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

Hi, everyone, and welcome to the presentation of Bonava's Q3 results. My name is Carolina Stromlid, and I'm Head of Investor Relations here at Bonava. With me today, I have our CEO, Peter Wallin; and our CFO, Lars Granlöf. And as always, they will take you through the highlights of the quarter, and they will also comment on the outcome of the strategic review and the revised targets that was announced this morning. As per the presentation, we will do a Q&A, and we will do the Q&A over phone only. So thank you for taking the time. And please, Peter, the stage is yours.

Thank you very much, Carolina, and welcome, everyone. Normally, we say good morning, but now when all the reports is coming, we are a little bit later in the day. But we are very much energized to talk about our report and the outcome of the strategic review. If we then start with setting the stage for the conditions -- the market conditions that we have experienced during the third quarter, they are very stable on a good, robust level. We have seen price increases across our different markets, albeit at lower rates than we have seen during the spring. There is still a very strong interest in the -- and demand, which reflects the prioritization for larger areas and greener areas, which we have seen during the pandemic. That is still true. Another thing that is impacting the way we are looking into the future is, of course, the continued lingering effects of the pandemic. We are seeing some implications in St. Petersburg, in Latvia, for example. And here, that -- this will impact some of our businesses right now. But we are still on a very high preparedness to act and we have exercised this preparedness quite some time now during the pandemic. Switching over and talking about the results. We are posting a strong report in the third quarter with 26% increase in revenue organically, excluding FX implications. We have a significantly improved EBIT and margin and it increases almost by more than twice, 2x. And the reason for this is, of course, the increased revenues and then also strengthening the project and regional mix with an increased gross margin. We have a somewhat lower contribution from the business units, St. Petersburg and the Baltics, and this is due to the fact that one of the projects that we have completed and sold has not yet been handed over to the clients in the third quarter. This will happen now in Q4 and perhaps also drag into Q1 2022. We are looking into a demanding situation across our markets when it comes to shortages of material, increased cost of labor, subcontractors and so forth. So far, we have seen quite limited implications of this because we have been able to control these increases and also offsetting these with increased prices. So that means that would actually strengthen the margin in our ongoing projects. And this is to be reported, as you know, when we hand over the keys, the apartments and the houses that we are developing. And we have a very strong financial position, which is a great foundation to grow from. And Lars will comment that at more detail. The starts, we are according to the plan and we have increased units recognized in the third quarter. We are maintaining our guidance when it comes to increasing the number of production starts by 5%. It's not far away from New Year's eve, and we do not start our projects until we have the right prerequisites for starting the projects. And we are also, of course, exposed to the permitting that is needed to start the projects. But we are still maintaining our ambition of 5% increase in production starts. And let me take a few examples of what we have started in the third quarter. To the left-hand side, we are putting a picture up of our single-family houses concept in Sweden and we have started one project on the West Coast of Sweden and one project in the Stockholm area during the third quarter. And perhaps you have also seen the press releases that we are continuing to increase into building rights here with the acquisition of building rights in Linköping, a very interesting university city in the middle part of Sweden. To the right-hand side, you can see Wedeler Tor in Hamburg, where we have started and sold 62 investor units. And also in total, this block is encompassing 123 units. And it's actually where our former petrol station was located. So it's really showing how we are developing and improving the societies we live in and work in. So let me switch gears a little bit and come to the strategies, the revised strategy and also the revised targets, the new targets for Bonava from 2022. When I started as a CEO, we embarked upon a quite thorough review, a fact-based review of our business. We have been looking into macro trends. We have been looking into the various markets. And we have also looked into the various business units and functions to understand how do we perform relative to the market, where are the gaps and how can we bridge the gaps and actually succeed in exceeding the targets. And the external conclusions are that our markets are attractive. It's more how we play in each and every one of the units on the market. What is our level of expertise? How does our land bank look like and so forth. The second part of the external conclusions is that all our markets are different. This might not sound like rocket science, but I think that it's first to recognize that this business is a local business. So that recognizing the fact that we are working in a different way, customer needs are different, and our maturity in our businesses are different. Thirdly, competition is moving fast. And there is no way like today when we have to use the opportunities in our business. We can't live on past successes. We must always prove ourselves for our clients, for our customers and, of course, to our shareholders. Then, looking into the internal conclusions of this same review. Again, not rocket science, but well-managed land bank is crucial, and we have underinvested for quite some time. So we really need to grow our building rights portfolio. Secondly, cost of resource efficiency is key to stay competitive. So we really need to look at our building systems. Once again, it's a local business and also depending on how mature we are in the various marketplaces. Thirdly, we need to continuously sharpen our commercial offering. And that is both on how we are doing the place making of a new area, but it also relates on how we are doing the customer journey. And what we have been building a lot of our successes on is working more and more digitally. We need to strengthen this part and work smarter. Fourthly, we need to clarify the operating model. Since we are a local business, we need to have a good balance between the center and the local business units. We call it a decentralized integrated model. And all of this comes together because if we don't have the right concept for the right land bank, we can't work with the right offering to the market. So all of these pieces is linked together. So first, setting a clear business focus, strengthening the building rights and the land bank in regions where we see the best opportunities to do so. The wind down of the Danish business as an example, where we are deploying capital to other more profitable and higher growth areas. Second -- thirdly, we need to leverage on the local market conditions and take the opportunities that we see in the market. By having a too scripted approach to what we can and cannot do, we are missing out on what's happening in the marketplace. The second leg is that we need targets that steer the value creation in the right way. So starting with a good purpose, we create happy neighborhoods for the many. And this is, I think, a very strong, which is close to our heart at Bonava, we love developing and creating happy neighborhoods, and we will continue to do so. To guide us in the right way, we have chosen to revise our targets and put more ambitious targets. So we have six financial and nonfinancial targets that will guide us. I will comment these a little bit further on. And thirdly, sustainability is an integrated approach. This needs to be throughout our value chain in order for us to make a real impact for society. The third and last leg is the strategic priorities for the themes that we are working on in order to get this strategic plan into fruition. Again, strengthening the building rights portfolio in the land bank, improving our efficiency and ensuring commercial excellence. If we look on our businesses over time to start with, we have a very high variation in profitability. And if we look into our business units, we have some business units which are within the stabilized business. They need to get the basics right. And here, we put the businesses in Norway and Finland. Secondly, we have ensure profitability, increased performance. And here, we put the Swedish business. And thirdly, we have the growth businesses where we put Germany and the Baltic St. Petersburg businesses. And we do not see that you can take the step from stabilizing the business to growth directly. You need to take it by ensuring profitability. So a little bit like walk before you can run concept. And that means that in the midterm, we will need to move away Norway and Finland from the stabilizing part into the insured profitability part before taking the next steps to the growth part. And here, you can also see directly towards our -- one of our targets, the EBT, earnings before tax, target of SEK 2.2 billion in 2026. And we will steer the businesses and the stabilizing business units will have a more restricted growth and more restricted mandate. The ensured profitability will have a little bit more mandate and the growth businesses will get the greatest mandate. So coming into the targets, EBIT, earnings before tax of SEK 2.2 billion in 2026, combined with the growth target, where we are aiming to reach 8,000 sold units in 2026. So with these two financial targets, you can see that it's mostly about increasing our profitability and the increased profitability is not relating to the growth rate. So mostly into improving our margin and profitability. Then, of course, a prerequisite is to have a healthy and safe working environment. Fourthly, customer satisfaction. We live for our customers and by our customers. So we need to have happy customers. Fifth, climate action, very strong targets when it comes to science-based targets. We're keeping those, of course. And lastly, and very, very important to make all of these changes to employee engagement, where we need to continue to be on the top 10% of the companies within our comparison, our peer group, the benchmark. Underneath, we are still keeping the framework of an equity asset ratio of at least 30% or above in equity assets. And when it comes to the dividend policy, we are maintaining the level of at least 40% of net income. We have added over a business cycle to reflect the fact that we, of course, aim to give a consistently increased dividends to the shareholders. But we need to be able to flex from year to year to reflect the investment opportunities that we see in our business because with increased investments, that is the way forward to increase value for shareholders. With that, Lars, I hand over the word to you.

Thank you, Peter. Hello. Good morning. I would like to start -- let's see, start to throw the, sort of, reconciliation of the units recognized that I normally do, basing on what we were saying in the Q2 report. And you see that there is a difference compared to where we're estimating. It's relating to our customer segment. You see that our investor segment is in line with what we were expecting at that point in time. So out of the expectations that we had closed in Q2, 65 of those consumer units were not completed in our third quarter, they were delayed, and 16 out of the completed were not sold by the end of the quarter. However, we managed to once again reduce the portfolio of completed unsold from prior periods and 79 units we managed to do in Q3. But out of what we were guiding in Q2 for completions, some 200 units relating to the St. Petersburg-Baltics segment were completed but were not handed over. And as Peter was saying, this will be happening now in fourth quarter and also rolling into the first quarter next year. So there are some 200 units that we were lacking in terms of handover. And I think that is explaining most of the difference or all of the difference compared to the market expectations that we have seen. So with the units, let's then move over to our income statement. And we have recognized more units compared to the prior year, as you've seen. And the main increase is coming in the investor segment. So we have increased our net sales to SEK 3.6 billion and with a good profitability coming from a good project and market mix even though we have a higher proportion of investor units in that -- that normally comes with a slightly lower margin than the consumer units. So with the increase both in absolute terms and in percentage terms in the gross margin, with our selling and admin expenses in line with the prior year, we are leveraging, of course, this and having an operating income and EBIT that is more than double the prior year. And in terms of margin, it's double the prior year. And if we look then at the financial net, slightly higher than the prior year, but it's like in the previous quarter that we have added a component where we are paying for an option in Germany that is the reason for the increase over the prior year and our tax percent is slightly lower than in the prior year, which is based on the mix that we are seeing in the business. So let's move over to the segments, starting with Germany. And here, you can see that we have a higher recognition of units, and that is coming from the investor area, not from the consumer area. And despite the fact that then we have higher part of investor units, we have an increased gross margin, increased profitability in the German segment with slightly higher selling and admin expenses in the quarter than we saw in the previous quarter. And if you look at sales and sold units in the starts, we see the market. As Peter was describing, most of our market or all our markets have a high demand and stable sales development also with increased prices in some markets a bit plateauing, but at a very high level. So we see a good market in Germany. We see good interest from -- here from the investor community. You saw that we had this project in Hamburg that Peter showed you earlier on. Starts were lower than the prior year, but were in line with what we were planning for this period. And normally, we are also then talking about this process of getting the building permits, which is an obstacle for us in the process. It's still there. It's still on the same level. Nothing has happened. It has not worsened, but it has not been improving either. And a bit of a heads up now for Q4 in terms of Germany is, of course, that now we are moving into the strongest quarter of the year for us. Moving over to Sweden. Also here, we see a high volume of recognized units again coming from the investor area. And despite that, also in Sweden, we see higher gross margin than in the prior year. With reduced administrate expenses, we see a significant increase, almost twice as high as in the -- or twice as high as we've seen in the prior period in terms of the EBIT margin. Moving over to sold units and start units. Also here, a strong demand and sales development. And here, we see that the prices are a bit plateauing, slowing down in the rate of increase in Sweden but at a high level, as I said early on. The sold units have increased mainly been -- driven out of the investor segment. There is a high interest for our investor deals and not only by Swedish investors, it's also from the international segment that we can see a high interest in our business here. And in terms of looking forward into the fourth quarter, we are seeing a high proportion of investor units that will be recognized also in the fourth quarter. However, in that quarter, that will have a slightly negative impact on our gross margin compared to how it was in previous quarter. The Nordic segment then, you see that here we have a very low volume of recognized units. It's basically driven out of Finland. You know that we have decided to wind down our business in Denmark, so that is a slow business. And also right now, we have a few recognized units in Norway. So with a low volume, we still have improved our gross margin slightly, but the volume is not enough to be able to leverage on the selling and administrative expenses that are slightly higher than in the prior year, mainly due to buildup of the Norway as a separate business unit. So here, we are in a negative margin as in the prior year, even though we have reduced the negative margins slightly. And if we're then looking at the situation in terms of the sold and start units, also here, a strong demand with increased prices, but we have a limited supply of units, products to sell to the market, in particularly in Norway. The investor segment is also very interested here. We have sold and started one project in Helsinki. And going forward, we are, of course, focusing on handovers and starts really driving, in particular, the Norwegian business going forward. And finally, then moving over to St. Petersburg-Baltics. We have been spoiled, you can say, with very high levels of recognized units in this. Now we are -- in the quarter -- we have had the quarter, slightly lower recognized units. And you saw that from my reconciliation, you can say, the bridge of units that we have recognized that we actually had some 200 units that we have not been able to recognize that would be coming in coming quarters. That is the main reason for us dropping slightly here. Still a profitable business even though the margins could be higher if we would have been able to recognize these 200 units. And looking at the market, we have continuously high demand and price increase, and we have a strong sales development in all of our markets in this segment. I won't comment on this project again. But as Peter said and I said, we have some 200-plus units that will be recognized now in Q4, in Q2. And in starts, even though we would like them to be higher, they are in line with what we are estimating. So moving from segments now over to some slides about our balance sheet and starting with the distribution of assets and the equity asset ratio. Normally, third quarter is the weakest quarter in terms of the equity asset ratio. We have been trailing 30% or around 30% in a number of years. Now we are almost on a 32% level. We are winding down in Denmark. So we are not building any new land bank, and we have divested the land bank now at 1st of October, it's not reflecting in these figures, it will be reflected in the Q4 figures. And we have a significant increase in our Baltics and St. Petersburg building rights portfolio. In terms of capital employed and return on capital employed with the target of 10% to 15%, we are now, for the second quarter in a row, within that range, now on 11.5% in return on capital employed. And that is driven out of now a continuous relatively low capital employed and the increased profitability on top of that is, of course, building a better return over time. And going from that over to our cash flow, we have a balanced cash flow. We have investments in ongoing projects that are financed through handovers. And in comparison to the prior year, we have in this quarter, slightly less of advances coming from customers that we normally are seeing coming in. And moving from that over then to what's the situation in terms of net debt? It's on the same level, same low level that we had in the prior quarter and that we have had now for quite some time. So we really have the power for future growth -- future profitable growth in the financing of our activities. Just going through these two graphs that you know that is very -- they are very vital part of our Q3 report and for estimating what we are completing in the coming quarters. And you see that there is an increase in consumer area up to 1,260 units to be recognized in the fourth quarter in our estimate and also in the investor area, 890 units. So all in all, 2,150 units is our estimate then for completion in the fourth quarter. So with that, I hand over, again, to you, Peter.

Thank you very much, Lars, clear presentation. Thank you very much. So rounding up this part of the presentation, good favorable market conditions, improved profitability. The sale of the Danish land part is going according to plan, and this will be recorded in the fourth quarter. We have a very good foundation, I would say, to improve our performance over time. This is a long-term business, and it takes time to move step by step. So especially with that as a backdrop, I think that this third quarter report is showing very good signs across the board. We have a leading position as a sustainable residential developer and we will continue to strengthen this as a main target for us. And talking about targets, the revised strategy and ambitious targets that we revealed today will set us off well into the future and also create a clear line of sight externally and internally what good looks like. That will mean that we will post SEK 150 million to SEK 200 million negative in the one-off items affecting comparability, which will be recorded in the fourth quarter. And also the profitability, very important. We are aiming SEK 2026 to hit SEK 2.2 billion, at least, in earnings before tax. And this will also be manifested by a growth to 8,000 units and homes sold by 2026. So with that, I hand over to you, Carolina.

Thank you, Peter and Lars for a good presentation. Before we open up for questions, I would like to inform you about our digital Capital Markets Day that will take place on the 14th of December. So please save the date in your calendars. We will send out a separate invitation with more details shortly. So let's move over to the Q&A. Please, operator, go ahead with the first question.

[Operator Instructions] Our first question comes from the line of Staffan Bulow from Nordea.

I have some questions regarding the new financial targets. So starting off, what kind of ramp-up does your target imply? Do you expect linear growth by 2026? And in fact, the 8,000 sold home target, that implies that you expect to start 8,000 units in 2024, right?

Was that the two questions that you had of ramp-up? Yes. And also, I think we will both comment it. But you're absolutely right, we have roughly 1.5 years in production before we actually hand over the homes and also record the earnings. So that would imply '24. But you should also remember that we are building up and the current portfolio of projects we have is also dictating a buildup. So it's not that we are starting from scratch. Any comments on that, Lars?

No, I think you're absolutely right. So it is a gradual build up in the different markets that we are in. I think you also had a question about the EBT target and the way to go there. I think we have to come back to that when we come to the Capital Markets Day. Right now, we are stating that this is our target for 2026, SEK 2.2 billion, the SEK 2.2 billion of earnings before tax.

And with that also, we are increasing profitability in the ongoing projects, the bulk that we have yet to be recorded. So there is, again, we are also not coming from a scratch situation there. And to repeat ourselves a little bit, and it will be mostly coming from increased profitability, i.e., increased margin rather than topline growth.

Okay. And regarding the SEK 2.2 billion EBT target, could you comment what kind of gross margin and the EBIT margin and the average selling price that implies?

We have, of course, been looking into the analysis and in order to drive an improved earnings before tax, we need to improve gross margin. We need to improve the EBIT and we need to have some growth. But it's Peter was saying, that is coming mainly from efficiencies and improved gross margins in what we are doing. And we are not about to, today, comment on what are the levels in terms of gross margin and EBIT margins, whether we are doing that going forward, we just have to come back to.

We have to save something, Staffan, for the Capital Markets Day as well.

I see. Perhaps this question will also relate to the Capital Markets Day, but I'm wondering regarding geographic mix, if that -- if the target implies changes in mix? Or do you expect the same geographic mix as you have today? Or do you expect it to change?

We are happy with the fact that we have ample opportunities to improve our profitability and growth within the current context. That, of course, also implies that we will grow the parts, which are showing the best preconditions for profitable growth. So the weighting could change. We have 22 regions in 8 countries when we start this after having wind down Denmark. And of course, there could be changes within that limit over the next 5 years. And this is our responsibility as management of the business to make sure that we are always measuring and looking at what is the best allocation of our financial and capital allocation over time.

I see. Can you comment anything about the selling and admin expenses, if you have to ramp up those to achieve the target?

Definitely not in line with the growth targets and the growth of EBT. Depending on where we are investing, depending on what kind of projects, et cetera, it might be that we need to invest some part in selling and administrative expenses, but not in relative terms in the same way as we are growing profitability.

And if I only can throw in there, and this is also pertaining a little bit to your earlier question on gross margin. We have to recognize the fact, which is clearly visible when we demonstrate each and every one of the business units that gross margin levels is so different across our margins. So we will need to sort of set these parameters on a local level when we measuring and give ambitious targets for the businesses.

I'll round off here with one question and save that one for the Capital Markets Day. I note in the press release that you state that investments in building rights must be linked increased reserves efficiency through repetitive production. And I reacted on repetitive production. Does this mean that you're planning to have some -- have the same production line of houses like core [ facciate ]. Or how should we interpret that?

Good question. It's not predominantly linked to a vertical integration, which you have implied when it comes to core [ facciate ]. It is that you have a building system predominantly. And then you can know what kind of concepts you can develop because when you acquire the land, you need a very good understanding of what kind of concept you can use in order to understand how you can drive the value of that specific land investment. And it also links back to the concept you sell to the market, the place making, the type of products. And all of these sort of is linked together on how you're working with your land bank. It will also mean that we will need to look into larger investments into specific areas and not infill investments. So that we, with the repetitive system, also can draw benefits from the value creation we create on our own in that specific micro location.

Our next question comes from the line of Fredrik Stensved from ABG.

And I have a few follow-ups on Staffan's question. I'll see if you will answer them today or save it for the Capital Markets Day. But -- so starting off with the EBT target of SEK 2.2 billion. And as you point out, most of that is expected to come from increased margins rather than top line growth, but you also mentioned that you have to invest in more building rights to get there. So the question is, how much incremental capital you need to the target of SEK 2.2 billion imply?

Yes. We are looking for a land bank increase over the coming years to start with of a few billion. But it's like Peter is saying, it will also have to -- we have to go into the markets where we see the best return on those and also seeing that it's relating to our building system. So we actually have a cost-efficient model to it. But that is what we are looking at right now. So building on Lars's question then, so overall, we have an increase. That increase is sufficiently covered by our strong balance sheet. And I'd remind you that we are not yet to the equity taking the profit secured in a large proportion of our ongoing projects, which are sold with binding contracts. Secondly, the net implication also means that some areas will need to decrease and others will increase. That's another way to fund it. So all in all, you have one level, which is a step up where we need to be as a business. And then you have yet another step to give the implication of growth going forward.

So I mean if EBT is going to grow by 120%. Can you say anything about the incremental capital need? Is that going to grow your balance sheet by 50% or 120% as well?

Let us come back to that on the Capital Markets Day, as you alluded to.

Okay. Okay. Then a second one then, the press release mentioned that you could, in some cases, fit on -- or continue to own the completed projects once they are finalized. Maybe if you could add some color on that. Does that mean that you can hold them for 6 months and then divest? Or could you sit on this for several years? And if so, do you have to sort of build up a property management organization as well in order to do that?

Very good question. Well, the idea of retaining some assets on the B2B side would be to see further value creation coming from these assets. And these assets, we know for a fact that you get greater value by having a portfolio rather than having a piece by piece. So that clearly indicates that we will hang on to some of them over a number of years, at least, but then sort of replenish the stock when you're getting up to a going concern level of that business. And if it becomes a true business, for sure, we will need to staff it adequately with resources.

Our next question comes from the line of Stefan Andersson from SEB.

Yes, I'll start with some questions on the strategy as well, I guess. First, you divided your regions in different stages, and I guess, Sweden being a rather big one with the interest a little bit. Could you maybe elaborate a little bit more on what you need in Sweden to get that up to the group of St. Petersburg and Germany?

Yes. Number one, I would say that you can divide Sweden into various pockets. And if you look into our single family house concept, we need to build that across the Swedish market where we have growth opportunities. So we need more building rights because there is a huge shortage today of single-family housing. So that is one growth area where we need to grow. Then on the multifamily houses, it will look a little bit different depending on where we are because we are working with different models in our different markets. So for sure, Stockholm, I don't think that we have enough muscles in the Stockholm area. And there is more opportunities in markets than we can take right now. So that also means that we will need to strengthen our business in our various regions within Sweden as such.

Okay. Then on the, I guess, sorry, bringing Norway and Finland, could, I guess, be entrusted as taking some of the costs that you mentioned will be charged in the fourth quarter. Are you willing already now to elaborate on what those costs will be associated with, what type of activities? Or do you want to wait for the Capital Markets Day to...

I think we can give some more flavor. And I'll let Lars give some more flavor to that.

Yes. I think if you read report, I mean, we have said that it's mainly relating to, say, impairment write-down of land pieces. And that is, of course, relating to places where we are not operating -- where we're not going to operate going forward because those are the other places giving the highest return. Those are not the places where we can run cost-efficient operations, productions and development. And we also have some sunk cost in a number of places where we also see that these are not the ones that are fitting our strategy going forward. i.e., getting the returns much earlier on in the time line as we see compared to where it has been in the past. So those are the two major areas that we see. And this will, of course, make it possible for -- to recycle the capital and plank it in where it gives more return.

And then coming back then to your question, is that Norway and Finland primarily? Or what -- where do you do -- geographically on those?

Yes. I mean they are on a bit of different markets, but they are also in Norway and Finland. And again, sound like a parrot here, but perhaps we will look into this, of course, during the fourth quarter, and that is why we have expressed a range. So when we have set the final cost come close of Q4, we can give much more color to that.

But for me, in my estimates, I'll just -- I should see this as being ending up in the different regions, not as sunk cost on a separate line.

It's like you're saying. It will be reported as items affecting comparability. So on the same line, as you see the provision that we took for the winding down of the Danish operations in Q2, we also have the gain -- the capital gain of the sale of the Danish land bank that we released on the 1st of October will be part of the fourth quarter figures on the items affecting comparability line.

And then you talked about this, I mean, stepping up. It's a fantastic market and everyone is trying to step up, and it's, of course, hard to get the permits and so on. And Bonava has been selling off some of the land banks, unfortunately, and now you need to acquire to reach your target, if I understand you correctly. And that's not the best market, I guess, to buy in. How do you see price levels out there? And then, I mean, the competition and then your ability to actually capture those building drives?

You're absolutely right. You need land bank in order to be successful in the long run. And you need a certain buffer to be able to offset how different zoning processes are taking back and forth in order to be on a consistent level. So with that as a backdrop, we need more building rights. Now, when we come to that, of course, it is a high competition for land and for building rights. And I think this lends itself to our part and how good we are on early stages in the zoning part. So we are really able to create a lot of value being early on rather than buying ready zoned land. We can buy ready zoned land by more exemption rather than the main rule of thumb. And then also when we get these questions, and we understand why we get a lot of questions regarding on how the situation is in the Swedish context. We are active in a lot of other markets apart from Sweden. So that also means that we see pockets of much higher appealing prices when it comes to buying building rights outside Sweden as well. So I think that lends to our advantage of being active in -- across a number of markets.

And then on the investor packages and rental and so on, which you've been doing rather successfully also. It seems like that market is very hot and yields are coming down, prices are very good. Where are we now on differences in margin between co-op and the investor packages. Historically, it's been a little bit of a lower margin, if I understood correctly, but where is the market now, you think?

Yes. I think in some pockets, we are extremely close as you see. So that also means that we are, as a backdrop of analysis, if we want to reduce risk, we are looking into what the risk reward is to actually turning a B2C into a B2B. We are that close. And that, of course, also pending on what kind of product development expenses you will need to take on and invest in order to make that transfer from B2C to B2B, if any. But it's clearly something part of a market where I have not seen it that tight for quite some time, if ever.

Okay, good. Yes. No, it definitely looks like an opportunity. If you can find the building rights and the land for it. Okay. Then my final question was not really a question, I guess, more of a request or so. I guess, we, as analysts, we're looking quite a lot on your guidance when it comes to completions. And then we have two quarters behind us with -- where you surprised us with completing and handing over quite a lot more than you guided for in the quarter before, and now it was on the downside with 200 or something. Maybe in order to -- I mean, it's possible since the deviation has been rather big, if it's possible to maybe press release adjustments during the quarter before the quarterly results of that number, I guess, that would be taking out some of the volatility, just a suggestion.

It's a good suggestion and thank you for putting it forward, Stefan, because I think also we want to be in -- with a good relation with the market and also to have this -- to be able to have this discussion of how things are faring in a good way and press releases becomes a very good open and transparent way of doing it. So we will take that piece of advice on board.

We have another question from the line of Jan Ihrfelt from Kepler Cheuvreux.

Okay. Jan Ihrfelt. I have a questions. Actually, a couple of questions, but two of them regards your charge here in the fourth quarter, and then it's actually twofold. Its land and it is some kind of sunk cost for different projects. But if we start with the land, are you -- by this saying that you see a risk that you are forced to sell these -- this land at a lower price than it's booked? Or how does it come, this charge?

Yes. And that is definitely correct. I mean, if you look at the situation where we have the land in our land bank at the carrying value, at book value, we have intended to do things from based on previous strategy. Now concluding on the revised strategy, we see that, that is not the way going forward. And in some of these, we don't see reasons for adjusting the value because we might not get the amount that we have paid for it in the past. So it's part, of course, of occasion here, say, impairment or reducing the amount to the sales value that we see, the estimated sales value.

And also -- I'm sorry, building on what Lars said, I think it's important. We do believe that we have an excess surplus value in the land bank as such. We have a carrying amount of SEK 7 billion. And we are not saying that the whole land bank is valued less. But this will -- there are -- we can't look at the portfolio when we look at this, we need to look at the singular and stand-alone pieces into the portfolio.

Okay. And this comes despite the strong market for building rights?

Correct.

Yes. Okay. And the other part of the charges, these sunk costs. Could you just give an example of what kind of products do not tend to materialize?

It is, for example, where you think that you have worked with a project that will come into fruition. You will have put the cost on the balance sheet and then the projects become different or it doesn't come into fruition, then you will need to write it down or rightsize the value that you keep in the carrying amount.

And another kind of question regarding the handed -- the units in -- the 200 units in St. Petersburg that wasn't handed over. Will all of this be handed over in the fourth quarter? Or do we see some delays even into 2022?

It's like we're saying in the presentation here and in the report that some of it will likely move into the first quarter 2022. But the greater part of it will, of course, be handed over and recognized now in the fourth quarter.

[Operator Instructions] And we do have no more questions registered. I hand back to our speakers.

Thank you all for listening into our presentation today, and welcome back on our Capital Markets Day, the 14th of December. Have a nice day.