamentering AS 996 217 981 Oslo 100.0% Linje & Kabelplöjning Peab Bildrift Norden AB 556707-8380 Helsingborg 100.0% 30 556487-3098 Borlänge 100.0% i Borlänge AB Peab Bildrift Sverige AB 556313-9608 Helsingborg 100.0% Olof Mobjer Entreprenad AB 556445-1275 Båstad 100.0% Peab Bildrift Norge AS 892 890 692 Skedsmo 100.0% 31 West Wind AB 556615-7797 Solna 100.0% Peab Vagnpark AB 556234-0371 Båstad 100.0% 32 G Nilsson Last & Planering 556236-0908 Båstad 100.0% Peab Industri Norge AS 990 609 527 Oslo 100.0% i Ranseröd AB Lambertsson Norge AS 985 129 738 Skedsmo 100.0% 33 AB Jämshögs Grus & 556048-3918 Båstad 100.0% Kranor AS 976 313 062 Slemmestad 100.0% Entreprenad AB 34 Rolf Olsens vei 30/32 AS 990 285 624 Oslo 100.0% BEFAB Entreprenad Mjölby AB 556595-7452 Linköping 100.0% 35 Peab Drift & Underhåll Peab Industri Finland AB 556687-9226 Helsingborg 100.0% 556581-4612 Linköping 100.0% Peab Industri Finland AB, i Mellansverige AB 2006361-5 Helsingfors 100.0% 36 Peab Energi AB 556104-1533 Båstad 100.0% finsk filial Peab Industri Oy 1509160-3 Helsingfors 100.0% Åstorps Bioenergi AB 556644-8246 Båstad 100.0% 37 Lambertsson Oy 0937993-4 Helsingfors 100.0% Peab Oy 1509374-8 Helsingfors 100.0% 488 488 Annehem Fastigheter AB 556683-4452 Båstad 100.0% 272 272 38 Kehitysyhtiö Pyynikki Oy 2214064-5 Helsingfors 100.0% Annehem Fastigheter & 556715-5220 Båstad 100.0% 39 Eastendin Palvelu Oy 2013178-8 Helsingfors 100.0% Projekt AB Peab AS 990 040 729 Oslo 100.0% 271 359 Fastighets AB Skeppsdockan 556563-0711 Ängelholm 100.0% 0 0 40 Gydas Vei DA 982 796 083 Oslo 100.0% i Malmö Björn Bygg AS 943 672 520 Tromsö 100.0% Fastighets AB Grisen 556466-1055 Båstad 100.0% 41 Peab Eiendomsutvikling AS 987 099 011 Oslo 100.0% Valhall Flyg AB 556718-8593 Ängelholm 100.0% 42 Heimdalsgata 4 Utv. DA 987 572 809 Oslo 100.0% Valhall Flyg KB 969724-7865 Ängelholm 100.0% 0 0 ANS Solligården 957 524 346 Oslo 100.0% Br Paulsson Peab AB 556113-4114 Båstad 99.9% 157 157 43 Stadiongatans Peab Bolig Prosjekt AS 990 892 385 Oslo 100.0% 556141-1736 Båstad 100.0% 44 Bergkrystallen Parkering AS 891 324 782 Oslo 100.0% Lokaluthyrning AB Peab Næring Stømmen AS 995 518 562 Oslo 100.0% Norrviken Exploaterings AB 556245-3356 Båstad 100.0% 45 Polarkanten AS 994 417 657 Oslo 100.0% Vejby Transport & Miljö AB 556240-2742 Ängelholm 100.0% 1 1 Peab Konstruktion AB 556061-1500 Stockholm 100.0% 42 42 46

PEAB ANNUAL REPORT 2012 79

NOTES Book value in Book value in Share of parent company, Share of parent company, 1 Registered equity MSEK Registered equity MSEK Company Corp.ID.nr office 1) 2) 2012 2011 Company Corp.ID.nr office 1) 2) 2012 2011 2 Peab Försäkrings AB 556511-5408 Båstad 100.0% 1,370 171 Brinova Jupiter 11 AB 556892-3428 Helsingborg 100.0% 3 Fastighets AB Skånehus 556371-3816 Båstad 100.0% 140 – Brinova Utveckling AB 556126-0745 Helsingborg 100.0% Peab Holding AB 556594-9533 Båstad 100.0% 0 0 Peab FU Holding 2 AB 556864-4156 Solna 100.0% 4 JaCo AB 556554-6487 Båstad 100.0% Peab Projektfastigheter AB 556202-6962 Stockholm 100.0% Varvstaden AB 556683-1722 Båstad 100.0% TGS Fastigheter Nr 2 AB 556680-5106 Linköping 100.0% 5 Fältjägaren 1 AB 556851-7287 Östersund 100.0% Peab Förvaltning Nyköping AB 556632-7747 Nyköping 100.0% 6 Fältjägaren 3 AB 556851-7261 Östersund 100.0% Peab Park AB 556107-0003 Båstad 100.0% – 2 Fältjägaren 4 AB 556851-7279 Östersund 100.0% Kokpunkten Fastighets AB 556759-5094 Stockholm 100.0% 7 Fältjägaren 5 AB 556851-7246 Östersund 100.0% Ängelholms Flygplats AB 556814-2896 Båstad 100.0% 8 Fältjägaren 7 AB 556855-7176 Östersund 100.0% Ljungbyhed Park AB 556545-4294 Båstad 100.0% Östersunds Fryshus & 556094-4810 Östersund 100.0% Activus Ljungbyhed AB 556558-9644 Båstad 100.0% 9 Fastigheter AB Ljungbyheds Golfcenter AB 556571-3012 Båstad 100.0% Birsta Fastigheter AB 556190-3765 Helsingborg 100.0% 60 60 10 Projektfastigheter Götaland AB 556259-3540 Båstad 100.0% Peab Norden AB 556134-4333 Båstad 100.0% 7 13 Haga Expolatering AB 556715-4850 Stockholm 100.0% 11 Peab Skandinavien AB 556568-8784 Båstad 100.0% 0 0 Skånehus AB 556547-6958 Båstad 100.0% Flygstaden Intressenter i 556438-9665 Båstad 100.0% 272 272 PEAB FU Silhouette 1 AB 556895-0116 Solna 100.0% 12 Söderhamn AB PEAB FU Ångkraftverket HDWG Finans AB 556470-0184 Båstad 100.0% 556895-0082 Solna 100.0% 13 Kontor AB Ortum AB 556641-8355 Helsingborg 100.0% Ulriksdal Utveckling AB 556509-6392 Solna 100.0% Stockholms Kommersiella 14 556105-6499 Stockholm 100.0% Riksten Friluftsstad AB 556547-8764 Stockholm 100.0% Fastighets AB Peab FU Rifa AB 556909-4690 Solna 100.0% 15 Skånska Stenhus AB 556233-8680 Stockholm 100.0% Flygstaden Intressenter Peab FU Rönnåsen AB 556909-4708 Solna 100.0% 556541-5360 Båstad 100.0% 16 i Grevie AB Incasec AB 556591-2267 Båstad 100.0% 0 0 17 Peab Fastighetsutveckling AB 556824-8453 Båstad 100.0% 1 0 Peab Grevie AB 556715-0213 Båstad 100.0% 0 0 Peab Invest Oy 1773022-9 Helsingfors 100.0% – 91 Peab Invest Yek AB 556753-4226 Borås 100.0% 18 Peab Fastighetsutveckling Peab Konsult AB 556715-0254 Båstad 100.0% 0 0 556825-9856 Båstad 100.0% Sverige AB 19 Peab Vejby AB 556663-2682 Båstad 100.0% 50 102 Peab Ägaarena 1 AB 556741-8552 Solna 100.0% Sieglo AB 556556-0595 Båstad 100.0% 169 – 20 Peab Ägaarena 2 AB 556741-8560 Solna 100.0% Skåne Projektfastigheter AB 556471-9143 Båstad 100.0% 1 1 Peab 556741-8586 Solna 100.0% Lappmarken i Malmö AB 556796-2849 Stockholm 100.0% Exploateraarenastaden AB 21 Hyresmaskiner Gösta Peab Drivaarena AB 556741-8578 Solna 100.0% 556082-6470 Båstad 100.0% 22 Pettersson AB Peab Högsbo AB 556594-4583 Gothenburg 100.0% Mauritz Larsson Byggnads AB 556036-8242 Båstad 100.0% 23 Peab Brunnshög AB 556649-9116 Båstad 100.0% HB Muraren 126 916837-9759 Gothenburg 100.0% Båramo i Värnamo AB 556713-7871 Båstad 100.0% Projektfastigheter Väst AB 556044-1866 Båstad 100.0% 24 Peab Hem AB 556077-8499 Båstad 100.0% – 1 Total 12,547 11,525 25 Peab Rydebäck AB 556397-3071 Båstad 100.0% 1) The capital participation agrees with the vote participation. Peab Vimmerbyvägen AB 556776-4690 Båstad 100.0% 26 2) The share of capital in 2012 is the same as the share of capital in 2011 except in Peab Hisingstorp AB 556776-4708 Båstad 100.0% Fastighets AB Bryggeriet, which was owned 100 percent in 2012 but only 25 percent 27 Peab Brämaregården AB 556781-6698 Båstad 100.0% in 2011, and the companies acquired in 2012. Peab Sofiedal AB 556470-0176 Båstad 100.0% 28 Peab Kastanjeparken AB 556059-0910 Båstad 100.0% Parent company 29 Peab Utsikten AB 556715-0239 Båstad 100.0% Peab Porten AB 556831-0030 Båstad 100.0% MSEK 2012 2011 30 Peab Vidar AB 556866-4311 Båstad 100.0% Acquisition value brought forward 13,705 13,786 31 Isstadion i Lambohov AB 556869-5836 Båstad 100.0% Purchases 509 – Annehem Hylliecentrum AB 556683-4478 Båstad 100.0% Paid shareholder contribution 1,301 463 32 Annehem Hyllie point 2 AB 556762-0546 Båstad 100.0% Repaid shareholder contribution – –544 Annehem Hyllie point 3 AB 556762-0587 Båstad 100.0% Sales –442 – 33 Annehem Bygg & Projekt AB 556699-8430 Båstad 100.0% 34 Peab Bad AB 556870-3564 Solna 100.0% Accumulated acquisition values brought forward 15,073 13,705 Fastighets AB Bryggeriet 556141-6115 Gothenburg 100.0% Revaluations brought forward 100 100 35 Pebri Glumslöv AB 556758-6853 Helsingborg 100.0% Accumulated revaluations carried forward 100 100 36 Pebri Glumslöv HB 969717-3335 Helsingborg 100.0% Write-downs brought forward –2,280 –2,158 Åke & Clas Skoogh Holding AB 556722-9066 Kristianstad 100.0% Write-downs for the year –346 –122 37 Peab FU Holding 1 AB 556855-6954 Solna 100.0% Accumulated write-downs carried forward –2,626 –2,280 Peab FU Måby AB 556874-6837 Solna 100.0% 38 Book value carried forward 12,547 11,525 INSPI Sweden AB 556796-7970 Stockholm 100.0% 39 Peab FU Sporthall AB 556901-4557 Solna 100.0% During the year, participations in Group companies were written down by 40 Peab FU Bryggeriet 1 AB 556901-4524 Solna 100.0% SEK 346 million (122). The write-downs refer to shares in Peab AS for a Peab FU Bryggeriet 2 AB 556901-4565 Stockholm 100.0% total of SEK 294 million based on impairment tests. In the calculation of 41 Peab FU Holding 3 AB 556866-8635 Solna 100.0% the useful value of Peab AS a pre-tax weighted discount rate for Norway of 7.3 percent (7.4) has been used. Other write-downs refer to dormant 42 Peab FU Almnäs AB 556594-9160 Solna 100.0% Peab FU Visby AB 556679-4862 Solna 100.0% companies or companies with little activity where the value of the write- downs is equivalent to equity. Annual write-downs are reported in the Peab FU Byggnad 124 AB 556901-4532 Solna 100.0% 43 income statement on the “Profit from shares in Group companies” line. Peab FU Byggnad 183 AB 556901-4540 Solna 100.0% 44 Peab FU Visby Exploatering AB 556800-9335 Solna 100.0% Peab FU Karlskrona 45 556746-9688 Stockholm 100.0% Exploatering AB 46 Fartygsmekano AB 556345-8586 Helsingborg 100.0%

80 PEAB ANNUAL REPORT 2012

Note 43 Untaxed reserves Note 44 Cash flow statement NOTES

Parent company Paid interest and dividends received 1 MSEK 2012 2011 Group Parent company 2 Tax allocation reserve 156 156 MSEK 2012 2011 2012 2011 Accumulated additional depreciation, machinery Dividends received 178 250 70 157 3 and equipment 0 0 Interest received 141 121 40 38 4 Total 156 156 Interest paid –418 –352 –203 –217 5 Adjustments for items not included in cash flow 6 Group Parent company MSEK 2012 2011 2012 2011 7 Profit from participation in joint 8 ventures/associated companies –120 –21 Dividends received from joint 9 ventures/associated companies 132 228 10 Group contribution received/ given – – –206 –834 11 Depreciation and write-downs 964 853 346 253 12 Unrealized exchange rate differences 7 4 13 Result from sale of fixed assets –200 –75 –42 – 14 Result from sale of business/ subsidiary –92 –45 15 Provisions 78 43 16 Change in fair value of financial instruments –30 93 –25 89 17 Accrued expenses and 18 provisions – –59 Dividends from subsidiaries – – – –1,146 19 Total 739 1,021 73 –1,638 20 21 Transactions without payments 22 Group MSEK 2012 2011 23 Aquisition of assets by financial leasing 196 345 24 Aquisition of subsidiaries financed by loan from the seller 52 – 25 26 Acquisition of subsidiaries and businesses 27 Group 28 MSEK 2012 2011 Acquired assets and liabilities 29 Intangible assets 16 129 30 Tangible assets 23 146 31 Financial assets 21 –16 Deferred tax recoverables 15 57 32 Project and development property and inventories 718 323 33 Operating receivables 22 305 34 Liquid funds 163 52 Long-term provisions – –5 35 Interest-bearing long-term liabilities –272 –170 36 Deferred tax liabilities –16 –36 Current liabilities –69 –392 37 621 393 38 Recognized negative goodwill – –12 39 Purchase prices 621 381 Loan from seller –52 – 40 Paid purchase price 569 381 41 Less: Liquid funds in acquired companies –163 –52 42 Effect on liquid funds 406 329 43 44 45 46

PEAB ANNUAL REPORT 2012 81

NOTES Disposal of subsidiaries Note 45 Events after the balance sheet day Group 1 MSEK 2012 2011 Peab is working on several major projects for Northland Resources Sold assets and liabilities that are connected to the iron ore mine in Kaunisvaara outside Pajala. 2 In regards to the information published by Northland Resources on Financial assets 3 –161 8 February 2013 concerning the company’s reconstruction, Peab 3 Project and development properties and announced that the company’s outstanding accounts receivable from inventories 863 1,083 4 companies in the Northland Group amount to approximately SEK 160 Operating receivables 22 15 million, of which about SEK 70 million is included in the reconstruc- 5 Liquid funds 2 2 tion. No write-downs are deemed necessary. During the reconstruc- 6 Interest-bearing long-term liabilities –813 –816 tion period Peab will receive regular payments for work performed. Deferred tax liabilities 2 –5 Peab is keeping close contact with Northland Resources regarding 7 their financial development. Current liabilities –34 –51 8 45 67 9 Sales price 137 112 10 Less: Loan to buyer – –33 Received purchase sum 137 79 Note 46 Information on parent company 11 Less: Liquid funds in disposed companies –2 –2 12 Effect on liquid funds 135 77 Peab AB is a Swedish registered limited company domiciled in Båstad. Peab AB’s shares are listed on NASDAQ OMX Stockholm. The address 13 Liquid funds of the head office is Margretetorpsvägen 84, SE-260 92 Förslöv. The The following components are included in liquid funds; consolidated accounts for 2012 consist of the parent company and 14 its subsidiaries, together referred to as the Group. The Group also 15 Group includes shares of holdings in joint ventures and associated companies. 16 MSEK 2012 2011 Liquid funds 429 961 17 Current holdings (equivalent to liquid funds) 10 9 18 Total 439 970 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

82 PEAB ANNUAL REPORT 2012

BOARD AND CEO ASSURANCE

The Annual Report has been prepared in accordance with good accounting practices in Sweden and the consolidated accounts have been prepared in accordance with International Accounting Standards, stated in the regulation of the European Parliament and the Council of Ministers (EG) no 1606/2002 of July 19, 2002, concerning the application of international accounting standards. The Annual Report and the consolidated accounts give a true and fair view of the parent company as well as of the Group’s position and result. The Board of Directors’ report for the parent company and the Group gives a true and fair view of the parent company’s and Group’s business development, position and result. It also decribes the major risks and uncertainty factors facing the parent company and Group companies.

Förslöv, April 3, 2013

Göran Grosskopf Mats Paulsson

Chairman of the Board Vice Chairman of the Board

Annette Brodin Rampe Karl-Axel Granlund Member of the Board Member of the Board

Svante Paulsson Fredrik Paulsson Member of the Board Member of the Board

Lars Sköld Anne-Marie Pålsson Member of the Board Member of the Board

Patrik Svensson Kim Thomsen Member of the Board Member of the Board

Lars Modin Jesper Göransson Member of the Board Chief Executive Officer

The Annual Report and the consolidated accounts have been approved for publication by the Board of Directors and the Chief Executive Officer on April 3, 2013. The consolidated income statement and balance sheet and the parent company’s income statement and balance sheet will be presented for adoption by the AGM on May 14, 2013.

PEAB ANNUAL REPORT 2012 83 AUDITORS’ REPORT

Auditors’ report To the annual meeting of the shareholders of Peab AB, corp. id. 556061-4330

REPORT ON THE ANNUAL ACCOUNTS AND The statutory administration report is consistent with the other parts CONSOLIDATED ACCOUNTS of the annual accounts and consolidated accounts. We have audited the annual accounts and consolidated accounts We therefore recommend that the annual meeting of sharehol- of Peab AB for the year 2012. The annual accounts and consolida- ders adopt the income statement and balance sheet for the parent ted accounts of the company are included in the printed version of company and the group. this document on pages 13–83.

REPORT ON OTHER LEGAL AND REGULATORY Responsibilities of the Board of Directors and the Managing Director for the annual accounts and consolidated accounts REQUIREMENTS The Board of Directors and the Managing Director are responsible In addition to our audit of the annual accounts and consolidated for the preparation and fair presentation of these annual accounts accounts, we have also audited the proposed appropriations of the in accordance with International Financial Reporting Standards, as company’s profit or loss and the administration of the Board of adopted by the EU, and the Annual Accounts Act, and for such Directors and the Managing Director of Peab AB for the year 2012. internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual Responsibilities of the Board of Directors and accounts and consolidated accounts that are free from material the Managing Director misstatement, whether due to fraud or error. The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss, and the Board of Directors Auditor’s responsibility and the Managing Director are responsible for administration under Our responsibility is to express an opinion on these annual the Companies Act. accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditor’s responsibility Auditing and generally accepted auditing standards in Sweden. Our responsibility is to express an opinion with reasonable assu- Those standards require that we comply with ethical requirements rance on the proposed appropriations of the company’s profit or and plan and perform the audit to obtain reasonable assurance loss and on the administration based on our audit. We conducted about whether the annual accounts and consolidated accounts are the audit in accordance with generally accepted auditing standards free from material misstatement. in Sweden. An audit involves performing procedures to obtain audit evi- As basis for our opinion on the Board of Directors’ proposed dence about the amounts and disclosures in the annual accounts appropriations of the company’s profit or loss, we examined the and consolidated accounts. The procedures selected depend on Board of Directors’ reasoned statement and a selection of sup- the auditor’s judgment, including the assessment of the risks of porting evidence in order to be able to assess whether the proposal material misstatement of the annual accounts and consolidated is in accordance with the Companies Act. accounts, whether due to fraud or error. In making those risk As basis for our opinion concerning discharge from liability, in assessments, the auditor considers internal control relevant to the addition to our audit of the annual accounts and consolidated company’s preparation and fair presentation of the annual accounts, we examined significant decisions, actions taken and accounts and consolidated accounts in order to design audit pro circumstances of the company in order to determine whether any cedures that are appropriate in the circumstances, but not for the member of the Board of Directors or the Managing Director is liable purpose of expressing an opinion on the effectiveness of the to the company. We also examined whether any member of the company’s internal control. An audit also includes evaluating the Board of Directors or the Managing Director has, in any other way, appropriateness of accounting policies used and the reasonable- acted in contravention of the Companies Act, the Annual Accounts ness of accounting estimates made by the Board of Directors and Act or the Articles of Association. the Managing Director, as well as evaluating the overall presenta- We believe that the audit evidence we have obtained is suffi- tion of the annual accounts and consolidated accounts. cient and appropriate to provide a basis for our opinions. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions We recommend to the annual meeting of shareholders that the pro- Opinions fit be appropriated in accordance with the proposal in the statutory In our opinion, the annual accounts have been prepared in accor- administration report and that the members of the Board of Direc- dance with the Annual Accounts Act and present fairly, in all mate- tors and the Managing Director be discharged from liability for the rial respects, the financial position of the parent company as of 31 financial year. December 2012 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Förslöv, 3 April 2013 Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2012 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Alf Svensson Thomas Thiel Standards, as adopted by the EU, and the Annual Accounts Act. Authorized Public Accountant Authorized Public Accountant

84 PEAB ANNUAL REPORT 2012 A Nordic Community Builder: Sweden’s biggest infrastructure project for research

Max IV Laboratory, Lund, December 2012: Peab has initiated construction of the second stage of what is currently Sweden’s biggest infrastructure project for research ever, the Max IV Laboratory in Lund. A gigantic super microscope will make it possible to study different kinds of materials and their characteristics down to their most minute parts. Together with professors from Lund University and the architect firm Snøhetta Peab has developed several innovative solutions to meet the project’s greatest challenge; vibrations. The microscope’s synchronous light is a fourth of a strand of hair wide and needs to be kept perfectly still. The project is a model of sustainable construction in Europe. The facility, which will open in 2015, will be an important place for thousands of researchers in the Nordic region and Europe making it an essential part of a new research community. Read more about Max lV at www.peab.se/MAXIV.

MAX IV Lund

PEAB ANNUAL REPORT 2012 85 CORPORATE GOVERNANCE Corporate governance report

Governance of the Peab Group is based on the Company Act and other relevant laws, Peab’s Articles of Association, the regulations for Nasdaq OMX Stockholm issuers and the Swedish Code of Corporate Governance.

CORPORATE GOVERNANCE members, of which two to three members AND THE CODE should represent the major shareholders The corporate governance report is not a and one to two members should represent part of the financial reports. The company’s smaller shareholders. The AGM elected auditors read the corporate governance Malte Åkerström (reelection), Göran Gross- report and acknowledge that a corporate kopf (reelection), Bengt Johansson (new governance report has been drawn up and election) and Magnus Swärdh (new elec- that its legally stipulated information is tion) to act as Peab’s nomination committee consistent with the annual accounts and with Bengt Johansson as Chairman. The Group accounts. nomination committee’s proposals will be presented to shareholders in the notice to THE ANNUAL GENERAL MEETING attend the 2013 AGM. An account of the AND THE NOMINATION PROCEDURE work of the nomination committee will be Göran Grosskopf, Chairman of the Board The Annual General Meeting (AGM) was available on Peab’s website. held on 15 May 2012 at Grevieparken, Grevie. It was attended by 399 share- THE BOARD OF DIRECTORS holders, representing over 76 percent of the AND ITS WORK Fredrik Paulsson votes, either personally or through repre- According to Peab’s Articles of Association Mats Paulsson sentatives. the Board of Directors must be made up of Svante Paulsson The procedure of preparing the nomi- no fewer than five and no more than nine Anne-Marie Pålsson nation of members of the Board of Directors members in addition to the statutory Annette Brodin Rampe (and where appropriate the auditors) for the employee representatives. The members of Lars Sköld AGM follows the nomination procedure the Board of Directors are elected annually Göran Grosskopf was appointed Chairman established at the previous AGM. by the AGM. At the 2012 AGM the following of the Board by the AGM. At the 2012 AGM the major sharehold- persons were reelected as members of the The following employee representatives ers recommended a nomination committee Board of Directors: were appointed by the employee unions consisting of the Chairman of the Board of Göran Grosskopf at the 2012 AGM: Patrik Svensson, Kim Directors and an additional three to four Karl Axel Granlund Thomsen and Lars Modin (members), Lars

Board meetings, attendance 2012

AMG elected members 30/1 14/2 2/4 15/5 15/51) 22/5 9/7 20/8 14/11 Göran Grosskopf • • • • • • • • • Mats Paulsson • • • • • • • • Karl-Axel Granlund • • • • • • • • • Fredrik Paulsson • • • • • • • • • Svante Paulsson • • • • • • • • • Anne-Marie Pålsson • • • • • • • • • Anette Brodin Rampe • • • • • • • • • Lars Sköld • • • • • • • • •

Employee representatives Patrik Svensson, member • • • • • • • • • Kim Thomsen, member • • • • • Lars Modin, member • • • • • • • • Lars Bergman, deputy • • • Monica Mattson, deputy • • • • • • • • 1) Constitutional Board meeting • Attendance

86 PEAB ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Election Shareholders Election Nomination Auditors Constitute the Annual Committee Information General Meeting Proposals

Election

Finance committee Information Board of Directors Remuneration committee Audit committee Goals Strategies Reports Governance mechanisms Internal audit

CEO and Group functions Executive management

Civil Property Construction Industry Engineering Development

Bergman and Monica Mattson (deputies). quality of company financial reports, estab- of the committee participated. The remu- The Board of Directors held nine meet- lishing guidelines for which other services neration committee regularly reports to the ings in 2012, of which five were ordinary besides auditing the company may procure Board of Directors. Board meetings (including the constitu- from the company accountant, maintaining tional meeting). There were four were addi- regular contact with the company accountant REMUNERATION TO EXECUTIVE tional Board meetings, three were held per regarding the scope and focus as well as MANAGEMENT telephone and one was held per capsulam. their view of company risks, evaluating the The 2012 Annual General Meeting Members of executive management auditing work and informing the nomination approved the Remuneration Policy for have given reports at the Board meetings. committee of the evaluation and assisting executive management. The remuneration The company auditor was present at two of the nomination committee in producing policy is available on Peab’s website, www. the ordinary Board meetings. The Board’s proposals for auditors and remuneration for peab.se. Information about salaries and work follows the work program adopted by auditing work. The auditing committee met other remuneration to the CEO and the Board of Directors at the constitutional twice in 2012. All members of the committee members of executive management can be meeting. The Board evaluates its work on attended, as did the company accountants. found in note 9 in the Annual Report, page an annual basis. The audit committee regularly reports to the 56, and on our website. The members of the Board of Directors Board of Directors. elected by the shareholders are compen- INCENTIVE PROGRAM sated in accordance with decisions taken THE FINANCE COMMITTEE Peab has no outstanding share or share- by the AGM. Members in 2012 related incentive programs for the Board of The majority of the AMG elected Göran Grosskopf, Chairman, Directors or the executive management. members of the Board of Directors (Göran Karl-Axel Granlund Grosskopf, Karl-Axel Granlund, Anne- Mats Paulsson Marie Pålsson, Annette Brodin Rampe and AUDITORS Lars Sköld) are independent in relation to The finance committee handles and makes Under Peab’s articles of association one or the company and executive management. decisions on financial matters in accord- two auditors with an equal number of depu- They are also independent in relation to the ance with the Finance Policy established by ties are elected by the AGM. At the AGM in company’s major owners. Mats Paulsson, the Board of Directors. Executive manage- 2009 the following certified public account- Fredrik Paulsson and Svante Paulsson are ment representatives give reports to the ants were elected until the AGM 2013: finance committee meetings. The finance regarded as dependent in relation to the Accountants committee met nine times during 2012. All company and executive management. Alf Svensson, KPMG (reelection) members attended all meetings. The finance committee regularly reports to the Thomas Thiel, KPMG (new election) THE AUDIT COMMITTEE Members in 2012 Board of Directors. Deputy accountants Göran Grosskopf, Chairman Dan Kjellqvist, KPMG (reelection) THE REMUNERATION COMMITTEE Karl-Axel Granlund David Olow, KPMG (new member) Members in 2012 Fredrik Paulsson Göran Grosskopf, Chairman, In addition to auditing, the accountants, deputy accountants and KPMG have only Mats Paulsson Karl-Axel Granlund, Svante Paulsson provided services for Peab in the form of Mats Paulsson Anne-Marie Pålsson accounting and tax advisement and certain The remuneration committee prepares analyses in connection with acquisitions Annette Brodin Rampe guidelines and the framework for Group and divestments over the last three years. Lars Sköld executives regarding salaries and other The audit committee prepares the work of terms of employment. The remuneration GROUP MANAGEMENT the Board of Directors by ensuring the committee met once in 2012. All members The President and CEO leads the company

PEAB ANNUAL REPORT 2012 87 CORPORATE GOVERNANCE

KUGGEN Gothenburg

according to the framework established by HR centrally determined principles for the Board of Directors and is responsible for Purchasing and logistics board appointments and signing for the the administration and control of the Group. company. Strategy and business support Executive management has during 2012 Operations development consisted of the CEO, the Deputy CEO ETHICAL GUIDELINES responsible for Finance and treasury, the Communication Peab founded its ethical work on Peab’s Deputy CEOs and Business Area Managers The staff teams work independently with core values; Down-to-earth, Developing, of Construction, Civil Engineering, Industry defined goals and coordinate their work in Personal and Reliable many years ago. and Property Development, the HR Director dialogue with each other. These core values form the basis of and the Head of Strategy. “Peab’s Ethical Guidelines” established by Executive management meetings are BUSINESS GOVERNANCE executive management. We work continu- held once a month and address issues of Executive management sets overriding ously to spread and root Peab’s Ethical strategy and tactics to improve operations. goals and strategies for the business in the Guidelines throughout the organization. Heads of Group staff teams and other Group’s business plan. This is then broken officers are called to attend meetings when down and worked with in the different busi- THE BOARD OF DIRECTORS’ needed. ness areas that set up their own business DESCRIPTION OF INTERNAL plans for divisions, regions and companies. CONTROL AND RISK MANAGEMENT BUSINESS AREAS Peab’s organization is characterized by CONCERNING FINANCIAL REPORTING Group operations are run in four business its clearly decentralized production focus Peab’s Board of Directors is responsible for areas: Construction, Civil Engineering, and delegation of authority and responsibil- ensuring that there are efficient procedures Industry and Property Development. Each ity in order to achieve efficient management for the management and control of the business area has a management team led and control in each business area. Group regarding financial reporting. The by the BA Manager and consisting other- Control is ensured through a clear line CEO is responsible for ensuring that internal wise of operational managers in the busi- of decision authority for every type of major control is organized and follows the guide- ness area and staff members. decision which includes: lines laid down by the Board of Directors. There is a clear set of rules in the Group for the requirement for special approval by GROUP STAFF the delegation of responsibility and authority executive management, or an organ Group staff, which supports both executive which follows the Group’s operative struc- delegated by it, for the acquisition of management and operations in the busi- ture. Financial steering and control is ness areas, strategically and in day-to-day development property, performed by Group Finance and treasury. operations, is been divided into the businesses and other major invest- The Board of Directors’ guidelines for following teams: ments, predetermined levels for bidding internal control concerning financial Finance and treasury for individual positions, reporting were laid down in the Internal

88 PEAB ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Control Policy. This policy establishes the Code rule 9:2 We have read the corporate governance way in which the internal control of financial The Chairman of the Board may chair the report and based on this reading and our reporting is organized, reviewed and remuneration committee. knowledge of the company and the Group assessed based on the following factors: Other members elected by the AGM we believe we have sufficient grounds for must be independent in relation to the our statement. This means that our statu- Risk assessment company and Group management. tory review of the corporate governance Control environment Deviation report has a different focus and a much Control structure Mats Paulsson, who is a member of the more narrow scope than compared to the remuneration committee, is not inde- focus and scope of an audit according to Information and communication pendent in relation to the company and the International Standards on Auditing and Evaluation/follow-up Group management. the professional code for auditors in Explanation of the deviation Sweden. Executive management with the support of The Board wishes to take advantage of the In our opinion a corporate governance Group staff Finance and treasury are long and unique experience in matters of report has been prepared, and its legal con- responsible for ensuring that all business compensation for senior officers that founder tents agree with the annual accounts and units in the Group follow the policy. In 2012 and former CEO of Peab, Mats Paulsson, Group accounts. work on strengthening the central coordina- has. The majority of the members of the tion of internal control and risk manage- remuneration committee are independent in Förslöv, 3 April 2013 ment was initiated. The CEO is responsible relation to the company and Group manage- for ensuring that financial reporting is ment and this is believed to guarantee the reported to the Board of Directors at the objectivity and independence of the remu- first ordinary meeting of the Board of Direc- neration committee. Alf Svensson tors after the end of every financial year. Authorized Public Accountant The Board of Directors has assessed AUDITORS’ STATEMENT ON THE the need for an internal auditing department CORPORATE GOVERNANCE REPORT and determined that the existing control To the Annual General Meeting structure together with the scope of the of Peab AB (publ) Company Thomas Thiel Group’s operations do not motivate estab- ID nr. 556061-4330 Authorized Public Accountant lishment of an internal auditing department. The Board of Directors and the Chief Execu- tive Officer are responsible for the corporate DEVIATIONS FROM THE CODE governance report 2012 on pages 86-89 and Peab has elected to make the following that it has been prepared according to the deviations from the code: Annual Accounts Act.

PEAB ANNUAL REPORT 2012 89 BOARD OF DIRECTORS

Board of Directors

Göran Grosskopf Karl-Axel Granlund Mats Paulsson Svante Paulsson Born 1945. Appointed 2004. Born 1955. Appointed 2000. Born 1944. Appointed 1992. Born 1972. Appointed 2003. Professor, LLD and Dr Econ MSc (economics), MSc Vice chairman of the Board Project and Strategy Manager Chairman of the Board of Peab (engineering) of Peab AB. of Backahill AB. AB, Ingka Holding BV, ColoPlus Principle owner and chairman Member of the boards of Member of the boards of AB, Mats Paulsson’s Foundation of the board of Volito AB. Skistar AB, Mentor Sverige AB, Fabege AB, Bilia AB, and Medicon Village AB. Holding: 18,402,000 B shares Mats Paulsson’s Foundation Backahill AB, AB Cernelle Member of the boards of and Medicon Village AB. and Rögle BK. Appo Services AG and Formerly various positions Holding: 7,824,715 A shares Birgma International SA. in Peab since 1959. 1,350,705 B shares Formerly professor of tax law and Holding: 9,754,910 A shares working chairman of the board 37,255,750 B shares of Tetra Laval Group. Holding: 460,000 B shares

Annette Brodin Rampe Lars Sköld Fredrik Paulsson Anne-Marie Pålsson Born 1962. Appointed 2000. Born 1950. Appointed 2007. Born 1972. Appointed 2009. Born 1951. Appointed 2011. MSc (engineering) Chairman of the Boards of Member of the board and MA University of California, Senior Partner of Brunswick Kulturgastronomen AB, CEO of Kranpunkten i Ph.D.Economics from Lund Group. Södertuna slotts drift AB and Skandinavien AB. Member University Södertuna Konferensslott AB. of the board of Scandinavian Member of the boards of Vice chairman of the Board Resort AB, Scandinavian Ernströmgruppen AB, IVA´s Holding: 15,000 B shares Länsförsäkringar Skåne. Office Group AB, Stichting Näringslivsråd and British Member of the board of INGKA Foundation, Stichting Swedish Camber of Commerce. GLB AB. IKEA Foundation and Stichting Formerly various positions in IMAS Foundation. Holding: 3,000 B shares E.ON Sverige AB, Exxon Chemi- Holding: 4,261,430 A shares, cal Inc and CEO of Senea AB. 6,002,154 B shares Holding: 50,000 B shares

Patrik Svensson Kim Thomsen Lars Modin Lars Bergman Monica Mattsson Born 1969. Appointed 2007. Born 1965. Appointed 2008. Born 1957. Appointed 2011. Born 1951. Appointed 2008. Born 1952. Appointed 2011. Foreman Construction Carpenter Construction Project Manager Construction Civil Engineering worker Credit coordinator Sweden Sweden Sweden Employee representative Employee representative Employee representative Employee representative Employee representative (deputy) (deputy) Holding: None Holding: None Holding: None Holding: None Holding: None

The holdings reported were those on 28 February 2013. Holdings include those of spouses, children who are minors and private company holdings.

90 PEAB ANNUAL REPORT 2012 EXECUTIVE MANAGEMENT AND AUDITORS

Executive management

Jesper Göransson Niclas Winkvist Tina Hermansson Berg Tore Hallersbo CEO and acting President Strategy and business Human Resources, safety Deputy CEO Acting BA Manager support and ethics Manager Division Norway, Construction Born 1966 Born 1969 Finland and Special Projects CFO Employed since 1995 Employed since 2012 in BA Construction Born 1971 Holding: 90,000 B shares Holding: 3,200 B shares Born 1955 Employed since 1996 Employed since 2005 Holding: 412,000 B shares Holding: None

Roger Linnér Karl-Gunnar Karlsson Tomas Anderson BA Manager Civil BA Manager Industry BA Manager Property Engineering Born 1956 Development Operative Manager BA Employed since 2003 Born 1956 Construction Holding: 16,450 B shares Employed since 1996 Born 1970 Holding: 35,100 B shares Employed since 1996 Holding: None

Auditors

Alf Svensson Thomas Thiel Born 1949 Born 1947 Authorized public accountant, Authorized public accountant, KPMG. KPMG. Auditor in Peab AB since 2007. Auditor in Peab AB since 2009.

Deputy auditors Dan Kjellqvist, Authorized public accountant, KPMG and David Olow, Authorized public accountant, KPMG.

The holdings reported were those on 28 February 2013. Holdings include those of spouses, children who are minors and private company holdings.

PEAB ANNUAL REPORT 2012 91 THE PEAB SHARE A weak year on the stock market

Peab’s B share is listed on the NASDAQ OMX Stockholm, LargeCap. As of 31 December 2012 the total market capital of Peab was SEK 9.2 billion (10.3).

TRADING IN THE PEAB SHARE Information on share capital development percentage of the Group’s reported profit As of 31 December 2012 the closing price over time is available at www.peab.com. after tax the proposed dividend amounts to of the Peab share was SEK 31.04, which 65 percent (66), which is in line with the was a 9.5 percent decrease during the CONVERTIBLE PROMISSORY NOTES dividend financial target. The direct return year. The Swedish Stock Exchange, Convertibles 2007/2012 matured on 30 calculated on the proposed dividend and at measured by the OMX Nordic Stockholm, November 2012. There have been no the closing price on 31 December 2012 is increased in 2012 by 10.5 percent. In 2012, conversions to shares and the loan has 5.2 percent (6.1). the Peab share was quoted at a maximum been paid in full. of SEK 39.70 and a minimum of SEK 28.91 and 69 million shares (111) were traded, HOLDINGS OF OWN SHARES which is equivalent to 274,000 shares per At the beginning of 2012 Peab’s own B trading day (412,000). share holding was 1,086,984 which corresponds to 0.4 percent of the total number of SHARES AND SHARE CAPITAL shares. Peab’s Annual General Meeting on The total number of shares at the beginning 15 May 2012 resolved to authorise the of 2012 was 296,049,730 divided into Board to, during the period until the next 34,319,957 A shares with 10 voting rights Annual General Meeting, acquire shares so per share and 261,729,773 B shares with that the company would have at most 10 1 voting right per share. The share capital percent of the total shares in Peab AB. No amounted to SEK 1,583.9 million. own shares were repurchased or divested At the end of 2012 the number of A in 2012, which means that Peab’s holding shares was 34,319,957 representing 11.6 of own shares at the end of 2012 amounted percent (11.6) of capital and 56.7 percent to 1,086,984 B shares. (56.7) of the votes and the number of B shares was 261,729,773 representing 88.4 DIVIDEND percent (88.4) of capital and 43.3 percent A dividend of SEK 1.60 (2.10) per share is (43.3) of the votes. proposed for 2012. Calculated as a

Price trend of the Peab share Peab share, total return 2 Januari 2012 – 29 February 2013 31 December 2007 – 31 December 2012 50 150

125 40

100 30

20 50

10 25

0 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCTNOV DEC JAN FEB 2007 2008 2009 2010 2011 2012 2013 2012 2013 Peab’s B Share No. of shares traded Peab total return OMX Stockholm PI (including after-hours trading) SIXRX Source: SIX Telekurs SX201030 Construction & Engineering PI Source: SIX Telekurs

92 PEAB ANNUAL REPORT 2012 THE PEAB SHARE

List of shareholders on 28 February 2013 Total Proportion Proportion number of of A shares B shares of shares capital, % votes, % Mats Paulsson with companies 9,754,910 37,255,750 47,010,660 15.9 22.3 Karl-Axel Granlund with family and companies 18,402,000 18,402,000 6.2 3.0 Folksam 11,400,000 11,400,000 3.9 1.9 Anita Paulsson with family and companies 4,261,431 6,013,905 10,275,336 3.5 8.0 Fredrik Paulsson with family and companies 4,261,430 6,002,154 10,263,584 3.5 8.0 Svante Paulsson with family and companies 7,824,715 1,350,705 9,175,420 3.1 13.2 Sara Karlsson with family and companies 7,881,948 863,299 8,745,247 3.0 13.2 Kamprad family foundation 8,581,236 8,581,236 2.9 1.4 Peab’s profit-share foundation 7,803,432 7,803,432 2.6 1.3 Länsförsäkringar Funds 5,514,810 5,514,810 1.8 0.9 Lannebo Fonder 5,512,029 5,512,029 1.8 0.9 Handelsbanken Funds 4,891,231 4,891,231 1.6 0.8 Danica Pension 4,276,300 4,276,300 1.4 0.7 Swedbank Robur Funds 3,533,099 3,533,099 1.2 0.6 SEB Investment Management 3,417,095 3,417,095 1.2 0.6 Foreign shareholders 29,905,229 29,905,229 10.1 4.9 Others 335,523 105,920,515 106,256,038 35.9 18.1 Number of outstanding shares 34,319,957 260,642,789 294,962,746 Peab AB 1,086,984 1,086,984 0.4 0.2 Number of registered shares 34,319,957 261,729,773 296,049,730 100.0 100.0

Data per share Allocation of shareholdings3) 2012 2011 Number Number of Proportion Proportion of shares shareholders of capital, % of votes, % Earnings, SEK 2.47 3.26 1– 500 14,440 1.0 0.5 – after dilution 2.47 3.26 501– 1 000 5,495 1.6 0.8 Equity, SEK 27.07 26.94 1 001– 5 000 8,101 6.8 3.3 – after dilution 27.07 28.10 5 001– 10 000 1,598 3.9 1.9 Cash flow before financing, SEK 0.34 –3.71 10 001– 15 000 718 2.9 1.4 – after dilution 0.33 –3.60 15 001– 20 000 269 1.6 0.8 Share price at year-end, SEK 31.04 34.30 20 001– 745 82.2 91.3 Share price/equity, % 114.7 127.3 31,366 100.0 100.0 Dividend, SEK 1) 1.60 2.10 3) Per 2013-02-28 Direct return, % 2) 5.2 6.1 P/E-ratio 2) 13 11 1) For 2012, Board of Directors’ proposal to the AGM 2) Based on closing price at year-end

1) Earnings and dividend per share Shares and votes per share class 3) SEK SEK Number Proportion of Proportion of 8 4 Share class Number of votes capital, % votes, %

6 3 A 34,319,957 10 11.6 56.7 B 261,729,773 1 88.4 43.3 4 2 Total 296,049,730 100.0 100.0

2 1

0 0 2008 2009 2010 2011 2012 Shareholder categories, proportion Shareholder categories, proportion Equity per share Dividend per share of capital 3) of votes 3) 8% 17% 31% 28%

Equity per share

SEK 30 25 6% 56% 20 35% 2% 15 13% 10 4% 5 Financial companies and trust funds Interest organizations Swedish private persons 0 2008 2009 2010 2011 2012 Other Swedish legal entities Foregin shareholders

1) For 2012, Board of Directors’ proposal to the AGM 3) Per 2013-02-28

PEAB ANNUAL REPORT 2012 93 FIVE-YEAR OVERVIEW

Group MSEK 2012 2011 2010 2009 1) 2008 1) 2) Income statement items Net sales 46,840 43,539 38,045 34,868 34,132 Operating profit 1,055 1,505 1,503 1,573 1,349 Pre-tax profit 813 1,195 1,513 1,619 1,014 Profit for the year 725 943 1,190 1,301 1,093

Balance sheet items Fixed assets 9,786 10,850 9,657 8,982 8,192 Current assets 22,287 20,499 17,923 17,632 17,500 Total assets 32,073 31,349 27,580 26,614 25,692

Equity 7,984 7,947 7,673 7,563 6,370 Non-controlling interests 1 0 0 43 92 Long-term liabilities 7,759 8,208 6,061 6,060 5,897 Current liabilities 16,329 15,194 13,846 12,948 13,333 Total equity and liabilities 32,073 31,349 27,580 26,614 25,692

Key ratios Operating margin, percent 2.3 3.5 4.0 4.5 4.0 Profit margin, percent 2.8 3.8 4.6 5.4 4.5 Return on equity, percent 9.2 12.1 15.6 18.7 21.9 Capital employed 16,618 17,094 14,712 15,440 13,277 Return on capital employed, percent 7.7 10.5 11.7 13.1 17.3 Equity/assets ratio, percent 24.9 25.4 27.8 28.6 25.2 Net debt –6,470 –6,626 –5,719 –4,571 –4,042 Debt/equity ratio, multiple –0.8 –0.8 –0.7 –0.6 –0.6 Interest coverage ratio, multiple 2.9 4.3 7.6 7.5 5.9

Capital expenditures Goodwill 14 79 –6 –23 1,446 Other intangible assets 2 47 –1 266 232

Buildings and land 57 –234 46 896 969 Machinery and equipment 847 1,014 496 278 2,827 Shares and participations –487 231 773 576 –222 Project and development properties 822 273 797 518 914

Orders Orders received 38,743 37,986 34,764 30,393 32,269 Order backlog 28,056 28,378 27,063 24,487 24,233

Personnel Average number of employees 14,825 14,560 13,541 13,633 11,945

Data per share Earnings, SEK 2.47 3.26 4.11 4.52 6.56 after completed subscription and conversion 2.47 3.26 4.10 4.52 6.45 Cash flow, SEK 3.30 –3.71 –1.09 2.76 –7,59 after completed subscription and conversion 3.21 –3.60 –1.06 2.68 –7,20 Equity, SEK 27.07 26.94 26.76 25.98 22.86 after completed subscription and conversion 27.07 28.10 27.93 27.13 24.13 Share price at year-end, SEK 31.04 34.30 57.25 46.00 21.60 Ordinary dividend, SEK 3) 1.60 2.10 2.60 2.50 2.25 Number of shares at year-end, millions 295.0 295.0 286.7 291.1 278.7 after completed subscription and conversion 295.0 303.8 295.5 299.9 287.5 Average number of outstanding shares, millions 295.0 288.9 288.6 286.7 166.6 after completed subscription and conversion 303.0 297.7 297.4 295.4 175.5

1) From 1 January 2010 Peab applies IFRIC 15, Agreements for the Construction of Real Estate, in reporting. As a result of the new principle IAS 18, Revenue, will be applied to Peab’s housing projects in Finland and Norway as well as Peab’s own single homes in Sweden. Revenue from these projects will be recognized first when the home is handed over to the buyer. The comparable items for 2009 below have been recalculated according to the changed accounting principle. 2008 have not been recalculated. 2) Peab Industri was distributed to the shareholders in 2007. Peab Industri was repurchased in December 2008. Peab Industri is included in the balance sheet per 31 December 2008. Peab Industri is not included in the income statment for 2008. 3) For 2012, the Board of Directors’ proposal to the AGM.

94 PEAB ANNUAL REPORT 2012 DEFINITIONS

Financial definitions Order backlog Peab Partnering The value of the remaining income in ongoing A type of collaboration which is similar to Peab’s Capital employed production plus orders recieved yet to be pro- Trust-based contracts. The difference is that Total assets at year-end less non-interest-bear- duced. partnering requires whole-hearted collaboration ing operating liabilities and provisions. by two or more equal partners during all phases Orders received of the construction process. Partnering is suita- Cash flow per share The sum of orders received during the year. ble for customers who want to be, can and are Cash flow per share calculated as the total of actively involved from start to finish. the cash flow from current operations and cash P/E ratio flow from investment activities divided by the Share price at year-end divided by earnings per Peab’s Trust-based contracts average number of outstanding shares during share. A type of collaboration between Peab and the the year. customer involving collaboration at an early Profit margin stage, shared goals and decisions and complete openness in processes and systems such as Net debt/equity ratio Pre-tax profit items plus financial expenses as a finance and purchasing. To start with, the cus- Interest-bearing net debt in relation to equity. percentage of net sales. tomer presents his/her requirements and then Peab comes up with a proposal. Customers are Direct return Return on capital employed not as closely involved in the construction process Dividend as a percentage of the share price at Pre-tax profit items plus financial expenses as a in Peab’s Trust-based contracts as they are in year-end. percentage of average capital employed. Peab Partnering.

Earnings per share Return on equity PGS Profit for the period attributable to shareholders Profit for the period attributable to shareholders PGS stands for Peab Gemensamt System in parent company divided by the average num- in parent company divided by average equity (Peab’s General System) and refers to standard- ber of outstanding shares during the period. attributable to shareholders in parent company. ized construction elements manufactured in Peab’s own factories or by partners. PGS means Equity/assets ratio industrial construction from fabrication to final Equity as a percentage of total assets at year- Construction related mounting. end. definitions Project and development property Equity per share Contract amount Holdings of unimproved land and decontamina- Equity attributable to shareholders in parent The amount stated in the contract for contract tion property for future development, real estate company divided by the number of outstanding work excluding VAT. with buildings for project development or shares at the end of the period. improvement and thereafter sales within Peab’s Fixed price normal operation cycle. Interest coverage ratio Contract to be carried out for a fixed price with- Pre-tax profit items plus interest expenses in out the contractor being able to alter it, unless Project development relation to interest expenses. the client makes changes to the contract or Finding project and development properties in makes supplementary orders. the market and developing these into complete Net assets (+) / Net debt (-) projects. Interest-bearing liabilities including provisions for General contract pensions less liquid and interest-bearing assets. Contract work where the contractor carries out Total contract construction and appoints and is responsible for Contract work where the contractor, in addition Operating margin subcontractors on the basis of documentation to building, is also responsible for planning the Operating profit as a percentage of net sales. provided by the client. project.

BRF KAJPLATSEN AND BRF HAMNPIREN KUGGEN Färjestaden Gothenburg

PEAB ANNUAL REPORT 2012 95 ANNUAL GENERAL MEETING Welcome to Peab’s Annual General Meeting

TIME AND LOCATION AB by Tuesday 7 May 2013 at the latest. Dividends as a percent of profit The Annual General Meeting of Peab AB Shareholders who have registered their after tax 1), 2) will be held at 3 p.m. on Tuesday 14 May shares in trust must have registered such % 70 2013, Grevieparken in Grevie, Sweden. shares in their own names at the latest by Goal >50% 60 this date. Shareholders should request 50 NOTIFICATION trustees to undertake such registering a 40 few days in advance. Notification of participation in the Annual 30 General Meeting must be submitted at the 20 latest by 2 p.m. on Tuesday 7 May 2013. DIVIDEND 10 Notification may be submitted by telephone The Board of Directors proposes to the 0 2009 2010 2010 2011 2012 to +46 431 893 50, by mail to Peab Annual Annual General Meeting an ordinary divi- 1) According to legal reporting General Meeting, c/o Euroclear Sweden dend of SEK 1.60 per share for 2012. The 2) For 2012, Board of Directors’ proposal AB, Box 7841, SE-103 98 Stockholm, or via proposed record day is Friday 17 May the company’s website at www.peab.se. To 2013. If the Annual General Meeting participate in the Annual General Meeting approves the proposal submitted, dividends shareholders must be registered in the will be distributed from Euroclear Sweden share register kept by Euroclear Sweden AB on wednesday 22 May 2013.

ANNUAL GENERAL MEETING 2012 Grevie

96 PEAB ANNUAL REPORT 2012 Rygg

SHARE HOLDER INFORMATION AND ADDRESSES Financial information

At peab.com we continually provide current information on the company, financial results and how our share is developing. Financial reports and publications can be downloaded there as well. They can also be ordered by contacting: Peab AB, SE-260 92 Förslöv, Sweden, Tel +46 431-890 00, Fax +46 431-45 19 75.

Follow Peab quarter by quarter Shareholder information

When Peab publishes our quarterly reports we also present the financial ANNUAL CALENDAR 2013 results for the previous quarter and a description of the current situation. First Quarter Report 14 May The link to the presentations can be found at www.Peab.com/About-Peab/ Annual General Meeting 14 May Financial-information/. Second Quarter Report 20 August Third Quarter Report 14 November Year-end Report 2013 13 February 2014 Analysts who follow Peab Company Name Email SHAREHOLDER CONTACT ABG Sundal Collier Fredric Cyon [email protected] Jesper Göransson, CEO and acting President Carnegie Tobias Kaj [email protected] Tel +46 431-891 94, Danske Bank Peter Trigarszky [email protected] [email protected]

DNB Simen Mortensen [email protected] Gösta Sjöström, CIO Tel +46 733-37 10 10, Handelsbanken Albin Sandberg [email protected] [email protected] Nordea Jonas Andersson [email protected]

SEB Enskilda Stefan Andersson [email protected]

Swedbank Niclas Höglund [email protected]

Head office Peab AB SE-260 92 Förslöv, (Margretetorpsvägen 84), Tel +46 431-890 00, Fax +46 431-45 17 00

Peab Sverige AB Peab Industri AB Peab AS Business area Construction Business area Industry Postboks 93 Røa Box 808 401 80 Göteborg NO-0701 Oslo 169 29 Solna (Anders Personsgatan 2) Norway (Gårdsvägen 6) Sweden (Sørkedalsveien 150A, 0754 Oslo) Sweden Tel +46 31-700 84 00 Tel +47 09 099 Tel +46 8-623 68 00 Fax +46 31-700 84 20 Fax +47 23 30 30 01 Fax +46 8-623 20 60

Peab Anläggning AB Peab Fastighetsutveckling AB Peab Oy Business area Civil Engineering Business area Sentnerikuja 5 260 92 Förslöv Property Development FIN-00440 Helsingfors (Margretetorpsvägen 84) Box 808 Finland Sweden 169 28 Solna Tel +358 207 606 200 Tel +46 431-890 00 (Gårdsvägen 6) Fax +358 207 606 206 Fax +46 431-45 15 08 Sweden Tel +46 8-623 68 00 Fax +46 8-623 20 60

PEAB ANNUAL REPORT 2012 97 PEAB ANNUAL REPORT 2012

www.grayling.se .peab.com www

Fax +46 431-45 17 00

el +46 431-890 GOTHIA TOWERS GOTHIA Gothenburg T

SE-260 92 Förslöv

Peab AB (publ) Peab peab.com GOTHIA TOWERS GOTHIA Gothenburg