Bonava AB (publ) (BONAVB) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to Bonava's Half Year Report 2020 presentation. Speaking is Louise Tjeder, Head of IR. And with me, I have Joachim Hallengren, CEO; and Ann-Sofi Danielsson, CFO. Joachim will begin the presentation and take you through some highlights from the report; followed by Ann-Sofi, who will take you through the financials in more depth. After some concluding remarks from Joachim, we will open up for a Q&A session. So with this, I hand over the word to you, Joachim.

Thank you very much, and welcome to Bonava's quarter 2 report 2020. Let's start with the second quarter, which, as all of you know, has been a very challenging environment to work in. But nevertheless, we succeeded to increase the number of stores in our main markets, both Germany and Sweden. And as you know, Bonava has a business model where we focus on -- both on the consumer and on investors. And we can shift the focus from time to time, and we did that in the beginning of the crisis, and I'm happy to see that, that has given result in increased sales to investors. However, the EBIT is lower, mainly due to 2 reasons that we communicated earlier. First, the Nordic segment, where we have been struggling with a while -- with a few well-known projects with really soft margins. They are gradually being finalized, some of them in the second quarter and the last one in the third quarter. And after that, we will slowly see a more normalizing project margins in the Nordic segment going forward. I would like also to highlight that the recovery, or the turnaround project, in Finland is going according to plan. And then Germany, where we have had both projects from investors, which basically have a lower margin than the consumer projects, handed over, but also consumer projects with lower margin than average in the German portfolio. Yes, coincidentally, they were recognized this quarter. I would like to stress, however, that this is not an indication of any softening margins in the German portfolio. It is, yes, an anomaly that happened this quarter. So from the third quarter, we will see normalizing project margins in Germany again. Looking at the first year then. The sales were weak due to the pandemic. But if you look on the overall sales for the quarter, they were more or less on par with last year, which I think is a strength. And we also increased the sales ratio from 70% to 79%. Again, softer EBIT, and that's, of course, a fact that we're absolutely not satisfied with. In the comparison for the first half year, I think it's also fair to point out that in the comparable period 2019, we did have a high volume of recognized units from St. Petersburg and Baltics which affected the result there. Key figures. We increased the net sales. And as I've already said, we have a soft EBIT. I think, however, it's more fair to compare EBIT excluding land sales, and that would take away approximately SEK 60 million from the EBIT results. So I think a better comparison is SEK 120 million compared to SEK 58 million. But still, that is an unsatisfactory result for sure. Looking at the first half year then. We have decreased the number of units in production from approximately 10,000 to high 8,000, and the absolute focus besides margins in the business is sales and starts in the project. We are planning to start a lot of units. But this year, we are extraordinarily backloaded, unfortunately. So it will wait until Q4 until we see the large volume of starts coming up, of course, depending on a stable market situation where we can sell our product. However, the value of sold not yet recognized is still on a very high level, SEK 20.7 billion, on par with last year. And as I said, a very strong sales ratio in the portfolio. Looking a bit deeper into sales and starts, divided into consumers and investors. The sold units were down in the quarter. We -- the sales were significantly down in late March and beginning of April, and were gradually picking up with June a pretty strong month, not yet on pre-COVID levels, but only it's a very positive trend. We lost approximately 30% of our sales in the quarters. There were units that were better performing than others. For instance, Sweden and Germany lost around 25%; Finland "only" 15%, 16%; while the Baltics suffered very hard from the lockdown and lost 50% of their sales, of course, affecting the average loss of sales. I said that the other markets -- the markets were picking up in June. The Baltics were suffering from a lockdown, but I think that I see signs now in July that, that market is also slowly but surely recovering. However, looking at the first half year for consumers, as you can see, we only lost 70 units compared to last year. That's 4%, and I think that's a very strong result. Started units up in the quarter and slightly below first half year. But then I think it's important to take into consideration that in the benchmark 2019, we started 700 units-plus in St. Petersburg and Baltics, and we only started a fraction of that this year. So more starts in our main markets and a positive trend. Investors, as I said before, investor deals is an important part of our business logic and we both sold and started more units, both in the quarter and in the first half year. This graph is showing our expected or forecasted completions in combination with the sales rep, and this growth is consumers. The major changes to this growth from the first quarters is that we feel more confident regarding the numbers now than we did then. There is still uncertainty, of course, because I don't think that we've seen the last of the COVID effect, but we really feel more confident. There has also been some delays in completions, as we have communicated earlier. So somewhat around 150 units have moved from the third quarter this year to the fourth quarter. But at the same time, we forecast that we will complete approximately 100 units more in the fourth quarter, disregarding the delayed units from Q3. Looking at 2021, there is somewhere around 650 more units to be completed than it was in the fourth quarter. So we're building stock. Moving over to investors. The major development here is that we have almost 500 units more in the second half year of 2021 to be recognized. And then a COVID-19 update. I think it's a bit too early to say that we are out of the crisis. However, I would like to say that I'm much more confident and positive now than I was 3 months ago. The markets has shown greater resilience to this pandemic than we feared. We have had all construction sites up and running. There has been a few disturbances, as I said, but nothing severe. Of course, with our profit recognition model, even a few days or a few weeks delay will impact the profit recognition. However, it will just be a delay and not money lost. Also some delays in handovers, but nothing material. Sales, as we talked about, has slowed down, but gradually is picking up. And the last market to pick up is the Baltic markets. And then we, at Bonava, continue to work very closely to the development. Focus is, of course, to protect our employees and customers and other stakeholders. And as you well know, there has been a huge change in the way the companies operate, Bonava among them. As one of the digital leaders in our industry, we have developed a lot of new tools and way of working also in relation to our customers that has been implemented during this period. And then old school mitigation of business risk, cost base focus and cash flow focus. And as I said, even though I feel more confident and positive regarding the future, we need to be on our toes. We need to be flexible and agile to be very close to the market because I'm not sure that we have -- truly have seen the impact on the general economy. Probably we have to wait until the autumn to see how that plays out. And with that, I would like to hand the word over to our CFO, Ann-Sofi Danielsson, for some financial details.

Thank you very much. I will dig deeper into the income statement and also the segments balance sheet, and finally, our debt situation and cash flow. Starting with the income statement then. I think it's fair to say that we actually have some impacts from COVID-19 here. I will come back to that soon, how that has impacted our income statement during the second quarter here. But first of all, what you see here, our income statement, you see that we have higher net sales than last year. And the main reason for that, if you take it shortly, is that we have recognized more units to investors, especially in Germany. That's the main reason why we have higher net sales in 2020 than 2019. The only thing I want to point out here is that we have lower selling and admin expenses. And here is the first thing to comment upon how COVID-19 has affected us. As Joachim said, we have taken a lot -- a number of mitigation -- mitigating actions to adapt to COVID-19. And that has impacted our selling and admin expenses during the second quarter here, where you see that we have lower expenses than last year. And to make it short, what we have done is that we have, of course, stopped all traveling, all conferences, training, et cetera, et cetera, and that has impacted these costs for us. I would just like to point out here, because the obvious question here is, of course, how will this impact the rest of the year? And one thing that we can say, we are not quite sure. But we are sure that the costs -- the admin expenses will be lower than last year. But quarter 2 here has been extraordinary when it comes to how we have mitigated the COVID-19 situation. And we will of course, increase activities during the second half of 2020, and that will give us somewhat higher cost than we've had the first half of 2020, but not as high as last year. So that is one thing I could say here. So all in all, an EBIT of SEK 56 million compared to SEK 182 million. And as Joachim stated out also, last year, we had an impact coming from sales of land. And if you take that away, we can compare SEK 58 million this year with SEK 120 million. So lower EBIT than last year, and I will come back to more details regarding that. Net financial items here, minus SEK 30 million, lower than last year or more negative. And it is a bit confusing here because if you look at our net debt situation, I will come back to that when I talk about cash flow and our balance sheet, but we have a lower net debt than last year at the end of June. However, we have used a lot of financing resources also in 2020. So the average net debt situation for us has been more or less the same as last year. And in addition to that, we have some costs here in the second quarter due to the fact that we have raised more financing resources. I will come back to that as well. And that has come with some cost for that. And also, as you all are aware, we have somewhat higher interest rates, 2020 than 2019. So somewhat higher negative effect here coming from higher interest costs during the second quarter. One other thing before ending this slide to point out here, is the tax rate. I usually comment upon that, and I do that also today. 28%, that is higher than last year. And the main reason for that is that we have now more EBIT coming from our German business and the German tax rate is higher than, for instance, in Sweden. So that's the reason why we have somewhat higher tax rate here in the second quarter of 2020. If we then dig a little bit deeper into the EBIT. Here, you have the different segments and to make it short then, SEK 56 million compared to SEK 182 million. And the main deviations compared to last year is, first of all, Germany. And as Joachim commented upon, we have had -- those units that we have recognized in Germany in the second quarter here had lower margins than last year. That is as -- the same as I actually said in the first quarter, that we've had some low-margin projects in Germany that have been recognized for profit. But that is not the normal margin level in Germany. We have a more sound and -- the portfolio in Germany is still very sound and the projects that we have going forward have higher margins than the ones that we have recognized for profit here in the second quarter. And here -- so that's the main reason here. The other segment that I want to point out already here is the Nordic segment. Those units that we have recognized for profit in Finland has -- have had a lower margin than last year. And that is also what we have communicated, both when we released the first quarter but also in the press release that we presented just a couple of weeks ago, where we stated that what you can expect from Finland is that we still have low-margin projects in that segment, giving us a negative and a very low EBIT coming from Finland. And that will improve during the second half of 2020, but not to be expected already in the third quarter. We still have some low margin projects to be recognized in the third quarter as well. So again, SEK 56 million compared to SEK 182 million, if you include the profit coming from sales of land. Some more details regarding Germany. Here, you have more details. And you see here that the gross profit is low -- lower. And the main reason is again that we have recognized units to investors with low margin. We also actually have had some smaller effects coming from COVID-19 due to the fact that we've had some issues with the authorities when handing over projects, giving us more -- some extra costs in one of the projects that we have recognized for profit here in the second quarter. So there are effects, not so big, but there are some effects coming from that. So we have, as you see, more units recognized for profits in the second quarter here, 527 compared to 314. And again then, lower-margin projects to investors, giving us this lower gross profit. Also lower selling and admin expenses, as you see here, and again, the reason is that we have had very low activities. We have mitigated to the COVID-19 situation by stopping all traveling, conferences, training, et cetera. And you can expect lower selling and admin expenses going forward also here, not as -- maybe not as low as in the second quarter, but lower than last year. So that's the German situation. I think it's also a very strong sign for us. When we look at the German market, it's a very good condition, actually. And then that is also what you see here when it comes to the number of units that we have started. During the second quarter, we see a very strong interest for our activities -- for our projects in Germany. So even though we have somewhat lower sales for the second quarter, however, the sales have picked up during the last weeks of June. So we have been able -- we see a good future on the German market. So we continue to increase the number of starts also in the second quarter. And going over then to Sweden. Solid, good performance. Units recognized for profit on a good level and also with good margin. If you consider that we had profit coming from sales of land that was in Sweden last year of SEK 55 million, so if you take that away, you have a very good and solid performance in the Swedish operations, if you look at the EBIT level. And again, lower selling and admin expenses and also in Sweden, adaption to the COVID-19 situation also here. And Sweden and Germany, we have stated that several times now, we want to increase the number of starts on these markets where we see a good demand for our projects. And that is also what we've done in Sweden. You see here, we have started, all in all, 318 units during the second quarter here. And that gives us, all in all, more units started in 2020 than last year. And we also see a very good, solid interest for our units -- for our housing units in Sweden. And also very positive for us is that we now have fewer unsold units on our balance sheet. We have been able to sell units also completed from our balance sheet from our stock in Sweden. That's also a sign of the strong market in Sweden that we see. And one more thing to comment upon here, also showing that the market in Sweden is strong is that we -- after the quarter, we have sold a quite big project in Västerås, 162 units to investors, and that will be included in the third quarter for Sweden. So that's a good market, giving us the possibility to start more units in Sweden. Nordic, again, here, you see it more in detail. We have, as we have stated out, weak margin projects have impacted the EBIT level also in the second quarter. And again, we will have a quite weak situation also in the third quarter in Finland, and you can expect that to be the situation. And -- but we still see -- we want to stress that we see a stronger performance and better forecast for the fourth quarter for this segment. So all in all, we have recognized 245 units here to investors and to consumers. None actually in Copenhagen, but in Finland and in Norway. Norway is performing well for us, but we still struggle with these low-performing projects in Finland, as we have commented on earlier. Here, opposite situation. If you look at the selling and admin expenses, higher than last year. And the reason for that is actually that, if you remember, we invested into the Oslo region at the end of 2019, and that has given us somewhat higher expenses here for selling and admin activities. And so at the same time, as we have decreased the costs, the expenses here in Finland and in Copenhagen, we have increased costs in Norway and Oslo due to the acquired operations there. Here, we actually see effect also on sales. We talk a lot about that. We have a strong market in Sweden and in Germany. However, in the Nordics, especially then in Finland, we see effects of COVID-19 with a more cautious market, giving us lower sales number and also -- that also has made us more cautious when it comes to the number of starts that we have in this segment. One thing to point out here, however, is that we have started the first consumer project in Oslo, the operations that I talked about that we acquired last year, successfully started that project, and we see a fairly good interest for that project in Oslo. And then the segment St. Petersburg-Baltics. And lower EBIT than last year due to the fact that we have lower margins in the projects that we have recognized. And we actually had a very strong margin in St. Petersburg last year for those units that we recognized then. So here, actually, what we can say here is also that this is also the market in the Baltics where we see the effects of COVID-19, a much more cautious market, and that has also -- so that affected sales, especially in the Baltics. Fewer sold units, as you see here, 135 compared to 244, and that is mainly in the Baltics, that reduction. No started units in the quarter. And the main reason for that is, of course, that we are cautious in the Baltics, but also that we have very big projects ongoing in St. Petersburg that we started last year, and we have a lot to do on those projects and also to sell them. So that means that we are, according to our own plan, more cautious when it comes to new starts here in this segment. If we then continue to look at the balance sheet, we -- total assets, SEK 24 billion. And if you compare it to previous quarters and previous years, the split between the different assets is more or less the same as in previous quarters and in previous years. And in equity-to-assets ratio, just above 30% at the end of quarter 2. So a strong balance sheet and good, sound health of our total assets. Lower net debt. And as I said when I talked about the income statement, lower if you look at the end of the quarter than quarter 1 and also -- quarter 1 and end of the year, this year and also compared to last year at the same time. But that was an impact coming from a very strong cash flow in the second half of June. So if you look at the average net debt during the second quarter, it was more or less at the same level as in 2019. But a good situation, and we tie up SEK 13.7 billion in our capital employed. And the EBIT and the profitability on that capital that we used -- have used is 6.2%, well below our own financial objective of being between 10% to 15%. So our main objective now is to improve profitability, to be back on these levels that we were in '18 and previous years, so that we reach our own financial objective. That is the most important for us going forward. We've had a very good and strong cash flow during the second quarter, SEK 1.1 billion coming in from our operations. And the main positive income inflow is, of course, the divestments that we made during the second quarter, SEK 3.2 billion. At the same time, as we have handled our working capital in a positive way, and I think it's also important to say that we continue to invest into our business for the future, so we still -- we have invested SEK 3.2 billion during the second quarter. And even though we do that, we still have a strong positive cash flow during the second quarter here. And that is, of course, very important for us. So I would say, to keep the costs in good line and also to keep the cash flow -- to keep a very strong cash flow, that is the most important things for us to do in this COVID-19 situation. And we also have secured financing, as I said, during this second quarter. So we -- all in all, if you exclude the project financing, we have, all in all, finance capacity of SEK 8.4 billion, whereof we haven't used SEK 4 billion at the end of the second quarter here. So that is also very strong and positive for us going forward. And one other thing I want to point out here when it comes to financing is that we now have green financing. That means that we finance green projects such as Swan-enabled projects in Sweden, for instance, of SEK 0.6 billion. And this is, of course, very important for us in many aspects, both that we -- that we work with our sustainability objectives, but also good for our customers to know that we have projects that we can -- that we have used green financing for. So this is a very important area for us going forward. So by that, I hand over to you, Joachim, to summarize this second quarter.

Well, summarizing again, we feel more confident. I feel more optimistic than I did 3 months ago at the last reporting. We have increased starts in our main markets, which was also a one very important objective when we started this year. The sales are picking up. We've seen a very slow end of March and April, but month by month, the sales have been improving, and that shows 2 things. The markets are -- have been more resilient towards this pandemic, but also that there is a big underlying demand for new residential. We are not satisfied with the EBIT result this quarter, as we have communicated earlier. And -- but we see recovering project margins in Germany already in the third quarters -- in the third quarter, and we should also see gradually recovering margins in the Nordic segment, especially in Finland, from the fourth quarter and going forward, as the turnaround plan is so far successful. Solid financial position, also we said that. We have a lot of credit lines that are currently unused for opportunities. But we also have a very strong sales ratio in our portfolio. And then again, I don't think it's fair to say that we are totally out of this crisis, even if it's more positive than we feared. We need to stay very close to the market this autumn and see how this pandemic has affected the general economy. With that, I would like to hand the word over to Louise Tjeder to moderate the Q&A session.

Thank you. Thank you, Joachim, and thank you, Ann-Sofi. We will now open up for questions, and we will start with 2 questions from the web from [ Per Thorsell ]. How do you choose project for investors and for own book? Is there a risk that Bonava takes the low end as not disappoint business relationships? Joachim?

It's actually quite substantial business logic between consumer projects and investor projects. The margin is lower in investor projects, but the risk is also substantially lower. So that means that the land price one can pay for a rent -- a rental project is much lower than a consumer project. So when we say that we ramp up in the investor side, it has started in the beginning of the value chain with finding land appropriate for -- for rental projects or investor projects. So there is no sort of internal competition. We value both our consumer customers and our investor customers equally. So I mean, no internal competition, quite different business logic.

Okay. And the next question, also to Joachim. What differs Bonava from competitors? And what is Bonava's strategy for a competitive advantage in the building sector?

There are a few things that separates us, and one is what we just talked about. We focus on both consumers and investors. We have said that approximately 1/3 of our business should be investors over a business cycle. When the consumer market is weaker, we can increase that part. Secondly, our footprint. We operate in 9 countries, in 23 different markets or regions, which is also a significant difference, and then our focus on more affordable housing. The competitive advantage, besides these 3 sort of strategic initiatives, is also that we decided to in-source all the design and work more industrial and only with the residential developer. And on top of that, we are also slowly but surely in-sourcing production capabilities to make sure that we can keep the whole business, the whole value chain within Bonava's control.

Okay. We will now open up for questions on the phone. So operator, please.

[Operator Instructions] And this question is from Simen Mortensen from DNB Markets.

And congratulations with what I would say was a good sales with roughly SEK 3 billion in new housing sales in the quarter, given the lockdown. But I have a few questions here. First of all, the margins in the Nordic operations. You communicated now that Q3 will again have the last of the negative figures, assumingly, on the project developments in Finland. But once these projects are washed out and given you've completed contract accounting, you're thinking it's going to be phased out -- phased up. But how -- what do you mean by that? Because this new project, every single quarter, what would you consider to be normalized margins for that business, especially since if you look at the market, Finnish development has one margin, but you have grown in Norway and it's typically we see a lot higher margins in Norway in that kind of operations. And when we will see higher margins from that acquisitions you did in Oslo here?

Okay. Thank you, Simen. Ann-Sofi?

Do you want me to take that? Yes, that's a very good question. But all in all, the segment -- the Nordics, consisting of Copenhagen, Bergen and Oslo and Finland, but what you should expect in the long run that they should -- that segment should have the same EBIT margin at least as the rest of the group. If you compare to Germany, for instance, or St. Petersburg-Baltics, they should have the same EBIT margin as they have. And as we have said in this quarter report and also previously is that we still -- we have some low-performing projects coming from Finland, and that will impact the third quarter. And of course, you should see a more positive development already in the fourth quarter, but it will take some time to be up on the same level as the rest of the Bonava and what you should expect from that business.

You also mentioned that in terms of starts, it's going to be a bit back-end heavy this quarter. Do you mean that -- how -- what can you help us with that thing? ( In this band ) so far, it sounds it's a job we have to estimate housing starts in both Q3 and Q4. If you can give us some indication of what you meant by that in terms of the housing starts?

Most of the housing starts actually this year is really back-loaded. So that means the fourth quarter. And again, due to the pandemic, for instance, in Germany, I mean a total lockdown also meant that the municipalities were locked down. Through a zoning process, there is things like public hearings and that kind of activity. So fourth quarter, but with the risk of delay. But I'm still positive. I mean we have a lot in the pipeline. It seems like when we're talking about Germany that our tactics is starting to pay off, that we're working in a sort of broader scale to get more building permits. But it's not evenly distributed. So most of the starts in the fourth.

Do you expect starts in like -- to be in line with what we have seen in 2019 and '18? I see that...

I think it's better to talk about different markets. If we go to -- we can talk about Sweden and Germany. I guided, before the COVID crisis, that we were looking forward to 1,500 starts in Germany this year. Due to the pandemic, I don't think that's realistic anymore. I would be really satisfied if we can come in somewhere between 1,200 and 1,300. And as I said earlier, with the majority of those starts in Q4. Sweden, we had a good start of the year. So that was a more even distribution. I would argue that we have projects for a plan for start to consumers, but that's more in the range of maybe 150 more. Looking at the investor side in Sweden, as we already communicated, we sold a package in Västerås for 162 units. And that is not recognized -- started yet due to building permit. And then we also communicated that we also have a letter of intent for another project, and that is in the range of 100 units. And I think that is what we can expect from the Swedish stocks.

And you want to touch upon the Nordics?

Nordics, I think it will be slightly lower than last year, and that would be an effect of what we said with a more cautious approach in Finland, that we'd rather work with the right size. Even if there is sort of an absorption in the market, we'd rather tread carefully after the experience that we had there. But I'm happy to say that we started our first own project in Oslo. As I said, we had one started already before. So the Oslo region should, during the year, have at least one more building start. And Bergen should continue more or less on the same level as last year. Copenhagen is -- would be in a pretty small scale.

And just [ to answer you ], just in the completion margins we do see in the Nordic. Is part of the low margins we do see here because of the M&A done in Norway, where you have like the accounting system, which units under construction have a very low margins when you account and consolidate them? Is that part of the margins we're now seeing?

No. That is not what you see. I'm not quite sure that I follow you, but we haven't recognized any projects at all. So you have no margin coming from the Oslo business, if I understood you correctly. So you have the same way, with no units finalized in Oslo and no units handed over, if I understood you correctly.

We now have a question from Tobias Kaj from ABG.

Yes. I would also like to start with some questions regarding Germany. You mentioned that the margin in Q2 should not be viewed as a new normalized level. But for the second half, should we expect similar margins as you had in the second half last year or is it more that we should expect an improvement from the second quarter in this year?

Yes. I -- it's more relevant to compare with 2019, actually, and saying that even if we talk about that, you should expect improved from quarter 2. But if you compare with last year and previous year, that is more relevant to compare with if you go -- looking forward in the German business. However, I just want to say that from time to time, we've had very high margins in Germany. And well, close to 14%, 15% for 1 quarter or for 1 half year, and that is actually very, very high. And so what we said is that -- and I want to stress that again, that to be about -- and having an EBIT margin, on average, of above 12% is very, very strong for a business like our German business, where we continue to grow, we continue to increase the activities. To be above 12% is still very, very good. So I want to say that. But you should expect margins to be more at those levels when comparing with the first half year of 2020.

And in Germany and in the second quarter, I mean you mentioned that you have more recognized units to investors. You also mentioned that you have had some cost increases due to COVID, but that they are not too big. Okay, I mean the gross margin per recognized unit fell from SEK 720,000 to SEK 240,000. So it's a huge declines. And I guess it has to be something more. And can you give some more details why we see such a big drop in the gross profit from per recognized unit?

One thing was, for example, where we have a fairly big project in Heidelberg, where we recognized units for that student apartments. And that was one of the projects that were delayed due to COVID-19. It should have been recognized and handed over already in quarter 2. We also -- so it was, from the beginning, a low-margin project that we've had ongoing for quite some time. And -- but the thing was that it was also affected by -- we were to bear some cost for that project due to the fact that the authorities didn't have the ability to come out and do the final inspections of that project. So that -- it's not huge in euros, but it affected the already low margin of that quite big project in quarter 2 for us. So that is what we meant when we said that. And again, we've had also some other projects for investors with lower margins than the normal level in our portfolio in Germany. So -- so I agree with you, low margin when you look at the number of units that we have recognized, if you look at that margin per project, per unit, low. But as we see it, there are explanation for that and not the normal margin that we have in our German portfolio.

To build on what Ann-Sofi just said, the Heidelberg program was, as she said, student apartments. Of course, they are of very small size. So when we use the unit KPI, that also affects both the earnings and the net sales for those.

And you mentioned, regarding cash flow, that you had a very strong inflow of cash in late June. Is that an indication that this will reverse in Q3, or do you think this is a sustainable improvement?

Very good question as well. No, actually, I would say that there were some impacts coming from the fact that we had earlier inflow from some of the sales, and the sales that we've had in the quarter, we had earlier payments from that. And also some outstanding payments that we will have to do in quarter 3. So it's an unusually strong cash flow in the second quarter due to this. So you shouldn't expect that to be as strong as it was in quarter 2, actually. And also, of course, that we've taken actions to be more cautious with our cash flow. We do whatever we can to mitigate so that we have inflow and outflow in the same quarter. That is always important for us, but maybe even more important now when we are in the COVID-19 situation and when we have to protect our financing. So I would say it was an unusually strong cash flow in quarter 2.

We have a question next from Fredric Cyon of Carnegie.

So 1 month ago, you issued an update following the development post-COVID. And in that statement, among other things, you mentioned that you expect sold units to be at a lower level 2020 versus 2019. Now in the first half of 2020, you're above previous year. That would indicate a decline. Do you maintain that view or is it an obsolete statement?

No. We actually maintain that because we -- as we are so back-loaded, as we talked before, in Q4 with starts, that will also affect our possibility to sale -- to sell. So we still forecast a lower level of sold units. And we haven't -- the sort of the sentiment hasn't changed that much since we released the press release. But I think we go back to the quarter 1, we are more confident regarding the numbers now than we were before.

And with regards to sold units, the selling pace, I would imagine, has improved during the quarter. Can you give us any guidance on development in June in isolation versus June of last year?

I don't have those specific numbers, unfortunately. However, Ann-Sofi, you might know how much of the June -- no, the total sales that were in June, I think it was somewhere around 40% of the sales.

Yes. Yes, and I would say that in some markets, for instance, in Germany, we are at -- we were at a higher level the second part of June compared to last year due to the fact that we have started more units, we have more units for sale there. On the other hand, I would say that in the Baltic -- in the segment St. Petersburg-Baltics, the opposite. So it depends on what market you are looking at. I would also say and argue that in Sweden, we've also had a pickup of sales in the second -- well, second half of June. So all in all, I think that -- I believe that this June -- the second half of June was better than the second half -- this year than the second half of June last year. But again, Finland, St. Petersburg-Baltics, the opposite. So it depends on what market you look at.

And then 2 more questions. One on the gross margin in Sweden. So the gross margin index in second quarter was below 10%, and you still had a decent amount of sales in the quarter. Why should we expect that to pick up during the next 2 quarters, because I guess you're not satisfied with having a sub-10% gross margin in Sweden?

Do you want me to answer that? Well, I think, yes, we -- again, I would like to reiterate what we say that, and that is that we -- if you look at the gross margin in Sweden, I think it's somewhat better than that, somewhat higher, especially if you take away the sale of land last year and compare the 2, the margin in Sweden is somewhat better than that. And -- but the Swedish operations should have the same gross margin as we have stated and also the same EBIT margin, above 12% going on a rolling basis. That is what we expect from the Swedish business and also what you should expect.

But not this year, Ann-Sofi?

No, no.

And then my final question, relating to Germany. We have already touched upon this previously, but just help us a little bit in our modeling. So the gross margin difference we should expect from the consumer product versus the investor packages?

Well, the gross margin in the consumer projects, gross margin in Germany is somewhere between from 18% to maybe 21%, while the investment packages would -- it depends. What we will see now is a larger influence of social housing going forward. So that would most likely be somewhere between 12% to 15%.

And we have one final question from Jan Ihrfelt from Kepler Cheuvreux.

Okay. I have actually 3 questions. And the first one regards your average selling price in Sweden, which seems to be rather high at about SEK 5 million. Could you give any guidance of the coming quarter, what you see on the average selling price?

Well, that was a very difficult question. Those prices are -- that is more Stockholm-related prices. And of course, as I said, we will start new projects in Sweden going forward, and that will carry a lot of sales. Will -- they are -- they will mostly be in other regions than Stockholm. So I think it's fair to say that you should expect lower average sales prices on that going forward due to the mix -- the product mix.

Yes, and I can confirm that's correct. So it would be more in line with the last year's average.

Okay. And the second question regards the margins in Sweden, and you have comment upon both Germany margins and Nordic margins. And what's the case in Sweden? You talked about 11 -- 12% EBIT margin. When can we expect that? Is that for next year or is it already for the fourth quarter? Or what do you mean by 12%?

I think that the first objective for Sweden is to climb above 10%. I think that's our sort of ticket to play level. And I -- well, let's hope that we can reach 12% the next year. I can't sort of put my head on the block for that. But for sure, we will strive to get there as soon as possible. But 10% is the first stepping stone.

Okay. And actually, I have 4 questions. My third question relates to your margins on an overall basis on -- in the group when it comes to investor sales. Is that somewhere between 8% to 10%, on average, for your investor business or...

No, I think that's fairly right. Maybe you could expand it up to 11%, 12%. It's sort of in the range from 8% to 12%. It depends quite a lot on which region. We are more -- Germany is a stronger market than others, so you can expect a bit more. On the other hand, as I said, there will be more influence from social housing, which will have traction downwards. But for the Nordic countries, I think that if you can get 10%, I think that's pretty good. So I think you boxed it in quite well there with a range between 8% to 12%, depending on from project to project.

Okay. And my final question is in regards to the German market. You were saying that it was totally locked down in the second quarter and that also was the case, of course, for the planning process. And is that a hindering factor for your ambitions in Germany for next year? I suppose it has some negative effects, which you already mentioned for this year, but for next year, will that will be a hindering factor for you to expand your German business?

Well, I mean a 6 weeks delay is a 6 weeks delay, and that might push projects from '21 to '22 and so forth. But I think it's a bit early to say because different municipalities in Germany has been sort of differently skilled on handling this. So I think that at the Q3 report, we can give a more detailed sort of flavor. But talking about future projects, I just guided on my -- today, my sort of -- my forecast on starts this year, that I would be really pleased if we can now be in somewhere between 1,200 and 1,500, which is a bit lower than we guided before the COVID crisis. So we think that the actions that we have taken are yielding results, but it's a bit too early to be sort of be more specific. But there -- of course, there is a risk that it will also impact 2021. If we had projects planned for start very late in that year, they might be pushed over to 2022, but it's a bit too early to say.

There are no further questions at this time. And I will return the floor to your presenters.

Okay. Thank you all for listening in. We will publish next interim report Q3, 23rd of October. And by this, we wish you all a very nice summer.