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

Good morning, everybody, and welcome to your home for the next couple of hours. We're so happy to see investors, analysts, the media, financial institutions and members of the Board with us here today. So again, a warm welcome. The feeling of coming home, that's what Bonava is all about. So let your shoulders down and enjoy. I'm Susanna Winkiel, Bonava's Group Head of Treasury, and I will be your guide through today's program. But first, we have a couple of practical notes. If there's an emergency, there's a hot starter in the reception area. If the fire alarm goes off, the exit is where you came in. There is one behind us and one at the far end of the office. And the assembly point is at the intersection of Ulriksborgsgatan and Lindhagensgatan. We have a great program for you today. We will see where we are as a group, we'll do a deep dive into our business units. Then there's time for a break for coffee or tea. And after that, we'll see Bonava's customer journey. And finally, we have financial guidance and then wrap up with some concluding remarks. There will be several opportunities for you to ask questions. If you are with us online, you can type and we'll read your questions as we go along. And if you're in the audience, you can raise your hand, wait for a microphone. These are our speakers for today. And with that, let's get started. Our first speaker has led Bonava for 4 years, and those have been 4 years with a pandemic with soaring inflation with war and unrest in Europe and other parts of the world. But now as the housing industry is starting to show strong signs of recovery, it is my pleasure to welcome our President and CEO. Ladies and gentlemen, Peter Wallin.

Thank you. What an introduction. Thank you very much, Susanna, and warmly welcome here to Bonava today, both here in person and on the web as well. So I have been looking forward for this day because actually we will share where we are as a company, and I think that we have a lot of great stories to tell. And I hope that you're going to find it interesting as well. So just starting off, just reminding us what we are today when we are present in 6 different countries. We have seen a reduction in net sales expectedly. We are within 20 regions and a lot of things is happening within those regions, which you will hear about shortly. We have sharpened, so we are 900 employees now, 900 very capable and competent Bonava employees. You will see some of them today. I'm not sure I will count myself as competent as for others to say. And we have strengthened our financial position. Strengthened it, of course, by the support by our shareholders with the new issue of shares that we did in the beginning of last year, but also by very strong operations within Bonava. Bonava today, we have a very strong position in selected growth markets. We have also changed the operating model, and this is extremely central for us that we have been working towards a decentralized business model. It also means that we have transferred the mandate out to the regions, and we have also lowered the costs. But we have also made sure that we have a more scalable model making the increases in volumes that we expect filter down through the P&L. What will support this growth that we expect over the next coming years is a very attractive land bank, a land bank that we have worked and cared for and managed over the past couple of years. And as I said, we have a much more stable financial position today. We have done a lot of different things to strengthen our balance sheet. So we are pegged up for a substantial value creation as a company. The last Capital Markets Day we hosted in Berlin, November 2022, feels like 8 years ago, and we have been quite busy since. Some of the promises we made in conjunction with this Capital Market Day was relating to strengthening our investment process. It was increasing the quality in the production estimates. We had a past of costs sort of surprising at the end of the projects. We said that we will strengthen the balance sheet. We started very selected projects in the very tough markets that we've seen, and that also made it possible then to work with improving the cash flow. So out of the SEK 5 billion in net debt reduction, SEK 4 billion has been created within Bonava and SEK 1 billion is thanks to the shareholder support. So when we talk about growing, we don't necessarily talk about adding new markets. We have a fantastic footprint with strong demand in our markets. And this makes it possible because we are in a fragmented industry, and we are in a position in the market right now where some of the competition has been sort of reduced since the interest rate has come up. So this is also an opportunity to grow our foothold in markets that is growing. And then the centralized operating model, I will mention that quite a few times. So don't get bored with me, but I think it's a very crucial point of changing and tweaking the culture in how we operate and also be laser-focused on profitability. We have a little time line just adding some of the points here. So over the past couple of years, we have reduced the number of footprint that we have, the business units. So since the Capital Markets Day in Berlin, we exited the business in St. Pete. We have also exited the Norwegian business. And this is to funnel those funds to the market that we are in today. We are very happy to have the footprint that we have. And by also sharpening the cost base, we are now pegged for the turnaround in the market that we see. So if we talk about some of the most important parts of the macro markets, I don't know about you, but each morning, I start the phones and you have news every day. But if we also look in retrospect, the level of unemployment is quite low. And even though it's expected to increase somewhat, it's still on a very low level in our markets. And the other part is real wages, they are increasing right now. So disposable income for our buyers is something that is, of course, benefiting the residential market. So that takes care of the demand side. So what about the supply side? This is a sticky industry. It takes a long time to sort of start and turn the volume around, 1.5 year in general for completing a project. And that also means that we are already in a pent-up demand situation in our core markets. And this pent-up demand where demand outstrip supply is actually increasing right now. So with the footprints that we have in the 3 markets you see displayed behind me in Germany, Sweden and Finland, we have a very robust situation. So what about Baltics? Why don't you have something of the Baltics. And as you will hear, Michael, the business unit President of Baltics state shortly is that here, we have a different market approach. We have a complete new demand to really rejuvenate and create sustainable new homes. This is a very central part of our model and how to understand Bonava, where we are now and where we were heading. So the driving factor for us is, of course, first sales. And that's why we will have a section today talking about the customer journey because it's central. When we have enough sales, we can start the projects and the production starts itself is the real engine on how we're going to drive profitability and business volume. And on the left-hand side, you see the bars here representing the various markets. And then at the very end, you have 3,500 to 4,000, which is how we pegged up as a business right now. We are looking into a level which is far below where we have been operating in the current footprint and is also far below where we ended when the market was really hot. So we have been really looking for a gradual pickup here. So we had a pickup in starts 2024 to a little bit more than 2,000. And we expect to increase this year and we aim to get into the range for the full year 2026. This will help us achieve our financial targets, which Jon will speak about later on. So I think this is a very important slide, and we will talk a lot about this. And of course, we will not start projects if we do not have control of 3 main criteria: sales, costs and the right team. So if you look into our land bank of 25,900 building rights. If you look into that, we do a valuation once a year in conjunction with the third quarter and we are looking into not increasing sales prices and not increasing construction cost and at the book values that we have in the land bank. The average project margin was 18%. So with that, that's the main driver for us to say that we can state that we will achieve our targets going forward. Again, Jon will show a lot of examples on how to reach this. So what we're doing now, we are ending the consolidation phase. We are going into a controlled growth phase. And the controlled growth phase is we only start when it adds profitability. So the setup is different today than it has been in the past. We have a lower debt indebtedness, and we have updated our operating model being more decentralized organization. Also, we have learned from the past, so profitability is really a key driver. And then we have a land bank that will support this controlled growth as it is. And if you look into the net sales of the land bank, it's roughly SEK 60 billion. So 18% in average gross margin, SEK 60 billion in revenue lines, you can understand that, that supports a profitable growth. So that is the status of Bonava today. And me and my colleagues will do everything to explain it and try to hone in on what will drive this going forward.

Thank you, Peter, for that overview of Bonava's progress and the great market potential. And now I would like to introduce somebody who may still be a bit new to you. Bonava's CFO and Deputy CEO, Jon Johnson. He joined Bonava at the start of this year and brings extensive experience within both finance and strategy. And those of you who have already met Jon know that he is very action oriented. But more surprising maybe is that he also has the analytical skills of a chess grand master. Ladies and gentlemen, please welcome Jon Johnson.

Thank you, Susanna, and great to see you all. I think Peter talked about controlled growth. And how can you achieve controlled growth in a project business like Bonava. I think that the completed contract method is, of course, good when you want to see what has been built 1.5 years ago. But in order to constantly track performance and have the controlled growth measured, then we need something else. And that's why we now introduce a percentage of completion. I think there has been an external push from analysts, from owners, from investors that we should switch to this because it's easier to benchmark us versus our peers and versus competition. There has also been, for many years, an internal pool because the organization in Bonava want to have some better measure to track the performance in the projects, and we are doing projects. So there's both an external push and an internal pull, which is the reason why we have then implemented it. I think if you summarize the rationale, you can do it in 3 ways. So better match with the value creation. We see what we are building and a smoother financial reporting. So we avoid the big peaks, which we have historically had and higher transparency and better predictability over time. So that's a summary of the rationale. I think many of you already know what percentage of completion is and completed contracts. Maybe we will have an examine before you leave, that you truly understand what is the difference or maybe not. But for me, it's essential at this picture. So think of that we are constructing a building and we put big tar polling on top of it, and we don't see what we have built until 1.5 years later. That's a completed contract method. So no one really knows the performance of the project until we reveal it. For percentage of completion, you do a sneak peek a little bit here and there to see that are we tracking according to what we said? Is the forecast accurate? Is the cost levels okay, price levels, have we rebased them. So we avoid the negative and nasty surprises along the way. I think that's one of the main arguments. And as you know, I mean, there is a prerequisite if we follow IFRS that we will continue to also disclose a completed contract on a group level. But this is for the segment reporting, and this is for how we are tracking the daily business internally as well. So it provides us with much better tools in order to monitor that one. If we dig into the formula, again, this is not something new, and I promise I'm not going to rehearse you afterwards, but it's really the sales rate times the completion rates times the forecast. And here it's important to keep these updated all the time in order to have a good monitoring of the project. The sales rate is, of course, sold square meters divided by total square meters. We have the completion rate, which is accrued cost versus the total cost of the project and that gives them the total project revenue and the total project cost. Worth to point out is that we exclude land cost in the completion rate because otherwise, you tend to dope the completion rate. And it looks as the project has progressed more than it actually has. What differentiates us from maybe some of our peers is that we also apply a risk factor. And no needs to take notes. We will follow up with all of you what this means. But in essence, it means that we are a bit conservative until we have reached 70% of the completion rate so that we are not overdelivering and overpromising. And once we pass that, it -- the risk factor becomes 1.0 instead of the 0.8 as you see here. So that means that we have this controlled growth. We look on what we have built all the time. And when the completion rate is about 70%, we feel confident this is a profit we're going to deliver. And this enables controlled growth, which Peter talked so warmly about and something that Bonava needs. So I promise you these are the only examples I'm going to provide. And then we're going to, of course, offer follow-up sessions in the coming days, and we have an infopack also on our website. But if you look at the base case to the left first, we have 100 in this example case in revenues or net sales. We have minus 80 in cost, and that gives a gross profit of 20. In the completed contract method, we would disclose everything 1.5 years later roughly. But in the percentage of completion, it's gradually spread out. And you can see a little bump there coming after Q4, in this case, we have reached a 70% completion and that's when we take out the risk factor. In the next scenario, which is the middle one, we just simulate how it will look like if the sales price was changed in Q4. And then you see immediately that it has a direct impact on performance in Q4 and onwards because the sales price is adjusted. And in the last case, to the far right, we just simulate how it will look like if the cost is down. And the cost is down has 2 impacts. One is, of course, that it gives an impact on the quarter where we realized that one. But also it increases the completion rate immediately because it's a higher percentage. So you also have that effect on that curve. And this is how we have chosen to treat it. We believe that it's a conservative approach and a risk-mitigated approach in this volatile business, and it's something also we discussed in length with their auditors and with our external auditors with PwC and have agreed to do. So what does this mean then for the financials? Again, we will provide the infopack, and you see the completed contract '23, '24 in this case. And those are the numbers you also will read in the annual report and in our, of course, year-end report as well. What you then see is the PoC numbers for 2024, and we have done the full pro forma for 2024. And worth to point out, it's not that big difference now in this situation where Bonava is, where with the number of starts. So yes, there is a change, in particular on the net sales and gross margin, which are the ones impacted. The sales and administration expenses are the same in both calculation methods. And that gives then a slightly better operating EBIT margin than compared to completed contracts in 2024. So it's -- when there is a downturn and where there's an upturn, the real changes occur. While, meanwhile, it's quite similar to completed contracts. It's just that when we report and when we talk about the projects, we can refer to actual performance rather than something which happened 1.5 year ago. Of course, we need to be able to bridge these ones when we do the external reporting and when we talk. So no doubt about that one. Worth to point out is also that we are not changing balance sheet and cash flow. We believe that the financial position is more accurate in the way we had treated it. So it's a clean balance sheet and clean cash flow. So what we are changing is the performance of the company in the P&L. And we will come back and answer all those questions as well, which pops up in your heads. I see some of there in the audience. And we will, of course, follow up on all questions you may have on this one. I think that's it.

Thank you, Jon, for that insight for presentation, a reminder that an infopack is available online, and we will now be taking questions. So if you're online, you can start typing. And if you have questions from the audience, raise your hand, wait for a microphone and then please state your name and company. But first, I have one for you, Jon. Could you just recap for me, what are the main differences to how our peers report percentage of completion? Or is it all the same?

Well, it's a lot of similarities. But of course, the difference is the risk factor which we apply until after 70% completion, we apply the full effect. But until then, we only have 0.8. And the second one is that we don't change the balance sheet and cash flow. And those are the essentials, right? And then, of course, we should also mention that we don't put the land into the completion rate as well because we think that, that does the completion rate.

So our net debt will stay the same as it was.

Yes.

Very good. I think we have a question over here.

This is Simen Mortensen from DNB Markets. One of your new financial targets is dividend or kind of the same situation, but it refers to the P&L., which you're now going to have both under IFRS and in segment reporting. To what figure or what kind of accounting system is the dividend referring?

I will say that, but it's a cliff hanger because you will see -- hear it in a couple of hours or 1 hour in the financial guidance. We'll come back to that. I promise to you.

A very good question.

If I say it now, then you're going to leave, right, because then you have received everything you came for.

Just also, will you still report complete the contract on divisional levels or not?

No, not on the segment level. So on the group level, definitely, absolutely. But on segment level, we will switch to PoC then because that's how we internally will measure it.

Very good questions. Somebody else? Question upfront here.

Jan Ihrfelt from Kepler. Two questions. The first one relates to what you mentioned here about balance sheet. So even in the percentage of completion, you include the debt and the tenant associations for...

We believe that's more prudent and conservative way.

Yes. Okay. And you also mentioned here that you have 18% margin in the current building right portfolio, so to say. And if -- then you have to add the administration costs and so on, I suppose, what percentage are you targeting there as a percentage of sales?

Let me come back to that also a little bit later, but I guess you can do the math yourself that if we're going to reach over 10%, which we announced on the -- then we backward calculate what it needs to be. But I will come back to that in the financial guidance definitely and elaborate more.

Thank you. We have another question upfront here.

This is Fredric Cyon from ABG. I also have a question on 18% margin in your building right portfolio. Is that per the Q3 2024 valuations or the book values?

It is the valuation, yes.

So 18% per the valuations and you have surplus values, meaning -- on book values, margins are higher.

Yes.

Perfect. And then secondly, Peter, you mentioned you aim to reach 3,500 starts in 2026 and growth in 2025. Can you be any more specific on 2025 than just growing versus last year?

I would love to, but we will see -- we have 2,000 starts in 2024, and we will see an increase over that number. But I can't give you more exact than that right now, but we will be in the range of 2026 if we can start projects with the 3 criteria. But of course, we see the opportunities to grow quite a bit now. So the controlled part of growing is the most important part because otherwise, we will not be able to hit the project margins that you asked about either. So those are essential for us. And that is also why we are laser-focused to make the margins. So if you ask me, what would you prioritize hitting the volume or hitting the margin. I would answer the margin. And then -- or you, of course, know that they are also volume dependent.

Right. We have one more question from Jan.

Yes. Just a follow-up from the last question here. The 3,500 to 4,000 starts you're aiming at 2026. Should that be seen as a run rate you will be achieving at that year? Or will it be a full year figure?

It's a full year figure for the full year 2026.

Right? So a lot of questions on financial guidance. We look forward to that session later on. With that, thank you, Jon, and thank you, Peter. And now we will do a deep dive into our business units. We will hear from our teams in Germany, Finland, Sweden and the Baltics, and they will take us through their operations, their market conditions, and their growth potential. First out is Sabine Helterhoff, Business Unit President, Germany. Welcome on stage.

Thank you very much, Susanna, and I'm happy to be here today, again to present BU Germany. I'm also happy that I have my head of operations, Rico Kallies, is here today with me and as well as Sophie Jenssen, our Head of Sales, talking a bit later about the customer journey. Germany, business fundamentals, we are delivering to 2 segments and 2 products in our markets. We are operating in 5 organizational regions, which covers around 9 markets. In Germany, we have a favorable payment model. What does it mean? That means that we are allowed to get to receive installments according to our building progress, starting with 30% when we start production, 28% when we have done the frame work and so on. And with that, considering a certain presales level and a constant sales speed, we can finance the whole construction by our customer payments. And that is a really huge advantage and, of course, very good for our cash balance in Germany. And when it comes to the market, we see that the market rising slowly, but it is rising, and we are really happy about seeing that. '22, I was talking about actions we need to do in a very, very challenging market. And today, I want to give you an update, what we have done. We have taken significant actions in those 4 areas. When it comes to footprint and organization, we have reduced the number of organizational regions from 8 to 5, while keeping our 9 markets. We have put the full responsibility for the projects including the production into our regions. We have reorganized the whole organization in Germany, combined with the huge reduction of employees from 1,000 to 500 just to adapt our organizational size to the new business volume. What we also have done is adopting all our processes, responsibilities to the new organizational setup. And we also started working in -- and thinking in a new way -- more efficient. We have adapted our land bank to our current market situation and we have also adapted our market offering, means we have lowered the standard. We have condensed the volume of purchase prices in order to meet our customers' financing capabilities. We have done all of that to get a more efficient, a more modern and more agile organization with an operated offering. And while doing that, we had also, of course, a huge focus on our operational business. And what you can see here is that sales and start picked up, especially in the last quarter last year. We also have managed to keep the number of units for sale on a constant level since '21, and we have also now reached a constant level -- lower level of ongoing production in our products. And what we are now focusing for the sales starts and also new investments. Peter was talking about the land bank, and you had many questions about this 18%. And, of course, we in German also contribute with our 7,600 building rights to this 18% gross project margin opportunities. And our current land bank secures business for the next 2 to 3 years with around 80% or 70% of our units starting until '28. And what we also see is really growth potential in our -- in 3 of our regions that is North Rhine-Westphalia and Rhine-Main where we have 11 million inhabitants in each of those regions. And we also see a huge potential for Berlin, our largest region at the moment to have a further slow growth and especially improve the margins. So that, of course, also results in a need for further investments. Some examples about projects which we are planning to start really soon during the next 2 to 3 quarters. All of those projects have project margins between 15% and 20%. The first one is a part of a huge investment in London, where we acquired 500 units where we entered the market already in 2012 as the first player. Our competitors were following us there over the years. And now we are starting 87 units with great potential also there. Then we have a project in Heiligenhaus in North Rhine-Westphalia that is a typical German row house platform project where we follow the sales speed and the sales process with our production and our whole operations in the project. The third one is the Cecilien-Carre in Berlin, a plot we acquired '21, 272 units. We have sold already 128 subsidized flats to an investor. And when acquiring that plot, we knew that we need to be very flexible when it comes to our offering. And so we are now offering at the moment to investors, subsidized rental flats or freely financed rental flats. And we are also preparing B2C sales. And we will be ready end of quarter 2, and then we need to take a decision whether you go B2B or B2C. We'll see at the moment, we are collecting the offers of the B2B customers, and we are very happy that we get one. The last project, the Hoppegarten. The picture does not show the project shows. It shows the current building and we acquired the plot around that. That is a project of 60 B2C units, condominiums and semi-detached houses, which we acquired end of '24, including a building permit. And that makes us really fast bringing those projects to the market. So the plan is to bring it on the market at quarter 2 and to start production in quarter 3. When it comes to Germany, I think there are 2 main questions to be answered. The first question is how can you sell in a very challenging market in Germany. When you have the outside view on Germany, you see the messages about recession, automotive industry is struggling. Political insecureness with a government, which is not set, which will take time. And also the role of Germany in Europe is not clear yet. Our opinion on that is our government had a goal of 400,000 newly built a year. And we, as an industry, have never reached the goal for 15 years now. So there is a gap increase of 700,000 to 800,000 units both rental flats and owner-occupied flats. And we think we have the key residential fundamentals and drivers already in place. So we have a high need and high demand and a undersupply at the moment. We have inhabitant growth with immigration. We have a huge shortage of rental flats with increased rents, no vacancies in Germany. What we also see is that the household incomes increases. And at the moment, the interest rates are on a relatively stable level. They were growing a bit by 50 points, but we really expect that it will be relatively stable. And all this results in that we have really good residential fundamentals and drivers. And what you see here on the map is our footprint. So -- and the heat map shows in red and yellow where the largest gap between the need and demand and the delivery is. And we are operating in all these markets, in total, 30 million inhabitants. You can see on the white dots, our brand awareness, that is also really important for us that our brand is recognized in Germany. So we are #1 in Berlin. We are #2 in Hamburg, we're #4 in Düsseldorf, and we are among the top 10 or top 8 in all our markets in a very fragmented market with huge competition in all our markets. So we are #2 in housing developers all over Germany. And so now answering the question when seeing what have we delivered last year, we have sold 1,384 units. And we have 2,000 units in production, and we have those 400,000 or 700,000, 800,000. So yes, we can sell. If we have the right product at the right location to the right price, which needs customer needs -- customer abilities to buy. The second question is how can we buy plots, how can we invest into plots. And you have seen that 30% of our portfolio of the whole company is located in Germany. And I was talking about the investment need, especially in our 3 growth regions. What also was really important for us is that we have continued to be visible at the market during the crisis. So we have continued to build. We have finished our project, and that is recognized in the market. So we are recognized with a strong brand being present on the market. We are recognized as reliable partner for the authorities. We are recognized as having a long-term plan in Germany. And we also see that we have a really good people in the regions with a good network finding the right plots. And with that, we get really good access to the plot market, which was not existing over the last 3 years. And we get offers now, which we got years ago with good payment conditions, good prices, and that was the reason for us start buying again end of '24. So we bought 3 plots with around 250 units end of 2024, and we will continue doing that. So covering all this, we think that it is good to be a bit early on market, start early to buy. That is the experience from the past. The competitors will follow. And when we look back, we have really good projects in Berlin, [indiscernible] Schulzendorf and Dusseldorf, [indiscernible] where we have bought the plots between 2012 and 2016. And those are the projects where we despite rising costs and despite the challenging sales market, have stable sales speed and really good margins. So summarizing BU Germany, we have gone through the deepest point, we are on the way to pick up. We have done what was necessary to do in order to be prepared for further growth, both in volume but also in profitability. And now is the right time to invest in new plots and the market is there.

Thank you, Sabine, for that. We have heard about Germany, where there are in many markets, no vacancies in spite of household income growing. And now we will turn to Finland with Business Unit President, Riku Patokoski.

Good morning, everyone. And yes, let's move to Finland, the happiest nation in the world, 8 years in a row, may I say. It has been quite a roller coaster for the past few years, very volatile market shifting demand, poor demand. And we have been struggling. There's no question about it. But we do see clear signs of spring market improvement. And for me, what defines a good company in this kind of circumstances. It's not how you perform when the wind is behind your back and everything around you is good. It is how you perform with headwinds and today, I'm really proud to say that BU Finland has not only stayed in the course during the storm, but we are coming out stronger, leaner and more focused than ever before. And my message to you today is not just about recovery from the downturn. I want to tell you how we have built the foundation for Finland to long-term grow and increase our profitability because we have the market, then it is slowly but surely turning in our favor. We are offering multifamily homes, both for consumers and investors alike, and we are well positioned in 3 biggest urban areas in Finland: Helsinki, Tampere and Turku. Cities that are growing and where people are getting older, and urbanization is still a strong trend in Finland. And then our customer payment model is stacked according to the construction period of the project, both in the B2C and B2B. In B2B, the payment terms are negotiated case by case, but cash flow is typically positive throughout the project. And then with consumer customers, the incoming cash flow has 2 components, it's project-specific financing in terms of bank loan, and the second part is customer advantages. The business update doesn't really look pretty. We are in a record low level in our production numbers. There has been significant obstacles in starting new projects. Main bottlenecks have been, first of all, poor demand, and second point is the availability of local financing for our projects. But as I said, we are seeing early signs of spring, more leads, more people visiting our showings, but it still takes a long time to convert those leads into sales. We have also been able to start first projects after a long break during Q3 and Q4. So those are also positive signs. Then in terms of our land bank, it does support our business plan, definitely. We have streamlined the land bank to strengthen our financial stability but also capital efficiency. But we see a clear need for new investments because this is buyer's market in terms of land, just like Sabine described from Germany. We see great opportunities going bravely to new investments in the kind of prime locations where we can trust that there is demand in the long term. And then one Finland specific feature is private equity funds that provide possibilities to sale and leaseback model for our plots. That's one way, in most of our new investments, to strengthen capital efficiency. Then looking into our roller coaster journey. We started our business turnaround 4 years ago with updated strategy. And then February 2022, the war in Ukraine interrupted our turnaround, with significant cost inflation, rapidly rising interest rates and soon, plummeting customer demand. So what can you do? We didn't just stand still and wait for better times. We actually continued with our turnaround and adapting our operations to changing market conditions. What we did was continue implementing the strategy that strengthens local accountability, just like Peter said. We restructured heavily our organization in several phases so that we can perform locally better. And we also have worked very heavily on improving our project governance and forecasting accuracy. And lastly, we have, of course, been forced to adjust our cost level because of the lower business volume. But all this has been the work to lay the foundation for future profitability and growth. And we are definitely there, positioned for a good future. And a few facts to back it up. We have seen that in our ongoing production, project margins are still improving. We have seen that our EBIT has been above budget 3 years in a row. We have seen that our number of unsold completed units, despite the poor demand, we managed to reduce the stock, over 50% in a year. But the most important fact is that because of the work we have done with the organization, we now have a winning team in place with right competencies going forward. As said, the market is poor at the moment. And our view is that recovery will take time. It's slow. But the thing that we have to keep in mind, also in Finland, is the long-term demand. Just earlier this year, there was a survey published stating that the long-term demand for new residential in Finland annually is around 37,000 units a year for the following few decades. And when we compare that to nationwide number of starts for the last few years, which are well below 20,000 units, it tells you the pent-up demand is quite big going forward. And that creates the conditions for prices to increase and the most optimistic estimations for price increases in Finland are already 3% this year alone. So that's quite significant. Then a few examples, again, back it up. When I talk about project performance, investment case, Sitadelli is in Helsinki, consisting of 571 residential units, 6 very well-performing B2B projects. And it's generating EUR 130 million of net sales, and profit from the project around EUR 24 million, which equals to 18.5%. And then a few cases that we are working hard to start during this year. B2C cases in different parts of Finland. So as a conclusion, we have proven that even in the toughest times, with right decisions made, very committed team and a clear strategy, we can deliver solid underlying performance from our projects. And I have full trust in our team and in our ability to deliver, not only according to expectations, but exceed those expectations years ahead, because we have proven that we have ability to improve our performance year-over-year. Thank you very much.

Thank you for that, Riku. We saw that the world's happiest nation is standing strong. And not only that, we saw several projects that have delivered higher gross margins upon completion that was actually originally budgeted. And now we will turn to Michael Björklund, Business Unit President for both Sweden and the Baltics. Welcome.

Thank you, everyone. Very nice to be here, both physically for those in the room and on the web. And Susanna, I realize that when you stand up here, it means that the time is about to run out. So I will manage time. Well, spring has arrived, I say, to Sweden. If spring signs are in Finland, and spring has arrived. And I say that because we have sold out our stock. We have a lot more customers on our web, and customers are coming to our events. So that is absolutely fantastic. Without our customers, we cannot start more projects. If I -- then I also want to recognize this first picture, which is Seminarieparken, our absolutely fantastic investment and ongoing project in the center of Uppsala. We have a model of that here. For those in the coffee break, you can look at that as well as also a model of Fredman in south of Stockholm, which we will start later this year. I will share today some of the basic business fundamentals. But I've also tried to give you a feeling of 4 examples of investments that we are ongoing and starting very soon. So business fundamentals. We operate in -- geographically in all of the major cities, except for in the South. This covers the purchasing power of the majority of the Swedish household looking for a new home. We operate in single-family house and multifamily house. We operate in the investor market, the rental market. We operate in the housing association market, condominiums, and we operate also in the ownership. The payment plans actually resembles the Finnish market in many ways. So thank you, Riku, for giving a guidance on that, with the added component of the ownership part, which is predominantly for Sweden in the single-family homes. And in that part, we collect around 10% down payment and the 90% in the end. A good thing with the single-family house is that we turn around that business from start of production to end in usually 12 months or even less. I also want to say a few words on the demand, what Peter mentioned as the pent-up demand. And I think all of you or most of you at least who come from Sweden, you follow the lack of supply and the different form of statistics of lack of housing from the authority Boverket but from my point of view, thinking about how this translates into business, it is also equally important to understand what drives the conversion of this demand. I mean most of -- I mean all of these, let's say, lack of homes, is not from people who don't have a roof over the head. Everyone has that in Sweden. But it's more from the life we live. From the fact that we commute too far to work. We are not able to have enough space at home to work. We sit in our villas when we get older and not have a better offer centrally with a smaller size to downsize or we have children working or being at home too long. So it's really about the purpose of Bonava about creating happy homes and neighborhoods. And I have taken myself to the statement that it's not what people say they want, it's what they actually buy that matters. So if we go further on to business update, uniquely low volume in Sweden right now. I have been part of Bonava the whole way even before in NCC. And I remember in 2016, we had more than 1,000 units sold. We had over 2,000 units in production. And we know what that is like. We know that, that is the market that is capable of in Sweden. This situation we have right now is absolutely not normal. What is really good, and I'm really proud that we are actually developing our offerings, and we will come out during 2025 with 16 projects for sales start. So we are actually going to promote our business, listen to customers, convert that into sales and starts, and that is across all our markets. And that also constitutes more than 800 units itself. We have a land bank that supports this for the next couple of years. And we have the organization, same as Riku was saying. We have spent a lot of work, and also Sabine about adapting our organization. We had, at the peak, 250 people. We are today 90 people. That is what we believe is enough to actually get back to the volumes of 1,500 units in production over time. Moving on from the market fundamentals to 4 examples. I mentioned Seminarieparken. What is really good here is to see that we are progressing with the sales according to our plan. We sold in the first phase today, 35 out of 66. So that's over half the first phase. We keep our costs, we keep our margins, which Jon was obviously talking so much about, that we can show the progression over time. We also have here an opportunity to test a new way of working with a possibility to lower the monthly fee by allowing the customer to pay more insights, more -- basically more money in the beginning and get a lower monthly fee. We will see how this works out later on because that decision for the customer comes at the time they're moving in, very interesting to follow. Moving onwards to Gothenburg. This is a large new area, a new investment, Sodra Anggarden. We have in the first part of this, we have created a joint venture with OBOS, which is another leading developer, and that was good both because we are able to offer the customers something more there through them and their unique offering of buy half first and buy the rest later. But also because we can benchmark ourselves. The way we think, the way we operate, the way we work. And from our understanding, this joint venture works really well right now in the beginning. So very exciting about that. As we state here also, there is more land bank in this investment, so a lot more volume to come. Moving over to Stockholm, Stockholm area. This is a fantastic investment that we are aiming to start sales now in May and come out and start production in later this year, called Fredman. It's in Fjarilshusen south of Stockholm, a very, very popular area, high demand. Other competitors are selling really well in the same area. Super excited about this. Moving to another part of Stockholm, Jarfalla. Here, we have single-family house business. Many of you, I think, know that Bonava has been one of the most active and largest developers of single-family house over the last 10 years, very successful. We are ongoing now with the second phase. That started faster than we thought, after having sold out the first phase really fast. And we now have also the opportunity to work with the margins to improve the margins. One of the benefits in single-family house is that as the area develops, you often have the chance to increase the margin phase on phase. In this area, and this is the final slide. We also have a lot of attention to sustainability. Of course, to start off, it is a wooden structure, which is, by itself, providing a very low carbon footprint. But we are also doing many, many other things to make this really sustainable. One little feature is interesting. We are giving the choice for the customers to have a battery connected to the solar panel, so they can even up the use and actually lower their cost to optimize the energy cost. And finally, one more thing. We are going to take one house here and test new ways of working and new technology with the ambition to make it one of Sweden's most sustainable house, single-family house. And that we will launch later this year and more to come. So that's super exciting. Thank you very much.

Thank you for that, Michael. A reminder that there is a model of Seminariet and Fredman in the office, so you can get a look and feel for these projects. And now, Michael will continue with the presentation of the Baltics. Go ahead.

Thank you. Have to bear with me a few more minutes. But I wanted to start this part with the fact that I came to NCC 2010 with these markets as responsibility, started from the commercial development. So I have traveled to this market for 15 years. I've seen them progress and grow and have seen also how proud these nations are, how they are developing steadily successfully with hard work. So I really think this is a fantastic part of new Europe. Some of the basics just to let you understand our business. Here, we are focusing the majority of multifamily homes, B2C. There is an emerging B2B investor market, and I will come back to that in a couple of slides in the end, which is really, really interesting. Business model is the same or similar to the Swedish ownership, meaning that you collect 10% in the beginning and 90% in the end. The same is also in the way that we are producing faster. So we have -- we are producing multifamily buildings roughly in 15 months, which is really good. A couple of words still on what these markets are. Maybe it's interesting to know that Tallinn, the capital of Estonia, is the closest capital to Stockholm, takes you 45 minutes, takes you a shorter distance than going to Gothenburg. And it doesn't take much to go to Riga and Vilnius as well by flight. We see the same banks in these markets, in many ways, Swedbank and SEB very active. We are focusing on the capital cities, and they are large if we count in the greater areas, which we do. So by population, these are really large markets. We are the #1 since many, many years in Riga, where we became the #1 by sales volume in Tallinn, and therefore, also Estonia last year, and we are emerging as one of the leaders in Lithuania, Vilnius. We have the country manager, Remigijus Pleteras, saying a few words later, and also available here today during the coffee break. It's -- he used to be the CEO of the largest broker. He knows everything. So take the chance to talk to him. Drivers for growth. Peter was mentioning, if we take Riga, 85% of the total stock is more than 35 years of age. 85% is more than 35 years of age. And if you combine that with a very active and good offering for bank financing from the banks, then this is a huge driver for growth. We sold in a pretty tough market, one would say, last year also in the Baltics, 511 units. That's quite a lot. We still -- that was so much less than what we did in 2021 when we sold 921 units. So huge potential. Business update. We did not go down, as many of you have seen in our report in volume in the same way as we did in Sweden and Finland. We have kept a good basic volume in production, good profitability. And we have proven over many, many years that we drive a profitable business in this margin. Land bank, many words have been said on land bank. We have a really good land bank in the Baltics. But I would add even more focus on the organization. We have an amazing organization, super engaged, super, let's say, proud of the company. Some of these factors mentioned here on the slide may not be known to you but these are really, really high numbers, and I'm super happy. And that is a big, big factor when you drive volume of production. A few examples of some of the big areas that we have to be developed in the pipeline and partly also developed. I will give one example of -- from each market. Starting off with Riga. We have our biggest business in Riga. Huge investment called Evalda Valtera. It has more than 700 units. We just started last year with the first phase, 42 units. We have also here our laboratory for life cycle analysis, state-of-the-art where we are better than the universities as calculating carbon footprint through the life cycle. Very interesting to follow that. We move on to Tallinn, capital of Estonia. Here, we have a big area where we have built a lot, and we have phases ongoing and more to come. It's over 400 units left. We also here have the location for B2B deals. We have sold forward funded plus also that we have in our own asset management. Finally, example of Vilnius, the capital of Lithuania, which is the largest country in these markets. Super exciting new investment, again, more than 700 units to come. We have sales. Started the first 59 units, 15 contracts signed. We're waiting for the building permit. Hope to kick that off during next month in production already to go. And this is a great location and a great offering. Final few slides, I will dedicate to the rental market. And we believe this is a really, truly emerging, interesting opportunity for Bonava. But it's just -- it's not just an idea, we actually operate 2 premises here, which you will see some facts on. But simply put, this market is, today, managed by private individuals. It does not exist a proper professional offering on the market in general, even though a number of transactions have happened. So if we look at the potential, if you would play with the idea that these markets behave in the same way as, let's say, old Europe, having 40%, 50% of housing by rental versus ownership, at least, there is a need for 165,000 units. And this is the figures given by a number of brokers. Bonava internally, I would say, more 250,000, but huge, huge numbers. So great potential for the future. Final slide. We are not just talking about an idea. We're talking about 2 real projects, 1 in each, Riga and Tallinn, filled up to 95% with the tenants who, we, Bonava, manage. We are leasing out. We are managing the -- both in building and we are managing the operation of the property. We know how they feel, and they are really, really happy. And adding on top of that, we have a pipeline of a number of ready-to-go new starts, which we are now currently seeking an investor or investors for currently prospect out in the market. So as a summary, Bonava Baltics is already going. It's already moving. It's a question of taking even further step of growth. Thank you very much.

Thank you for those valuable insights, Michael. We heard that there is a great potential for many more sustainable homes in the Baltics.

And now we will open up for questions to all of our business unit presidents. So if you will, please come back on stage, Riku and Sabine. If you're following us online, do start typing your questions. And if you are with us in the audience, you may raise your hand. First, I would like to ask you, what is your main priority for this year, Michael?

Starts, especially Sweden.

Starts. What about you, Riku?

I would say we do everything in our power to create market and conditions to start new projects.

Starting projects?

Yes.

And for Germany, Sabine?

Germany does not have any other plan. Also starts, of course.

Starts, starts, starts. Do you agree with that, Peter? Our CEO is nodding and giving a big thumbs up. Okay. So our priorities are clear. I think we had a question from the audience down here.

It's Simen from DNB, again. You had previously announced a strategic evaluation of the Finnish operations. Can you give any update on that last thing? And where does that all statements stand in the current business plan?

Shall I start and you continue?

Peter, you can join us up here. So we see you.

It is very clear that we do see good business potential, that's what I described in my presentation, and there is a clear potential for us to perform in the long run. I also want to be very transparent that the market at the moment does not support our business in Finland. However, this kind of question is something that management always need to evaluate and consider regarding every market that we are in. So it's not just specifically for this moment. It applies to every time every market area.

And as Riku has demonstrated, we have done a lot of steps. We've touched every inch of the Finnish operations in order to hone in and get more efficiency. And the strategic review, you need to do with all the businesses over time. And when we launched that idea of a strategic review of Finland, we did it at the back end of '23. So if we just fast forward what has happened since then, we have had growth in Germany, in the Baltics, and we are seeing the spring coming here in Sweden, as you say. So again, we are seeing signs in Finland. So when is the right time to leave a market is when it's going down, not when it's going up. So we are very happy with the footprint that we have right now.

So you're still not looking at active divestment of the operations, if I understand correctly?

No.

Thank you for that. Yes, one more question?

Yes. Following up on the turn of the market, both for perhaps the Sabine and to the Finnish market. We have both a bit challenging markets. Interest rates are low, not expected to go any lower. What is the main thing needed for the market recovery in your view? Do we need to see improvement in the labor markets, the utilization in Germany, typically regulations getting more things on the market? What is the main thing that has improved in the markets?

What has improved. Yes. So I guess you know that our government has a large list of what needs to be improved in Germany that goes with reduce bureaucracy, faster -- faster processes to get master plants and building permits, more easy product opportunities, not so high regulations on the products, of course, also some supporting programs for our customers. So a lot could be done. What we think the most important is because we are focusing, what can we influence, what can we do to grow, to improve our business. And I have elaborated what we have done. And for us, the best would be a more long-term stable view on the housing business from the new government and really improved speed in building permits and master plan processes, that we get projects ready to start because at the moment, with all starts, we are heavily dependent on really getting the building permits in place at the right time.

Potential in decrease in bureaucracy?

Yes. Yes. Yes.

Anything to add?

I could build on that. I would say consumer confidence is something that we do need to back our business up. And as we all know, that is dependent on several different factors. But we have also proven that we have ability to create the market with choosing specific, most potential projects that we see are sellable in this new market situation.

And I can add a real big focus is how do you create a really -- and communicate a strong offer in the early stages, like 2 years from moving in? How do we make sure that the customer gets a great offer, who signs up in the beginning. It's not the same thing to sell 2 years before construction is completed. And the customer should really get a benefit and a better offer.

So they feel trust and comfort in taking this decision ahead of time.

And later on, we will hear about our brand and the customer journey, and then you will see really how we work with that.

We'll do that, right?

One more, if I may, goes into the Baltic rental operations also. The Baltics have had falling population growth for -- negative population growth for 20 years. Why do you want to grow in those markets in terms of having more rental operations.

Well, first of all, we don't operate in the whole country. We operate in the capital regions. And I -- you can always look at the statistics a bit in different ways but I would say that urbanization generally works here as well as the rest of the world. So Riga, Tallinn and Vilnius, I believe, have a generally, not stagnating population. Always the question about Riga but that has other dynamics. But that's not the real, let's say, thinking here. The thinking is that there is simply a lack of a large amount of the population living in those old homes that either cannot or do not want to mortgage. So there's a huge volume existing today who we think should benefit from a new modern home.

More than a more energy-efficient.

But it's also floor plans. I mean, again, 85% is 35 years and older. I mean the bathrooms are not the same. The kitchens are not the same. Many things, the balconies are not the same. There's plenty of value add to a modern home.

Things have changed in priority since the '70s and '80s. Yes. And we have a question in the back.

[ Robert, Carnegie ]. Just a question on -- so you're ramping up starts, and this is perhaps more related to Finland, and how strict will you be on project margins during this ramp-up phase?

Very good question.

I would say, very strict. We need to have all prerequisites in place before we start. As Peter also mentioned, we need to have the customer, we need to have the team and we do need to know our costs. And even...

Maybe could we repeat the margins that we foresee in the projects to start this year?

Yes. They were in the range of 18% to 22%. Those are projects that are in the pipeline without investment decision yet but what we are preparing. And that's what I was referring to carefully choosing the most potential projects that support our business plan. And that also goes not just for the demand, but also for profitability. So that is something that we will not sacrifice.

Thank you. Then we have a question in the front here.

This is [ Fredric ] again from ABG. I have 2 questions. First one for Sabine in Germany. So the sort of plot market that you were talking about, are you going for land plus with building rights or without building rights or both or sort of read the building permits?

When we -- when I was talking about the balanced building right portfolio, I was talking about exactly both. So we need to have a good mix between projects where we develop the building right through a whole master plan procedure and ensure that we pay when the master plan is in place. And on the other hand, as you have seen this example, also makes it up with projects ready to the market to be fast on the market because also of that problem, what I described that we are really dependent on getting or receiving the building permits in time.

So it's a mix of getting the time right, but also creating a lot of value with the plot that don't have detailed plan.

So it is both.

Perfect. And then one for Michael. When you sort of start your presentation concluding that spring is here, you also said we have sold out the stock. What does that mean? Because if we go back a few months, there were quite a lot of unsold apartments in Sweden.

Yes. We have only stock except for projects with single-digit units here and there today left in Umea, and that is selling steadily. And that is from a project start we took with 0 presales rate going back in time. So we -- looking backwards, you can argue that starting with no sales to begin with was perhaps not the best decision but that is not the way we operate, and the markets look very different then.

So in sort of the ongoing production and in the finalized projects, you are completely sold out ex-Umea?

Yes. And that is a discussion internally whether that is even good or not because, obviously, we have a little to sell. I think it's good. But some showrooms and some, let's say, connection with the market with a ready product is, some of it is not bad.

All right. Thank you for that. And we have the next question from Jan.

Okay. Jan, Kepler Cheuvreux. A question for Michael. You mentioned 16 possible starts in Sweden. How many of these are rental apartments?

None. And its sales starts. Production start will -- some of them will take until the next year. But it's all consumers, and we believe it will all come out to the market.

And why do you don't start rental apartment? Isn't the market there? Or is it something else?

The market for rental is actually also arrived spring time for. So there is opportunities during 2025 for us to actually start rental as well but they are selective. We don't have a land bank, which is focused on rental and, let's say, ready to start in general. We have a number of those examples. So rental market fundamentals are actually working today. Obviously, you cannot have a much of land price in the calculation, but that's normal also for rental.

All right. Thank you. And with that, we would like to thank our business unit presidents. And it is now time for a short break. After the break, we will go into our customer journey and also financial guidance. So please be back at 10:45. Thank you. [Break]

Welcome back. I hope you've had a good break. Maybe some of you in the audience have recently bought a new home. And in that case, you surely remember what strong emotions come with that. Anna Wenner, our Senior Vice President, Brand & Culture will, together with our team, take us through our customer journey. But first, we'll see some clips on what it's like to buy a home from Bonava. [Presentation]

Hello, everyone. So I will speak about our customer journey and our brand. And I will not do it alone. I have some dear colleagues from some of the business units and they will soon join me here and give you some flavor of reality as well. So Bonava, we have chosen to use a one brand strategy, which means that the Bonava brand is what we use in all our markets and in connection with our customers and when we did the land acquisition and all our stakeholders. So that's what we do. And of course, the brand is super important to us and we have put a lot of effort into building the brand since many years. And of course, we do it every day. So every day, we create a brand, we put building bricks to the Bonava brand together. We have also explored the customer journey and have looked into the different phases of the customer journey. And we have done that with a lot of data and customer insights from the different markets. And when doing that, we realized that it's very -- it's the same -- so it's very similar. The customer journey -- the highs and low in the customer journey is very similar in all our markets in the different situations. So that's together with the brand, the customer journey is our backbone, meaning that we work on that together as a group, we develop it together and we use the synergies as a group when doing that. And the basis for the brand is what we call the House of Happiness. Now you heard the Business Unit President -- the Business Unit President talking about creating the happy neighborhoods. So the elements of the House of Happiness and what it points out is focusing on the home itself. So how do we make customers satisfied? We focus on the home. We focus on the neighborhood and the customer experience. And when doing that, we create the happy neighborhoods. So that's the guiding tool for us in everything we do. Of course, not only in the nice pictures that you have seen but also in the daily work, when meeting the customer, the marketing material in any contact with the customers. So we're trying to create that one brand experience but of course, with a lot of focus on the local customer, the local customer needs and the local customer insights. That's what we do. And we have done a lot of work. Even we had heard about the recent years, how much hard work it has been, even so we had put a lot of effort in to further develop the brand and the customer journey, which also means that we are very much ready to scale up. Let's dig a little bit deeper into the customer journey. And as Sanna said, I think you all recognize, many of you in here, you have bought homes probably a few and sold homes as well. So this you recognize when you look at it, the different phases of the customer journey. So it all starts with explorer phase when you dream about your home and you start to investigate and looking into the details, you do the research. And then when you're ready, you move in to the prepare phase when you have decided. And then you sign the contract, you worry quite a lot about the financing and you go to the bank and you personalize your home. And of course, we support that as well with our add-on sales, trying to find the best kitchen for you and so on. And then you dream and you wait and you organize before the day has come when you get the key to your new home. And then you're ready for the living phase. And there's ups and downs in that as well. You get the key but then you need to settle in, in your new neighborhood and the new happy neighborhood that you're moving into. And you will hear soon more about what we actually do from my colleagues here soon in the different phases. But what we also do, as I said, as this is the backbone for us, we have also translated and captured the customer journey into a digital customer journey. And that's something that we develop together and we are very proud of that because it means that we collect the demand from the business units, we work on it together and we create that interface and the tools that you need from a digital point of view in the customer journey. And the capabilities we keep here, we have them in Stockholm. So we work on it here to make it very efficient. As you know, these capabilities are also quite difficult to find, so have the best resources to continue to develop. And this -- we do the tweaks all the time. And sometimes, we will take bigger steps, of course, on that journey but that's what we do. And then the beauty of it is that we also adapt and use it locally to fit every customer in the local market. And of course, that also makes us ready for using AI tools, for example, which we have started to use in some sense, so that's what it looks like. But now you will get the opportunity to listen a little bit more on the different phases and we will start with the explore phase. So I would like to invite [ Fredrik Wickström ] on the stage, who is the Head of Sales and Marketing for Bonava in Sweden.

Thank you, Anna. Thank you. So happy to see you all and be here to talk to you about the first phase in the customer journey, the phase that we call explore. Here, it's about building the awareness of Bonava as a company and also our project. But not only awareness also, of course, desire. And we also need to create a feeling of safety for people, potential buyers, to be ready to sign up for a new home a few years ahead. Here we have a great benefit over our strong brand and that's, of course, very helpful in this phase. To be successful, we need to work in a very structured way but yet to be flexible in order to meet customer demands and customer expectations and also behaviors from customers and of course, the market situation. When we start a new project, we always aim to have at least 1 or 2 clear target groups. And then we develop a concept and an offering that we think will fit them and are attractive to them. As an example, in Seminar Parken that we talked about earlier, the typical customer is a couple living in a villa. They are 55 years or older. They have no kids living at home anymore and they are looking for easier life to live in the future. Why not in an apartment in Seminar Parken? When we come to the communication, we have an omnichannel strategy but with a very high focus on digital channels. So every day, we're monitoring the progress and the status in the sales funnel, all steps and are ready to take action if necessary. So where do we act and when do we act? Well, it depends where in the funnel we need to. So for instance, if we need more visits to our web, to our projects, then we may need to adjust the communication. And then it's a very good thing that we are also digital because that's the media that we can adapt and change quickly. So when we have a sales start? We talked a lot about sales start today. We invite potential customers to an on-site sales event where we present all aspects of a project for potential customers. So we talk about floor planning, energy solutions, financial solutions, project time frame, everything that is important for the customers to know. And of course, we take the opportunity to also talk about why this would be such a great area to live in the future. This is often very well visited events and appreciated by the tenants. But also for us, it's important because we need to know a bit more every time about what customers expect in that specific project. Also important to know is that we normally don't release all units at once at the same time. We have several sales releases. And the benefit of doing that is that we can see which units are most popular and also which ones to prioritize for the coming phases. It also gives us the opportunity to adapt some of the offering or sometimes even the actual product. And we said that we have a lot of sales start already on Sunday in Linköping. We will start a new project in [indiscernible] and the week after, we will meet potential customers in this very room for the third phase of Fjärilshusen in Järfälla. So to sum up, this first phase in the customer journey is much about digital communication, in combination with a personal interaction and meeting with customers. So with that said, I will leave over the word to my colleague, [ Sophie Jenssen ] from Germany to talk about the next phase.

Thank you, Fredrik. I'm happy to be here. My name is Sophie Jenssen and I'm the Head of Sales in Germany. And as you heard from our BU presidents already, there are challenging times in terms of politics and economy globally and nationally. And trust is the big challenge. There's hope that rising income and economic expectations turn German consumers' uncertainty. This is exactly why we have taken these difficult times to -- as an opportunity to learn what customers really need. It's product quality, reliability, security and visibility. We show our customers that we are still here, that we are continuing to build and that our projects are running. Why is that so important? How many times do you think Germans buy a new home? Once in a lifetime, German buy an own home. And this is our footprint that sets us apart and makes us a strong brand. Our knowledge helps us now and when the market turns again. We have undergone a major change. The time of the seller market is over for now. In the buyers' market, we are focusing more on customer orientation. That means fast, personal and reliable. Fast means making contact quickly. Personal, not just sending documents but holding on consultations and finding the perfect unit. In the past, we have been in the office with our customers. Today, we are 90% on the site, reliable, available all the times. How do we achieve this? We make our sales reps fit with training, emotional selling, building customer confidence. We make sure to close the deal. However, adapting to customer needs also means adapting to a different target group. Germany is becoming more international. In our project, [indiscernible] and Parkstadt Karlshorst, we see the Indian community. We are not only adapting technology by Google Ads in English, for example but also in terms of culture. For example, the belief in Feng Shui states that aligning the front door to the east brings prosperity and health into harmony. We had a similar experience in our project, [indiscernible] with the Vietnamese community. As we also see that the younger customers, in general, ask for barrier-free units. They look also into the future. With this knowledge, we can identify the perfect unit for the customer, even if we have to change the front door. We create the quality of sales with the help and strength of the brand. But it's not just about the quality of sales. It's about the quality of what we sell, the quality of the product. This is what customers identify and associate with the brand Bonava. And here too, we know what customers want, a home that's more than just 4 walls, a home where people feel comfortable and secure that retains its value in long term. All in all, we stand out because we are a strong brand and our goal is long-term trust in Bonava. And now I will hand over the word to my colleague, [ Remigijus ] from Lithuania.

Great. I worked for this company for 6 years. And I'm very proud to stand before you today as a part of Bonava. Bonava, the leading residential developer in Baltics. Our journey in Riga, Vilnius and Tallinn has been nothing short of remarkable. And 2024 has been a testament to our success. We have sold 511 homes in 3 Baltic capitals last year. In Riga, more than every fifth unit sold was developed by Bonava, solidifying our #1 position in the market. In Tallinn, we are also #1 developer with a higher sales volumes. And over the past 6 years, we have left a strong footprint in Vilnius and our growth journey continues. Before move in, we arrange housing school event, typically 1, 2 months prior to handover. This gathering allows us to meet each other, setting the foundation for connected and social neighborhood. And during this event, we guide our customers, what we expect, how to operate new home, details of the acquisition and warranty process. And this initiative is our way of managing customer expectations by fostering strong relations right from the beginning. The home is a significant commitment and our customer service standard ensures that our clients still support it through the entire journey. According to this standard, we maintain consistent communication about construction progress, current time lines, future plans. Our team is not only committed and dedicated, our team is fully engaged by always asking open-ended questions to our customers, listening attentively and addressing concerns transparently and confidently. And we never shy away from difficult topics. Our goal is to ensure customer satisfaction. Before final agreement and key handover, we take one more crucial step, a preinspection. This reassures our customers, that we have fulfilled our obligations by allowing them to see their home firsthand. And this extra level of transparency strengthens our relations and leave no room for doubt. At Bonava, we also have a 0 defect policy. And that means we have, as professionals, never hand over a home if we recognize even minor defects. In residential real estate market, it could be tempting to finalize sales with pending minor fixes but we refuse to take such step. A home should be perfect upon handover and anything less is a potential for disappointment and we simply do not compromise on quality. With all that said, we stand out in the market. Our dedication to excellence has led -- it has led to high customer satisfaction rates. Our customers are not just happy, they are delighted and the positive experience drives word-of-mouth recommendations. And we are not just building homes, we are shaping the future of living in Baltics. Thank you.

So thank you, dear team. We work on a daily basis together in the commercial council, coming up with ideas that we can implement together. So hopefully, you got some good examples from the market and also the understanding of the balance of the synergies using the strengths together with having the ear to the ground and listen to the customers in each of the markets all the time. I think this combination also makes us ready to scale up, so we can utilize the [ spring ] feelings fully in all the markets. So we are ready. Thank you.

Thank you. Thank you, Anna, [ Fredrik, Sophie and Remi ]. I know that I would certainly feel very safe buying a home with the support of this team. And now we will shift back to financial outlook as Jon Johnsson returns to give us financial guidance on 2025 and the years after that. Jon, please go ahead.

Thank you. I'm back. And now, Simen, it's time for the questions you all have, right? And why did I wait until now to have this financial guidance? It's not just to keep your hang in there, it is really because we have tried to tell you a story of what builds up the financial guidance. We -- Peter talked about controlled growth and the cost reduction program and everything we have done in the last a couple of difficult years. When -- the BU President also talked about the market and that we are ready to start. We heard the customer journey, our shift to PoC as a method. So all this builds up to what I'm now going to show you. And we sent a press release already this morning. So some of you may have read it already. But what we say basically is that we stick to the same financial targets and financing frameworks, which we have communicated before. The difference is that we switch. And now to answer your question, Simen, we switched the income statement targets, including the EBIT and the return and dividends to the PoC model. But we stick with the balance sheet items on the financial framework and the balance sheet items on the frame. So to repeat, what we say is that we're going to reach an operating EBIT above 10%, 2026. We should maintain a return on equity of at least 15% over time and that we should distribute 40% of net profit over time. We also have the financial framework to keep us sound in all this with an equity-to-asset ratio of above 30% and net project asset value, which is above the net debt, excluding leasing. So all these are the same targets as before but now from an income statement point of view, switched to PoC. Now recapping a little bit on what we have tried to preach the whole morning and that is really that the profitability level is depending on volumes. We believe that we have done the internal homework in reducing the cost and rebasing the structure, having profitable projects in our land bank, ready for development. So what remains is that the volume should return in the different markets. Michael talked about the spring. And as you can see, spring in Sweden, it's sometimes sunny and the next time it may snow. So it will be a little bit bumpy road until we get there. But we are confident given the demand, which we now see on all the markets that we will have this controlled growth and gradually take us there. So we have 6,200 units right now, ready for production, '25, '26 and how that is going to play out. It depends really on the demand, on the sales rates, which we are talking about. So we cannot just start producing. We need the sales rate on the markets to return accordingly. Otherwise, we will probably reach it faster because we are ready as you heard the BU Presidents. So a gradual and controlled growth. And that then leads us to that we think that '26 is the year when we have sufficient volume and market demand built up in -- over time then. So you can see that we had like the 2,000 units produced 2024 and the year prior, it was 1,300. So that trend we do expect to continue. Exactly when, we will not give you guidance on but we believe that '26, as mentioned, is when we reach to more optimal level and '25 will be a bump on the road towards that. Then let me just spend a little bit time on the financial framework and how we look at it. I mentioned that we have had a couple of tough years in Bonava and you have covered us and all the banks and shareholders, you have seen this from the outside point of view. I think in order to be agile as a property development company, you really need to have the building rights, matching equity and the net project assets and matching external debt. But with the financial framework we have in place, we also need to secure -- give security to the lenders and to, of course, the shareholders that we do not build more than we can handle and where the demand is not there. That's why we have this financial framework to keep us sound and keep us healthy in the financial model. So we need the net project assets still to be higher than external debt to have that risk profile set. And as you can see and then we also said in the Q4, we were 1.6x in '24. We also need this equity to asset ratio so that we have sufficient profitability embedded in the land bank and in the equity to tell our story towards the shareholders. And that's why it needs to be above 30% also. It was 42% in Q4. So we will continue to safeguard that we deliver on these financial framework and that's also why we keep it. The second one and this is an interesting one. So we did not only reduce costs but we have also reduced net debt significantly and this was a prerequisite because we were having a net debt as high as SEK 8 billion in -- going into '23. So from SEK 8 billion to SEK 3 billion, this is also something we communicated in Q4 and tremendous has been done in order to reduce that net debt. We were not on a healthy level back then in early '23 when the market hit. But we have done, again, a good work in reducing that one. You can also see that on the interest rate because that illustrates the risk profile, our partner banks have put upon rightfully so because we were in a lot of problems, you could say, back then with that high debt and with the very low volumes. So we believe that it was the right level to be there but we also believe that we are now slowly regaining the confidence which will take us to a refinancing this year or next year, depending on the process. And as you probably heard of, we did the new green bond, which was the first step out. We are now working actively with project financing, in particular, in Germany, which will create also a foundation there with depth closer to the active assets. That's super important for us as a company. And that will eventually take us in renegotiation also the big corporate debt which we have. We don't believe that the absolute debt level should increase that much in the year or 2. But we do believe that we can lower the financial cost already in '25 and definitely '26. Then you heard in particular, Sabine. But I think it goes for all the business units. We see 2 things in terms of investments. One is that we have a need to replenish building rights in regions which have been successful. And in Germany, we have a number of cases like that in the Baltics similar like we talked about Riga and so on. So we really need to add new building rights where we have consumed a lot of building rights in the last period of time. There is also a brilliant opportunity to actually acquire plots, which also Sabine alluded to. So now is the timing to actually get attractive prices with the controlled investments. We want to do this like headless and just run out and do investments but we need to consider this in the next 2 years when it's attractive prices and where we have the need. So all this builds up to what I'm now going to show. So again, recapping where we ended PoC '24 with a 4% operating EBIT margin. We said that we would keep the 10%, 2026, about '26. And that leads us to the 2025. What can we expect from 2025? And you who follow us, you also know that we had a lot of starts of units and sales of units in the later part in Q4 last year. We will see that continue but it takes time to develop the profit levels, which we need and it takes time to have all these units in production. We need to get the volume kick back of the cost savings we have done. So that's why we guide on -- above 10% still on '26 and that 2025 will be on the move towards that items. And then we wouldn't have financial targets if we didn't say anything about dividends and return on equity. But it's depending on so many different items. We talk about the refinancing and the financial cost. We talk about the come back on the Swedish and Finnish market, how fast can we achieve that one and a number of other things like gross profit in the projects, which we have support for. So we believe that -- we will, of course, come back to that. But somewhere in '27, '28, when we have first secured the financial framework and then done the investments we need, that is like the horizon we see when the conditions are good in order to reach these ones. I think that concludes what I'm about to say.

Thank you, Jon. We will now be opening up for the last Q&A with both CFO and CEO. [Operator Instructions]. First, I'll just like to check in with you, Jon. Will we be giving any more guidance on bottom line or other detailed numbers at this point?

No, we won't.

No, this is it. All right. Then that's clear. All right. I believe we have a question over here from Simen again.

In accounting in residential development, there is always the possibility to include interest rate costs as part of the goods sold being capitalized, being part of that impacting EBIT margins. And last year, you had more than SEK 500 million in interest rate costs. How is that cooked with the current targets? What is the correlation you expect going forward between financing costs and the EBIT margin? And how are these being seen together?

Okay. Former CFO and the current CFO. If I start with this, this is something which we are looking into and as Jon has alluded to, with more project near financing, it makes sense to put the financing cost into the project cost. But we need to look into that. And also, if I might correct you, Simen, you are right that with SEK 500 million but it's both guarantee costs and financing costs. So that's -- but to have -- to really take on the cost wherever it is in the P&L, to take it down, that's the major target for us now.

And if I just built on that, Simen, I've been in the -- this position now for 3 months but it's definitely something on my mind. So we need to take the total cost down in financial cost for the projects but we also need a good measure how to govern the projects also from a capital point of view. And that would be one option. But let's just come back to exactly how.

But given the run rates from last year, is that -- what we are supposed to think about, us sitting on the outside as in the guidance?

It will be a reduction versus '24 but it will be slower because we still have the same financing, you could say.

Right. So that's a good point for you, Peter, that our net financial items actually include guarantee cost, which is sometimes different in different companies. We have another question over here.

[indiscernible], SEB. So first of all, you have this gross margin target for new projects at 18%. But what can be said about ongoing production or the completed production? What's the project margin there?

Right. So what is the project margin in ongoing production?

We had in last year, as Jon has alluded to, close to 12% in the reported gross margin. And in the CEO letter that not only the CEO is writing, we stated that we have a higher margin in the current ongoing portfolio than the ones we had reported. So it's on the rise up but it's also -- it's very much impacted by the tougher market we are coming from. So completing low-margin projects and selling out the stock, as Michael has been talking about will also relieve the pressure on the margins. And I also think that the margins that each of the Business Unit President has sort of talked about now, give you an idea of how the uptick will be. But it is volume dependent also on covering costs, indirect production costs. So that is why we have sort of pegged the guidance to what we have done. And this 80% component, as you now alluded to when it comes to the percentage of completion also makes a more subdued impact in 2025 when we are early in the project completion compared to 2026.

And how many units in ongoing production do you need to reach this 10% EBIT margin?

I mean we talked about it. So we need to start, so 3,000 to -- 3,500 to 4,000. But that is -- if you then calculate that we -- our projects are typically 1.5 years, so we need up towards 5,000.

Between 5,000 and 6,000.

And also a question on the net debt. So it has come down quite a lot, which is to reduce inventories and also due to fewer starts. But if you want to increase starts, how do you expect this net debt to evolve in the coming years?

It will grow as we grow with volumes. But our idea -- the whole concept is that we will not put ourselves in the position we were back in the day. So we believe that, again, the debt needs to be closely linked to the projects we are running. So it will somewhat increase '25 but not dramatically and then over time, grow with the projects.

So another question on the financials. Do we have any guidance on the ICR?

No.

And Adding to that, we also saw from Sabine's presentation in Germany that in Germany, customers actually pay down payments when we start the projects, which means that not all projects need to increase our net debt.

It's important.

We have another question up front here.

This is Fredric again from ABG. So I wanted to go back to Simen's question on interest costs. If we sort of exclude whether or not it's capitalized or not and just look at the actual underlying costs, how much lower sort of will it -- how much cheaper is it when you get financing closer to project than on group level?

It's a question to the banks and not me. Well. But on a serious note, I think that there are gains, I don't know. I can't give you an exact number but it's definitely lower spread in project financing. But we need to deliver on the promise of those with the sales rates, correct sales rates in the projects in order to get that reduction, right? So we need to provide the confidence to the lenders in those specific projects and then we are able to reduce the spread. I talked about the risk profile and that is really what we need to work with. We need to show that we sell what we have and...

So there's potential both in the project financing costs but also on the central financing costs.

Exactly. Yes.

Perfect. And then second question on SG&A. You talked about sort of the under absorption of costs and when volumes go up, you can move part of that to cost of goods sold, while at the same time, you sort of ramp up volumes. So that would sort of imply a higher SG&A just if we exclude the accounting? So how do we match these 2? How should we think about SG&A going forward?

I can start and then you can fill in. But I think that the key is really -- and the message we're trying to convey is that there has been like this big cost reduction program, which was needed and that puts us in the position we are now. The big benefits we have still is when we are growing the volumes without growing the number of resources in the same way to have less fixed costs going forward and be more agile to the business cycles because the only thing we know is that this business is going to continue to move in cycles. And then we cannot tie up too much costs, which makes us unprepared for the swings. So for me, it's really about productivity and efficiency rather than more cost reduction.

So -- and we have achieved roughly SEK 1 billion, which equates to both the visible S&A as you saw from Jon's picture but also the indirect production costs. So the swing impact is quite important here as the volume picks up and that is also what makes us hit the return on equity targets then later on. So we had a question on the project margin, the project margin, we expect to get up. And in addition to that, the under absorption of indirect production costs will be reduced as we increase the volume. So thereby, you will increase the gross margins. And then the selling and admin, we will work with efficiencies. We don't expect that to increase on the back of a higher...

Percentages will be better also there in relation to turnover.

Very good. And we have the next question here from Jan.

Jan Ihrfelt, Kepler Cheuvreux. Just a follow-up there. Do you -- could we expect maybe 5% to 6% about the administration cost compared to sales? Is that reasonable to you?

I would prefer less. But I think -- so think around 5% is a normal level compared to net sales over a long period of time. And as Jon said, if you then take the 10%, then the gross margin needs to be at least 15% in order to meet the operating margin target.

Thank you. And with that, to wrap up today's great discussions, I will now hand over to CEO, Peter, for some closing remarks. Go ahead.

Thank you very much, Sanna. So I promise you not a lot of slides between me and the lunch for you. So first and foremost, I would like to thank you all of the Bonavians that have been part and making sure that we could host this fantastic capital markets. So thanks a lot to each and everyone, whether I can see you or not. But thanks a lot. And if we just start with the map. You heard our business unit presidents answer. We want to start new projects. So this answers where we are in the various markets. So if we go to Germany and the Baltics, we are already on a decent level and we intend to increase from this decent level. [ Mr. Spring ], Michael is saying that we will start a lot of projects. So coming from a uniquely low level, that's a spike up in terms of [indiscernible]. And then in Finland, you can see the L-shaped is the beginning of the spring and the preparedness of the organization, selected project starts in the beginning and then gradually as the market improves. All in all, this will produce an increase, a controlled increase of starts. So having seen all the Bonavians here, I'm immensely proud to be leading this team. And I'm immensely proud by the -- all the actions that this team has taken over very challenging times. And that puts us in the situation where we have derisked Bonava to a great deal. We have a strong market and strong positions where we are. You have heard the testament to that from our business unit presidents and then further honed in, of course, by the way we are working with sales. We have a much more efficient operating model. And I can't put enough emphasize how important it is to have a strong decentralized business. We have a very attractive land bank where we -- it will support our growth for the coming 3 to 4 years and we have a stable financial position. So guess what, as Anna said, we are ready to go. Thanks a lot.

Thank you, Peter. And I would also like to thank all of you for joining us today. Thank you for sharing your questions. If you have any unanswered questions at this point, then our team is available for one-on-ones in the coming days. We look forward to tuning in the next time on May 9, when we will be presenting our Q1 report. If you are following us from home or from online offices, then we wish you a great rest of your day. And here in this office, we will now be serving lunch. So once again, thank you.