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

Good morning, and warm welcome to Bonava's headquarters in Stockholm and the presentation of the results for the fourth quarter and full year 2024. Bonava is a residential developer operating throughout Northern Europe with the purpose of creating happy neighborhoods. My name is Fredrik Hammarback, and I'm joined by Bonava's President and CEO, Peter Wallin, and our new Deputy CEO and CFO, Jon Johnsson. Together, they will take us through the highlights of the report in just a while. But Jon, perhaps you could introduce yourself briefly.

Sure. I'm super excited to be here. And I started 30 days ago. So I'm new on this job, but I have a long experience from manufacturing industry and the health care industry prior to this. So looking forward to work with Peter and the rest of the team in Bonava. Great start.

And once again, warm welcome. And Jon took on his position in the beginning of January. And we'll get back to you shortly. But first, some practicalities. As always, we will open up the floor for questions at the end of the presentation, and you can already now start to type your questions in the chat online. Or if you want to join us here in the call and ask your questions live, please join the phone conference and press star 5. And last but not least, this conference will be recorded and will be uploaded to our corporate website, Bonava.com, together with a PowerPoint presentation later today. So let's get started. And I hand over the word to you, Peter.

Thank you. Thank you. And Jon, finally, welcome to this team. I've been looking forward to greeting you welcome, and what a start, but with the report sharply presenting it to the market. So that's the way to get started. Then good morning everyone from a snowy Stockholm. We have a picture here of our fantastic project, Hellersdorf, in outside Berlin, in Germany. So that's a great start of the presentation actually. We start by looking into the market highlights. We have a stronger demand principally coming from the fact that disposable income is increasing for the households. So the consumer market is getting a further push, positive push. We have always said that we will be looking forward to a gradual increase over the year of starts and so forth, but we have also seen a rather big push when it comes to sales. So all in all, the sentiment for us has actually meant that the reservations and sold units have increased 35% year-over-year. And if we then look at the sales rate of ongoing projects, that has increased to 59%. As I said, the consumer segment has increased the number of sold throughout the year, and we can see a really strong fourth quarter. And also we are talking about the return of the investor market, the B2B market. And of course, this is underpinned by the fact that the production cost has stabilized and even coming down a little bit, that the interest rates have come down and the expectation of inflation has come down, in combination with rents picking up speed of inflation, historical inflation. So all in all, that balance means that investor sentiment and segment is stronger now. Historically, this segment has made up roughly 30% of our business. The past 2 years, it's been nonexistent until we came to 2024, and it's starting to pick up. And we see more of those deals in the pipeline into 2025. Turning into our performance. As expected, we have seen that the number of completion has been relatively low compared to last year, that was expected. So the sales, net sales, was SEK 3.1 billion compared to SEK 5 billion a year ago. Jon will come into the details here, of course. And all the things that we've been focusing on improving profitability in the business is also visible in the gross margin, which has increased to 14.7% from 13.5% in last year. And one of the things that we have targeted to reduce, as you know, is the operational cost, the indirect cost, and the selling and admin costs. And we set ourselves on ambitious targets of SEK 1 billion, and we actually achieved a run rate of SEK 1.1 billion when we end the fourth quarter. So that will help us also going forward in getting more scalability in our business as we grow the volumes of the business. The EBIT margin is roughly the same as last year, 9.2%, despite the fact that net sales is much lower, which is a testament to the growing gross margin and the lower operational costs. Last but not least, we're continuing to strengthen the balance sheet, and yet again we report a strong cash flow in the quarter, and reducing the net debt to SEK 3.1 billion compared to SEK 5 billion. So this is considerably lower than we were trading at mid-2023. If we do a little bit of an expert say, around the projects, around in our business units, we're starting off with a large B2B project in Gartenstadt Karlshorst. That's the first part of huge investments in actually not too far away from the center parts of Berlin. And we have a lot of areas around there where we can see a continued opportunity to develop homes. Then we have single family housing, Fjarilshusen, outside Stockholm, where we during the beginning of this year actually starting the second phase of the same project. Continuing to Finland, where we started an investor project, Selene in Turku. And last but not least, we also started a project in Riga. And the Baltics has overall contributed a lot to the start volume that we report for the year. And you can see all of the projects on our website of course. This is a great fundament to what our business and our organization has been working with. But let's continue to dig into the numbers. Jon?

Thank you, Peter. Looking forward to present the financial development of Bonava for the fourth quarter. If we start with the slide showing the recognized units, and we have completions in the quarter of 788 units. Then 87 of these were unsold in the quarter. But we have also reduced the inventory with 108 units, and change in balance of minus 8, leading to recognized units of 801 in the fourth quarter of 2024. This was 552 from B2C, and 249 from B2B. And this was done slightly lower than the forecast due to some projects in Germany which were delayed into a bit of 2025, but they will absolutely come. And we have a large sales ratio already on these units. If we continue on the next slide, we have the completed unsold bridge. And this is something which is close to the heart of the Bonava people during the year, because there has been a lot of efforts in this. And we went into the year with 505 units. And then, of course, we completed 1,913 in the year. But we had more than 90% sales of these completed units, which reduced it. And then on top of that, we have reduced the inventory of a total of 364 units. This is equal to a cash flow effect, a positive cash flow effect of SEK 700 million. So strong achievements. And the margin of these projects have been in average about 10%. So I would say that we are now on healthy levels. But of course, we will continue to monitor the inventory as part of regular business going forward. On the next slide, you see the P&L and Peter talked briefly about the sales and lower volumes we have in recognized units, leading to lower net sales compared to last year. But as you also can see, the gross margin remains strong, and also strong compared to last year. We see improvements in the projects we're making. We have done a lot of the cost reduction program, which Peter also talked about, and that results in a strong EBIT and operating EBIT, which is the same as EBIT because we don't have any operating adjustments in the quarter or items impacting comparability. So strong solid result in Q4. Worth to note is of course that Q4 is traditionally a strong quarter for Bonava, but nevertheless good result. If we continue with the business unit performance, we see that a lot of the profit of course comes from our strongholds in Germany and Baltics. And I will come back to the reasons behind it, but there we see a strong demand and a strong development. Then Sweden and Finland are behind the curves, but in the specific quarter, we recognized a project in Helsinki which supported the result for Finland specifically. But margins picking up, and also growth picking up lately. It's just different trajectories, you could say, on the different markets, the different business units. Deep diving then into the business units. The first one out is of course Germany, which stands for 69% then of net sales in the last year, significant portion. And we are fortunate that we have a good geographical mix where we operate in regions which are favorable and which are still growing and have good business development. We see doubling of sold and doubling then of started as a consequence. So you can see 210% in sold units in the quarter compared to the relatively low numbers last year, but nevertheless a great achievement. And the B2B business and market is also back, and we made 3 B2B transactions in Q4 which supports that idea. And we have stable operating margins and good projects also going forward. So Germany remains a stronghold for Bonava with 10.4% EBIT margin in the quarter. If we then continue with Sweden, which are behind in the business cycle and of course from a very low level we also see a strong development with gradually higher demand in a cautious market climate. We have an increase in sold units. And we also have, what is perhaps even more important, a strong sales rate of the ongoing productions, which is the first signs you can see of consumer confidence coming back on that market. We have also done the cost reduction program, like we have done with other business units, creating a solid foundation then for '25 and beyond. Moving forward to Finland. Remember, I talked about a project which we recognized in Helsinki in Q4, and that supported the result in the specific quarter. It's still a challenging market, not only for us but for many property developers in Finland, but we had a very strong result in the quarter then supported by this specific project with a 19% gross margin. And then on top of that, there was release of provisions related to the projects, which impact even more on a positive note, giving an operating EBIT margin in the quarter of 13% in Finland. So strong and also worth to point out is that we saw the first B2B sales and starts in 1.5 year, which is 99 units in total. Moving over to the last business units out, Baltics. Like in Germany, very strong development with 114% up in sold units in the quarter. Of course, the recognized units like the other markets are lower than last year, but the margins remain stable, and we also get good leverage on the cost efficiency programs we have made. Worth to point out here is also that Lithuania is one of the markets where we invested in previously, and that will come back now in '25-'26 because of the realized and recognized units which we will have in the next year or 2. So all the 3 markets will support in the profitability going forward, which will be a next step in the development of that region. Last comment is that -- which some of you may know and read in the newsletter we sent out is that we have a B2M projects in this region, which has been very successful, where we secured financing from local banks. And that is, for me, an evidence that the business model works for these markets, but we will continue to explore. And it gives another resilience to Bonava as a group. On this slide you see the expected completions and the current sales rates, and this is somewhat forward-looking. But of course, this is constantly changing with the new starts and sales we have. And as you can see, we have now added the projects which were generated in Q4, and this supports also the trajectory going forward. We can say, as you can also see, that Sweden and Finland are, in our view, a little bit underrepresented, and that's another sign of the business cycle they are through. But we hope that they will also contribute to the total pillars, not only Germany and the Baltics as -- which are the dominant players, you could say, on the B2C business. If we continue with the B2B business, that's a little bit more irregular in terms of completion because it's bigger projects, which are finalized throughout the year. And we saw that we completed 249 units in Q4, but also in Q2 we expect 270 units to be completed. So there will be a positive contribution also in 2025 from the B2B business. And as you can see, this is mainly related to Germany and Finland, where this business is one of Bonava's part. Moving over to the building rights portfolio, and this is very interesting. And of course, the core in what we are doing that we have the right distribution between the markets, we have the right distribution between the years and also between the customer segments. And this is something we need to continuously work with and optimize so that we invest in new land and new building rights in areas like, for instance, Germany and Baltics, which are very successful for us in growth and find new opportunities to explore and to build on. But we will keep you updated on this one going forward because it's, of course, a super-important slide and distribution for us as a company. This leads me to operating cash flow. And this is, of course, a very nice picture to show in a year like this, and we have SEK 0.5 billion in positive operating cash flow in the quarter and SEK 1.5 billion for the full year. And this is supported by EBITDA, of course, but also this optimization of building rights I talked about and not the least the sellout of inventory for previously completed and sold units with this SEK 700 million I talked about in the beginning of the presentation. So very strong cash flow in the year and in particular in the last 3 quarters, this has been on a very good level. That in turn allows us to reduce the net debt. Remember, Peter talked about this in the first slides, and we went from SEK 7 billion in the end of '22 to SEK 5 billion in the end of '23 and now on SEK 3 billion in the end of '24. So behind those numbers are of course massive works from our different business units and group in order to come back on a net debt level, which is more suited for the number of projects ongoing. And we have then less capital bound in land and in completed unsold. So we are in a healthy state. But we do expect this to grow. Actually, we hope that it will grow because it means that we will start a lot of new projects, exciting projects, which we need financing for, and that is also the trends we see. So the high level of available liquidity is good, and we are on the levels where we plan to be. It's SEK 2.1 billion in available liquidity. But that will be used for this project financing I talked about and also amortization of the term loans, which is also super-important for us and for our stakeholders, the banks, of course, going forward to reduce that part on behalf of project financing. Last slide out is we implemented in 2024 financing frameworks. And I can just report back that we are well above the KPIs we set out. So on net project asset value, we are on 1.6 compared to 1.0, which was our target. And then the equity-to-asset ratio, we are on 41.7% compared to the 30% we had in ratio. So with that said, it looks promising. Thank you, Peter.

Another promising fact is a very good presentation by our new CFO. Great. So let's get to the summary before we get to the Q&A. Our market is gradually improving. It is of course super important for us to see that this continues to be the case since the start is dependent on sales and interest in our projects. But it looks very promising, and we have a good pipeline for '25. We had a strong finish, as we have alluded, to '24. And actually with the support of all the things that we have done in an improving market, we have a significantly improved cash flow and reduced net debt. And this of course increases the resilience for us and also create solid foundation for growth in starts going forward as Jon has pointed out. The large cost measures, they are fully implemented now, but that doesn't mean that we are -- we will fall asleep. We will be on top of the cost levels, and we will continue to search and get efficiency across. And this is important because as we scale up the business with starts, we need to be able to leverage from a much more better cost position. We have taken the bullet early on, and we should reap the benefits of it now when we are growing the business. And another thing where we have not been sleeping on our job is we have prepared the projects. We have worked actively with the land bank, and we are prepared to start more projects given that the market supports it. And I think this is a testament to that we can say that we expect to grow the starts in '25 from the level that we were ending '24 on. So with that, Fredrik and Jon.

Thank you very much for great presentations. Now it's time to open up the floor for questions, and you can ask them in the chat online or if you are participating in the phone conference, press star 5. And I would like to start with a question. Peter, recent days we have seen fluctuations in the global markets. What is your take on the potential impact on our business?

That's a small question, Fredrik. I will try to…

How much time?

I will try to wrap it. Firstly, when we see the sort of short-term implications from tariffs and tolls between the U.S. and China and so forth, we have literally no import from the U.S. So we are not impacted there. On the other hand, of course stability is very important for long-term business. So getting to know the conditions for growing, letting people know that they have their work and they have a growing income so they can take a bet on a new home, which is a bet on the future. So I think volatility is not good for our business. We need long-term rules of the game well set. So it will impact us, but it also makes that the work that we have done on the resilience part with reducing net debt, reducing the cost levels and being more on top of our projects, which we have been working with over the last couple of years, that will help us.

Thank you very much. And I think that we have -- we can take one question from the phone conference.

The next question comes from Jan Ihrfelt from Kepler Cheuvreux.

Yes, I have actually 4 questions. So I'll just kick off with the first one. If we look at your consumer business, it seems to me that the average selling price is more or less SEK 4 million in Sweden and about SEK 5 million in Germany. Is that a level that you're going to continue on? I'm just curious, I'm a little bit interested in your mix here.

Good morning, Jan. Well, with all the mix implications, there, over time, the mix between where we build the projects, is it in Berlin, is it in Cologne, is it in the city, is it outer city will have an impact on the average price, which you then can compute over the quarters. So it could vary even though that the margin will increase. So it doesn't necessarily need to be a higher price to increase the margin is what I'm saying. With that said, we are seeing an implication in 2024, of course, that we are seeing impact from a tougher market. So the margin is a little bit sort of subdued to that fact that we are recognizing projects started and sold during the tougher market conditions. And then, of course, the active sales activity that Jon was alluding to when we have reduced the completed unsold number of units of course also means that we have -- even we have a positive margin on those projects, but it is not where we want it to be, of course. So those implication is lowering average sales price also. So it's very hard to answer the question. So the margins expectations in the started projects in during '24, as I write in the report, in the CEO section, actually is increasing over the ones that we have reported. That is the most important for me regardless of the price.

Okay. And that leads me perfectly to my next question and your commentary that you have higher margins and what you start right now compared to what you delivered in 2024. Could you just comment on the size of it? Is it just 2%, 3%? Or is it more 5%, 6% or what level?

Yes. I will not give you that kind of detail. But what I can say is that, if you recall, the way that we have structured our profit and losses is the gross margin, in order to give the 10% down on EBIT, the gross margin needs to be at least 16% to support that. And I think that is the margin that we're seeing at least in the ongoing projects.

Okay. Great. And could you just comment on the conditions to start new rental apartment projects in Sweden? Has it changed somewhat in the last, let's say, 6 months or so?

Yes. Good question. Sweden is a laggard compared to the others, other markets where we have started in Finland and Germany. But we are seeing also increased interest in Sweden. So hopefully, knock on wood, in the pipeline that we're talking about, we have a few rental projects in Sweden that we are prepared to start given that we can reach the right conditions.

Okay. And my last question, you are having quite impressive operating margin in Finland this quarter, and you were also mentioning about the reversals of guarantee costs in that region. To what extent -- to what amount is that? Could you give your figure there?

I think that it is around EUR 1.5 million in release provisions. So there was a strong project margin of close to 19%, excluding that. And then on top of that, EUR 1.5 million in release provisions.

And thanks to you. And thank you very much. We can take a question from the chat. It's from [ Henrik Hilenius ]. "You mentioned some successful B2M projects in the Baltics. Is this a business segment we should expect to see more of in 2025-2026?"

Yes.

Yes.

Short answer.

If you want to expand a little bit on it, I think the 2 that we had, 1 in Riga, 1 in Tallinn was to test the pilot projects in order to test the rental market, the ability to lease out, et cetera. We have been very successful of leasing out combined with a very interesting yield and rent level. So that supports what Jon has talked about, that we have secured financing for those projects now. So of course, we are eager to start with new opportunities, and we're looking at different types of business models in order to support growth in this area. I don't know whether you want to…

Yes. No. But I mean, you're absolutely right, and it creates flexibility in our business model and the resilience I talked about. So this is absolutely something we're going to explore more about.

And we can take another question from the phone conference.

The next question comes from Fredrik Stensved from ABG Sundal Collier.

I would like to start with a follow-up on the margin statement that you made in relation to the previous question from Jan. And so the way I understand is you need 16% or more gross profit margins to reach 10%. That makes sense? Given that how tough the market has been in recent years, it's really quite impressive that recent starts have the 16% margins. That's very good and probably better than the market expects, I think. Does this go for all geographies that you have started projects in 2024? And how should we think about the split between B2C and B2B?

Finally, I got the sound cranked up on the computer. So I think your question was on the margin part. Do we get support in the 16% across the markets in the consumer business? And what's the difference between B2B and B2C? And the short answer is we get on average 16%, I would say. Of course, there are small differences between the markets. If you look into the segments, we do not, on average, get 16% on the B2B deals, but the way they are structured, as you know, Fredrik, is that we are getting paid as we go along with those projects, and we get a large payment upfront when we close the deal. So from an IRR perspective, they are really accretive value creation wise. So the mix between those 2 segments will, at the end of the day, define how close we get to 16% or over 16%.

Understood. And then I have another question on starts. You say both in the presentation here and in the report that the market has improved, you have a solid base to increase starts significantly in '25. Can you elaborate on what significantly means? Is that a 50% jump or less or more? Where are your expectations?

You have a job to do as well, Fredrik. But if I can give you a little bit of indication, we are rigged to do between 3,500 to 4,000 projects, as we have said. And to get up to that level is getting into a more normal situation for Bonava. I do not believe that we will be in the range until 2026. And how big portion of that we will cover in 2025 is really sort of dictated by the market and market development. And one of the lessons learned, we also speak to the lessons learned, is not -- you can grow this business so fast, but operational control, making sure that we have the right cost, the right sales and the right team is something we have worked with over almost 4 years now, and that has stabilized the business. So if you look into the margin of Finland that Jon has sort of talked about, the size of the margin is an exact proof point that we are controlling and are on top of the cost in a different way. So the strong foundation of a house is started off with a strong foundation. So that also means that when we grow the starts, we will not compromise on this. We will only start when it is right to start.

Perfect. And then I have a final last question also on starts in '25-'26. There is a chart in your report, Page 5. You don't have it in the presentation, but it's in the report where you show sort of your building rights portfolio split per year and whether or not it has a building permit. And basically looking at that chart, it sort of implies that you have building rights between 1,500 and 2,000, somewhere around that, with building permits ready to be started in '25. So how should we think of a significantly higher volume in 2025? Do you expect the building permits without -- or the building rights without building permits to be granted? Or do you expect to make acquisitions? Or how should you reach a significantly higher volume?

Very good question. It's actually the answer you've been giving, that we are very progressed in the zoning processes. So that's the condition we need to fulfill in order to get access to that building right to develop it. So that's going to be turning. So we will not be sort of a net investor into land other than the commitments that we are reporting. And I think out of the commitments of SEK 1.2 billion, we are dictating around SEK 700 million to be done this year, '25. And in addition to that, we were in a situation in the past couple of quarters when we've talked about optimizing the building rights bank. And I think we are in a situation now where the growth and the pickup of growth in especially Germany and Baltics shows that we really need to be looking at the growth of building rights in those 2 regions quite shortly. So that will also provide us with -- we are not in a -- we must be able to use the market conditions now because the difficulties in the residential development market in Germany, for example, has flushed out a number of players. That offers opportunities for us to step in and acquire land at attractive prices and attractive condition that suits our building process and building platforms.

Understood. And maybe as a follow-up on that, the 700 commitments you have in '25, are those building rights that can also be started in '25?

Correct.

Thank you very much. And we can move on with a question from the chat. It's quite a similar one from [ Gustav Johannesson ], actually 2 questions, but we can take them one by one. The first is also about the building portfolio, a similar one. "Is your current building right portfolio composition optimal for driving profitable growth in your prioritized markets? Or do you need to accelerate investments in the land bank or work with reallocation in the coming years?"

You want to have a stab it?

Yes, I can definitely. No, I think it's a combination of both. I think we have a good foundation to start from. But obviously we need to invest further in the regions Peter just talked about, where we now see an opportunity to benefit from the situation and investing.

Yes. And…

And let me just add as a clarification, growing without profit, it's not a purpose. So profitable growth goes without saying.

Yes. And Gustav Johannesson also has another question, and it goes like this. What is a suitable net debt range for '25, '27, considering you are targeting business volumes?

Guidance or? You already talked about that the net debt is expected to grow some.

Yes.

And of course, during the year, we have the cycles where we have a stronger cash flow in the fourth quarter typically.

Yes.

So if you look at the traditional one, the net debt will increase a little bit more during Q1 to Q3, especially as we also then have the SEK 700 million in land acquisitions as we had talked about. But then you have a sort of tail off in the fourth quarter.

We have 1 more question from the phone conference.

The next question comes from Simen [ Frod ]Mortensen from DNB.

Two questions from my side. One is kind of similar when it comes to the working capital and the number of starts going forward because your EBIT or EBITDA will most likely be given by the number of completions, which based on your guidance will be lower 2025, but we will have a stronger market when you need to start, which again going to need you to commit more capital as you've been touching upon. But given the net debt-to-EBITDA situation, which then occurs with low cyclical profits, but the high demand to start new projects, how do you assess this? Will, for instance, any covenants become an issue for holding back starts if the market becomes very strong? Any kind of flavor you can help us on with this in terms of technical element that already is in place. Could you please elaborate a bit on that?

It's a typical CFO question.

Yes, sure. No. But I think that we have the covenants under control also for 2025, where of course they will be put under pressure as we start the production of units exactly as you say. But I think that the important thing for us is really to move over to project financing. And the sales ratios, which we have right now is supporting that view of 2025 that we will be able to get project financing as the market returns. And in Germany and in Baltics, in particular, this is not an issue. So yes, a little bit under pressure, but not in our forecast to be jeopardized.

And if I can add on…

So with project financing, that will be a workaround if the market is strong enough, if I understand correctly.

Yes.

Okay. Another question from my side is on the financing, the financial expenses in the quarter. If you look that in the size ratio versus of the net debt, it becomes quite large, almost 14% of the average net debt in the quarter, on the average net debt in the quarter on an annualized basis, been this high for quite a few quarters now. Could you please elaborate a bit about what is behind those financial expenses we're now seeing flushing through the P&L?

I think if you -- I don't know which numbers you have computed. I have not computed the number anyway.

No, just the financial expenses divided by net debt…

Yes. Yes. But if you then look into the footnotes, you see the difference between interest net expense and other interest items. So you need to take away the other interest items because those are FX, interest swaps and guarantee cost, which is not correlated to the net debt level. So that is 1 part. But getting into actually the core of your question, the size of the interest cost then, that is one of the very strong focus areas we have to get into, a stronger operational performance and to deal with the financing cost. That is one of the top focus areas that we have right now because all in all, we see that with an improved performance, we have, and much reduced risk level in Bonava, we have the opportunity to get a better and more competitive financing cost. So that will be Jon's and mine's key focus areas for this year.

And when you mentioned cost, naturally building costs have been a recurring topic for the last few years. Some of your listed peers have talked about that being an issue also to start projects going forward. What is your assessment of the cost situation in your markets? And please, can you help us understand what you are seeing on trends, especially perhaps in Germany and the Baltics?

Yes. We are seeing actually a reduction of production costs, but at a very high level, as you allude to, Simon. And the factors behind the reduction is of course to some extent coming from the input materials, but another big chunk also comes from the fact that the construction subcontractor market now is very competitive. So they are lowering the markups in order to get backlog. So that is benefiting our production cost. And it also gives an opportunity to reset the type of construction companies we would like to work with now and to create stronger partnership, not shopping around the whole time, but getting the efficiencies going. And with this restructuring we have done in Sweden, where we have almost completely moved away from the split contracts, apart from on the single-family housing. And in Germany, where we are also not having blue collar anymore, that in itself means that we will need to form stronger relations with construction companies going forward.

And my last question, any update on the financial -- or sorry, the strategic review of the Finnish operations?

No news.

Thank you very much. And we have one question from [ Jonas Sletung ] in the chat, and it also has to do about Finland and the market there. "Quite a few companies are experiencing difficulties in the Finnish market. What are your views on this? And what do you think must happen for the market to stabilize?"

Firstly, I think that Finland was dragged into the financial crisis at a very high level of ongoing production. And of course, what happens then when production is gradually completed and come to the market unsold, that puts a wet blanket on the market. We have seen the excess supply being reduced over the last couple of quarters, but it's still evident that the existing oversupply creates a situation in the market where generally it's hard to get new production going. There are spots of light in the Finnish market. And I think some of the stronger regional cities where we operate, there we see more opportunities to start projects than in the Greater Helsinki area, for example.

And Jonas also has 1 more question. It's kind of a big one, but what is -- "Why is the fourth quarter a traditional strong one for Bonava?"

You have to look back on how we report. And we report completion and handovers. So that is 1 part of the answer. But then you have to look back then the 6 to 8 quarters before we start the projects. And that is also very typically that you start the projects sort of midyear and then you hand it over 1.5 years later. So January is typically a very weak sales month and so is the back end of December. And then you have really strong pockets of growth in sales and starts during springtime and early fall. So I don't know. All the people are following sort of the herd in a little bit, and that creates a little bit of cyclicality. But that is of course more pronounced because of the way we report. We report the profits and net sales when we hand over the keys.

The completed contract method, yes.

Yes. And I think that we have some questions that are quite similar to the ones we have had before. Maybe we can skip that one or we can actually take -- because Jonas Sletung has 1 more. "You talked about the reduced net debt, but also about how this could go up as a testament of higher building and project starts activity. Could you elaborate a bit on what is the best level, I think it says, when it comes to net debt for Bonava?"

I think that the net debt should really illustrate the number of ongoing production so that the equity is equal to the building rights and the land bank, and that is something we continuously strive for. So I think depending on the project level, we will always have some debt, and that should then be closely linked to the number of active projects and of course with a high sales ratio to keep it healthy.

And if I can also add on that, it's not exactly where the debt is located because one of the things that we will work more on, and we heard that on the questions from Simen, for example, that project finance drawn at the specific projects will be where we are getting sort of more and more into when you look at our financing structure. That will be the end target. So less of a group central debt indebtedness in order to fund projects, but more indebtedness relating to the project. That also makes it much more clear, that it relates to growing the CapEx of projects rather than buying and doing other stuff.

Let's see if we have some more on the phone. Then we have more of a question from of formality from [ Martin Lindgren ]. "Why was Jon Johnsson appointed Deputy CEO in December?" And maybe this is actually a question for our Board.

Yes. That's for the Board. But I think that Jon's background and seniority is also calling for a good platform.

Very much. Do we have some more questions on the phone? No. Then it's time to end this presentation. And if you would like to know more about Bonava, our projects, strategy, people, you can always go to Bonava.com. You can always send us an e-mail or you are of course always welcome to give us a call. Finally, we would like to highlight some dates going forward. Bonava's Q1 report will be published the 9th of May 2025. And before that, on the 27th of March, we will invite you to a Capital Markets Day. And on the 9th of April, the Annual General Meeting will be held. Thank you very much for tuning in this morning. We wish you all a very nice day. Goodbye for now.