NCC AB (publ) (NCCB) Earnings Call Transcript & Summary

So welcome, everyone. A warm welcome to NCC's Capital Markets Day. My name is Maria Grimberg, and I'm Head of Investor Relations and Communications and will be moderating this day. I've already said welcome to the people in the room, but I also want to say a warm welcome to the people joining us online. It's actually been 3 years since we had an event like this, and then it was all online in the middle of the pandemic. We have forgotten about the pandemic. We have other challenges to grapple with now, but it's really nice to be able to do something physical and online together. The purpose of today is, of course, to give you all more insight into NCC. We want to have your questions, and we want to, of course, answer them. There are several ways of asking questions in the room, but also there is a questionnaire so you can send questions to us online. And there will also a telephone conference that we will open up and -- for questions a bit later on, and we'll get to that when we get to the question time. We have actually the whole senior management team of NCC here in the room. You will hear from the business area managers CEO, CFO and also Head of HR, but we also have Johan Lindqvist here, the Head of Purchasing and Legal here in the room if you want to talk to them in the brief. So let's take a quick look at the agenda. I'm not going to go through anything in detail. You will get to the program soon. We will start with a strategic and financial update from our CEO and CFO. And after that, we will have a short Q&A session before we hear a bit more about the market, about the business areas, including the new one that we have released this morning. Then we will have a short break of about 30 minutes, and then we will conclude with business area Industry and then the couple of topics that we also want to bring to your attention and another Q&A session for those of you who would like to ask questions and discuss with us then. So with that and without further ado, it's time to hand over to Tomas. So welcome, Tomas.

Thank you, Maria. Welcome, everybody, and I will provide a strategy update, but I will also provide background from -- for the rest of the program here today. So without further ado, let's get started. Since a couple of years, we have now been working with 2 different themes. One, which is what we normally talk about is how to make NCC more profitable with the business that we have. But we've also been working with how can we address the low value creation over time in our company but in the industry in general? How do you make large construction company create more value for the shareholders. And the way we think about that is like this because they are somewhat interdependent. We've been working -- we are working with improving the profitability through more focus, and you will hear more about that and also on operational excellence in the company. We have developed a strategic direction that I will elaborate a little bit more on, but it's about leveraging the large company and how can we learn from what we do around the organization. And then we have 2 large priorities. One is about developing the best available competence for the construction industry, both in terms of managing projects, but also in terms of leading a project-based organization and then it's the digitalization. And we will cover all of this throughout the program. Let me start with this, improve the profitability and what has happened over the last couple of years. First, when you follow the business on a quarter-to-quarter basis, it may look like there are big changes. I would say that we are pretty stable. This is the way the order backlog looks since the beginning of 2020. And there's one thing in particular that I'd like to point out, and that is order backlog goes a little bit up and down throughout this period regardless of general perception of if it's a good or bad market. It's actually low during 2020, and I think that we all can agree that we think the market was good there. And this, of course, translates into net sales. And this is the net sales over the same period, and the green line is where we have excluded property development that has a bit more lumpy type of revenue recognition. So it's very even line throughout this period. But you can make it even more clear by showing this graph. Flat sales over the period. At the same time, we have decreased the number of employees in the company with roughly 4,500 people. Now with sold businesses, and that corresponds to roughly 2,000 people that was part of the businesses that we sold. But the remaining part is through ongoing adjustments to be more efficient and to be more flexible in the business. And at the same time, even though we sold businesses corresponding to SEK 4 billion, the net sales are roughly the same throughout the period. This represents a major shift in how we operate in the company. Now some of you were present at our Capital Markets Day that we had in 2018 -- fall of 2018. And you may remember this graph. It represents profitability in terms of margin per department, we have roughly 60 departments in the organization. And the length of each increment is the size of the business and it represents the margin. So we could -- we told -- we could demonstrate that we had challenges in 2018. It was roughly 1/3 was loss making. More than half was underperforming, but the small part was performing better. And the dotted line represents our internal targets for the contracting business, and this is the contracting business. Now what has happened since then? And this is what has happened. It might not look that dramatic because the big negative margins towards the end of this -- the tail of this graph sort of distorts the picture. But you can see a couple of things. First of all, the best are getting even better. And the second is roughly half of the departments are meeting the margin targets. And it's only a small part of the business that are not performing and the losses are significantly smaller, and we are continuing to work with this part of the business, and we have activities ongoing continuously. So this is the development that we've seen on profitability over the last couple of years. But I started out saying, this is about increasing the profitability of the company. This is another way of looking at it. We have separated the parts of the business that has percentage of completion profit recognition, that's the blue line that would be contracting units and the industry. And then we have property development that has completed projects profit recognition. So it's a bit more lumpy depending on when we sell and handover projects. You can see that we continue to steadily improve margins throughout the pandemic, but then admittedly, we were hit by the inflation and cost increases that came with the Ukraine war. And it's particularly influenced industry, that were hit by energy cost and it impacts both of the building business areas Building Nordics and Building Sweden, and Building Sweden had a limited number of residential projects with poor project management, and that became evident in the situation. So we -- that was a setback. But now we are improving. And I would say this is a pretty clear demonstration that we are working with increasing the profitability of the group and underlying we're on a pretty steady trajectory, but we had an impact of the war in Ukraine, like so many other businesses. That on improving profitability, and I will now move on to strategic direction and development priorities. We did a rather thorough work talking about our own job, but also talking to a large number of stakeholders around us primarily customers, of course, but also society in general, politicians, other groups of people, people at universities and also people in the organization, how do we think about the organization. And one of the important things that came out from that was this. The definition on how do we think about our business? How do we differentiate? How -- where is the value creation in a company like NCC today? And we came up with a purpose statement that says take the customer through the construction process with a positive end result for all stakeholders. Now to me, this has a more profound meaning than I think most people recognize. Because it doesn't include the trades, the carpet and the concrete workers and the machine operators. It doesn't include the finished products. Both of those are, of course, super important. Don't get me wrong here. Both of them are super important, but it's not where we differentiate and it's not where we create value with our customers. And from this purpose statement, we've come up with a market position stating that what we want to be, what we want to represent, what we want our customers to understand is that we are proactive construction experts, realizing complex projects with our customers, of course, always with an organizational integrity when we do this. And a clear example of that is that we have an increasing amount of early-stage projects, where we, together with our customers, develop the projects and decide on the scope and understand what can be built and choose the technical solutions. So this is, to me, one of the most profound and important changes that we made in the strategic direction. Now if you want to understand our strategic plan, there's 2 slides that you have to look at. This is the first and the most important part is that's the big letters. People tend to miss that because they are too big. It's competitive edge by leveraging the large company. That's in the current business environment, that's rather contrarian. Most people talk about decentralized responsibilities and organizations today. And we are talking about leveraging the large company. And I think it depends, of course, on what kind of business you are in, but it depends also on the starting point that you have. We are operating in a super fragmented business with a large number of small companies operating on razor thin margins, even if you perform really well. And with a starting point of super decentralization, a super decentralization that no industrial company could ever imagine. So I think it's about starting point in your perspective that you're in. So what we say with this is we should probably, in a systematic way, try to learn from the business we do. If we are doing 90 schools right now, maybe we could learn from each other instead of having the organization totally decentralized. It's still very decentralized. Based on this, based on the core statement, based on the purpose statement, based on the market position, we have picked 4 themes that we want to develop in the organization. It's people and culture. It's digital and data informed, and we actually separate that, so it's not only about IT, it's actually about taking decisions on data. It's customer proactivity, working with our customers. And it's not taking our expertise for granted, but deliberately continuing to develop that. And from this, we have a limited number of focused initiatives, rather large ones, but focused initiatives that we are working with. We are working on future proofing our IT backbone for end-of-life reasons, of course. But we're taking that opportunity to develop something that will be future-proof. We're working with the culture of data-informed decision-making and around culture, behaviors and values, we have 3 large initiatives that we are running from the group and then the business areas are responsible for building rate business, reaching out to customers, understand what value you can provide and leveraging the expertise needed to deliver good infrastructure or buildings or whatever it can be. So this is the way to think about the strategic plan for NCC. And we will get back to all of these parts later on in the program today. As an example on what we do for data informed. We've been through -- we've done a thorough research, quantitative and qualitative on almost 100 projects, recently ended or almost ended. They are all larger than SEK 500 million. The average size is a little bit more than SEK 1 billion. And we tried 13 different perspectives on what could be driving success or failure in this type of projects. And these are the extremes. But in the successful projects, we see a clear correlation between these 5 factors. And for the problematic projects, we see the same correlation with 4 out of the 5, but then there's one more. And out of that, we have now had 6 factors that we are focusing extra on education and governance, making sure that we have systems to cover these in our projects. We have not tested it for smaller projects, but it seems possible but that same logic applies to smaller projects as to large projects. So in summary, for the strategy, we have a clear strategy for the group. It's relevant, and it's implemented in all the business areas. We have a few but very focused strategic initiatives. We have decreased the internal volatility, and we are managing the external volatility, for example, the pandemic. And with that, I intend to move on to financial targets, which was one part of the press release we signed earlier today. This you recognize, these are the targets that we have now, it's SEK 16 towards the end of this year. It's less than 2.5x EBITDA debt and it's a dividend policy that says that we should distribute roughly 60% of the profit after tax. Current status looks like this. We reported that last week in connection with the third quarter report. And we will get back to what the status will be for the full year in the quarterly report in January. I will not say anything more about this year. Just hear me clear -- loud and clear, I'm not saying anything about this year. I will talk about the future. So how are we thinking about financial targets going forward. First of all, this dividend policy remains the same. We changed it in 2022. So it remains the same, distributing roughly 60% of the after profit tax. It's SEK 6 for this year. I think that's all known. The net debt-to-EBITDA target will remain the same, less than 2.5%. This is the way the chart shows how it has been looking for the last couple of years and the increase that's in connection with the share repurchase program that we had in 2022. And then we get to the final one, the earnings per share target, the SEK 16 this year, it ends this year. So we need to do something with it. First of all, why are we using EPS as a target? And it's -- to me, it's the question of what kind of metric would you use that in a fair way represents the business, regardless of if it's property development, capital intensive with lots of current assets that we should have a return on capital on or if it's a contracting business where you should be super capital-light and margin as a metric of risk, is the most relevant metric or if you have an industry that has a mix of this with lots of fixed assets as well as a contracting business. So both are relevant. How do you find a target that represents development or how you really are doing. And to me, profit after tax transferred into EPS is a relevant market. Of course, we have internal targets for each business area, and I will get back to that. And then the question is, why SEK 16? Our assessment is currently that if all business areas contributes in a good way, we should be able to meet SEK 16 given the market like yesterday. So the target will continue to be SEK 16 and it is valid for the short and medium term. And then the question immediately is how long is that? And this is the way we think about it. We are expecting the contribution from contracting and industry to increase over time. The underlying contribution from contracting and industry should increase over time. But we are in the short term dependent on that the transaction market for properties opens up. And we don't know when it will -- when that will happen. If you have any deeper insights on it, will happen, please let me know. But I wanted to demonstrate the importance of the property development market to -- in our earnings over the last couple of years. This year, we have so far roughly SEK 200 million contributes from a property that was sold in the old days, but profit recognized this year. And another perspective you can have on this, if you recognize that the property development will be important to reach it, we will have a larger contribution from contracting industry. We have recognized 1 project of Kontorværket. We have announced that we will recognize land sales in Solna, Part 2 and please understand that selling land is probably lower value than selling the fully developed piece of property. And then we have announced that we will recognize Arendal, which is a piece of logistics real estate in Gothenburg, then there's a gap. And towards the end of the year, we plan to recognize profit from MIMO also in Gothenburg. And then there's a long gap. It's '25, it's '26 and all the way to the second quarter of 2027. Does this mean that we will not recognize over the next 2.5 years? Not necessarily. We have 4 unsold finished project, and we have 4 projects under development, not sold. So when and if the property markets becomes more liquid then you can see transactions, again, we intend to sell these projects as soon as we find it -- we can motivate the sale for that. We have internal targets. We have an EBIT margin target for the contracting business, which is 3.5% asset-light. We have an industry margin target of 6% because they have more fixed assets, but we also have a return on capital target of 12% for industry and for property development, we have a 12% return on capital target. You can translate the capital employed with this margin to find an absolute number, which totally means that the new financial targets and dividend policy going forward is SEK 16 for the short and medium term, depending on the property market. Net debt lower than 2.5x and dividend policy approximately 60%. Before I end, I will talk a little bit about other targets, and that is our sustainability targets. Health and safety, we have target for 2026 of LTIF4 of 2.0. We're continuing to work with that. And then we have climate targets of minus 60 for Scope 1 and 2, minus 50 for Scope 3. For those of you who follow the CO2 emission targets closely last week, you can see that we are really close on Scope 1 and 2. And we are working hard with Scope 3 to get the relevant metrics. We will get back to that when we have new data and a new target once we have met it. And with that, thank you all.

Thank you, Tomas. I know that you all have questions for Tomas, but you will get the full perspective before, so we will have invite Susanne Lithander to talk more about our balance sheet and give you even more of a financial update before we open up for questions. Susanne?

Thank you. What can be more exciting than to talk about the balance sheet on a Capital Markets Day. Here it is. This is a very high-level overview of our balance sheet. It is rounded numbers for simplification, of course, we have SEK 34 billion in assets and liabilities. What is worth pointing out at this high level is that our property development is only tying up SEK 8 billion is only their share when it comes to completed and ongoing projects. And on the other side, on the debt side, the financial interest-bearing liabilities aren't too big either when you look at it like this. The big chunk is really about working capital. We have an asset-light operations. And today, in this world, it makes us a bit more efficient actually compared to our peers. And we try to illustrate that here by having a return on equity where we put earnings to market cap. And that makes us come out at 17%. And to the right, we have also the average inventory turnover days. When we include our properties in our inventory, and here, we are slightly below 70 days. And continue to talk about our asset-light operations, we usually try to convince you people that our contracting business, they should be able to operate on negative capital. And here, we actually show that they do. In Q3, they contribute and supply SEK 2 billion that we didn't have to go out and finance externally. What can be noted on this slide is that we have been better before. And we also have -- last year, we started a program to improve our working capital situation. On the debt side, we have a lower exposure than peers. And that is, of course, substantially reduced by the fact that we don't have any residential development in our portfolio. And to try to visualize this, we have added up our aggregated interest-bearing liabilities up until 2025, compared to some of our peers. Those are the blue boxes, and we have set that in relation to revenue, which is the red line on each company. So also there, we come out as pretty good. Also, when we talk about our exposure to the financial market and the uncertainties of the financial market, we can look at our portfolio and its maturity structure. And as you can see, we have a base plate with where we issue bonds from our green framework. In addition to that, we have undrawn credit facilities, both bilateral and syndicated facilities. And the short-term needs, the fluctuations, the seasonal variance that we have, we handle with commercial papers and several bank credits. And these days and these times, it feels pretty good to have a slightly cautious view when it comes to financing strategy, I can say it. We also want to look at some traditional KPIs when it comes to the balance sheet, return on equity and equity-to-asset ratios. Our return on equity rose incredibly to really high levels. Unfortunately, that was due to the fact that we removed a lot of equity in the 2018 cleanup. However, after that, we have improved our performance significantly and are now progressing really well on this KPI. And we think we are on a level where we should be around the 20 area -- 20%. The equity-to-asset ratio has also improved since 2018, and we think that this type of business would need 15% to 20% equity-to-asset ratio. And as you see, we are a little bit better right now. Finally, the most commonly asked question we get is that what are we going to do and how are we going to allocate the capital when we have such a strong balance sheet? And oh, by the way, if we get to sell some property [indiscernible] what are we going to do? That's the most commonly asked question. And the answer to that is that we stick to our model. We think our model still hold. It is our first option to invest excess cash in property development, provided that they fulfill all our requirements. And those requirements keep changing depending on where we stand in the marketplace. So today, the requirements are quite tough. However, we always evaluate many options. And we have, as our base plate even also here, we have the policy to distribute 60% of the net profits. Last year, we had a share buyback program. That was what we thought was creating most value at that point in time. And we continue to invest in our digital transformation. We also always search and look for if we can invest in competence, build our competence from buying companies, mergers and acquisitions to strengthen our current offering in our current portfolio in our current business. So that's the full answer to this question. So to summarize, and what I tried to convey is that we do have a strong financial position, and we have a flexibility to act on what we need to act on. And also, we have a heavy cash-generating units in industry and the contracting units, and we have potential to improve further when it comes to working capital. Thank you.

Thank you, Susanne. And I thought we will have time for short. I guess, there may be some people having questions to Tomas and Susanne regarding strategy, financial targets, what was just presented. So I thought I'd open up the room. Since we are on a live broadcast, you will need to use a microphone. And so please say -- wait for the microphone, it'll find its way to you and then please say your name and the organization if you have a question. Anyone in the room who wants to ask a question. Markus?

Markus Henriksson, ABG. Two questions from me. First off, a bit on industry. I think you've seen a strong recovery here in 2023, and you talked about the weak market in 2022, but we're still very far off from the margin targets you showed us your internal targets of 6% and 12% return on capital employed. Could you outline a bit on the road map, how you should be able to reach your internal targets for industry?

Well, you will hear more of that towards the end of this Capital Markets Day. There's a special session on industry and Grete will present that. But fundamentally, we've taken large steps towards the right direction, making sure that we understand pricing better that we understand the cost structure better and the assets that we have in the business, and that will continue.

All right. Yes, maybe we'll get back to that later. I could have one on the reiterated target of EPS. So going back, I think it made sense to have an EPS target where you were when it was first introduced because it kind of implied a strong earnings recovery and we had a good kind of set for the different type of business areas how you should be able to get back on track. But now I think it kind of potentially implies that we will see short time behavior because you could divest companies, you can buy back shares at different time periods in order to reach your EPS target instead of maybe having a return on equity target you mentioned, for example, 20% return on equities level that is fair to be at over time. Could you elaborate a bit on how you're thinking?

Well, yes, we could have other targets. Our intention is to make sure that we meet it with better profits from, first of all, the industry and the contracting units and then as soon as the business -- or transaction market comes back. We have not really elaborated on the return on equity target for the entire group. And I think that in the end, bottom line earnings should be a good target for business. It's not more complicated than that.

Then a follow-up. It also implies a bit that we're going to expect you to make SEK 16 per share for eternity. So in the end, how should we kind of approach the level or should we look at it at different years, different business units will contribute to SEK 16. How should we, in a more longer-term perspective, approach the target?

We've stated a short to medium term, and that's because the uncertainties in the property development markets. Eternity is a really long term, and it's way out of this, and I -- we intend to increase these targets, but we need to understand the property development market.

Hopefully, we will get back to you at the one point on that.

Before eternity.

Before eternity, we promise that we will have another Capital Market Day. Thank you Susanne. We will continue to look into more of the actual business and what we're doing, started with today's news about the new business area. So over to Tomas again.

Yes, market opportunities, and I will actually not start about the big news. I will start with some other things. First of all, if you think about NCC, this is the way that we are -- one way to describe how we are organized, and we have a good position throughout the Nordic region, we have businesses in almost all of these fields. And the Nordic region is a long-term stable and macroeconomic good environment to be in. There's a fundamental need to develop the built environment. Every generation needs to develop and every generation needs to maintain and every generation needs to build. So it's a good environment to be in. And now just right now, the industrial development and the transition into the green economy is providing extra opportunity. That's sort of the big picture on where we are. Right now and reiterating what we said in the Q3 report, we are a bit contrarian to some of our peers. We're saying that large parts of the construction actually -- market actually has a good demand, but you have stronger local variations. And since everybody is talking about that residential and commercial buildings are very weak demand. And then we also just wanted to immediately state the obvious that it's that municipalities and regions have a somewhat more muted financial position right now. We see that in the news all the time. We don't know how that will impact the long-term investments, but we wanted to make everyone aware of that for the market. We see the large variations, both geographically, where we can see a rather strong demand in Denmark, but also in local geographies in all the countries, Northern Finland, for example, has for some strange reason, a stronger market than the rest of Finland and Northern Sweden is building up for a really strong market and has had a strong market for a long time. But you can also see differences between segments, residential and commercial building being on a more low side, while other segments has a really strong demand. One demand could be public sector buildings like hospitals and schools and prisons has come up as a surprise market segment. In infrastructure, we have electricity generation, electricity distribution, you have water treatment, water distribution segments, and we will get back to that. Because you will hear more from the business areas on their specific growth opportunities in these segments, and that's a really important part of our strategy. Together, though, we will -- we have decided to start a new business area because of the green industry transformation that we see starting in Northern Sweden. But we are expecting that it will expand to all of our countries. And this is something of a -- this is something that we haven't seen. It's the change of the generation. In Northern Sweden, we expect that the construction volumes will triple over the next coming years, triple over the next coming years to roughly SEK 140 billion according to our calculations from '24 to '30. And in addition to that, you will have energy production, energy distribution, all sorts of enablers to this and housing and all sorts of buildings. And the challenge for this is this large complex projects with extensive construction components. For example, mines are, to a large extent, extension of a mine is large to largely a construction project. We anticipate when the project start, there will be a requirement of fast pace because our customers will require positive cash flow as soon as possible. We will see new technology deployed on a large scale. So you have to have expertise to meet that from both us and from our customers. And what we also see that our customers are demanding more collaboration and co-creation and early involvement in the projects. We see an opportunity in this. We see that we have a leading expertise and knowledge on large projects. We have the ability to bring all of this together from all our business areas under a common leadership and we have the ability to be agile and fast moving to service this opportunity. And therefore, we have decided to start a new business area to make sure that we get the focus, that we protect the focus that we need that -- but also so the existing business areas can continue with their existing businesses in Northern Sweden in the first part building houses, building infrastructure. And then the first focus is Northern Sweden, but we expect that this type of projects will emerge throughout the Nordic region. The industrial development of generation increments and challenges in Northern Sweden, we expect that those investments over the last -- next 10 or 15 years will be some more than SEK 150 billion, and that will be the priority for the new business area. While the 100 billion investments expected in the enablers will be the responsibility of the existing current business area structure. We will have a new business area in group management. We are currently recruiting a very senior manager for this that will have to be able to build an organization from basically scratch, but with the potential to lead a multibillion business. The new organization will be operational from the first of January. We will initially report it under other elimination, and we expect that the buildup will come -- the volume buildup will come after 2024. Delays in starts are frequent in this type of business, but we -- at some point, it will be -- we will see the report of the new business area. So summary, new business area, Green Industry Transformation, we call it, GIT, to capture this opportunity and the existing business areas will continue with the local markets. And with that, I hand over to you.

Thank you. We will continue actually to look at the business areas, and you will very soon hear from Kenneth Nilsson, who is Head of Business Area Infrastructure, part of this, part of others. But before you get to that, you will get a very short course in water treatment. So let's look at this while Kenneth comes up. [Presentation]

Okay. I'm going to talk about the infrastructure, and I will do it in 3 ways. And we talk about what we are building and also look at our performance and the performance up till now. And then I will talk about what is important for us going forward. This is what we built. We are building roads and railways. We are doing groundworks, energy and water and some industry works. We are now 3,800 employees. And with the fair split, we have between white collars and blue colors. And we got 1,500 ongoing projects, from really big mega projects to smaller projects. And we have, right now, 550 customers. Going to our operations and looking at our net sales in different segments, and our largest segment now is energy and water treatment. And that is a segment I'll come back to that. That's very important for us going forward, and it's growing. And then the groundworks and railways that are also large segments. If you look at the right side of the picture, you can see the net sales in different countries and Sweden are dominating with 74% and then a fair split between Denmark and Norway. And here, which we come back to Denmark is growing. Moving over to our net sales and our EBIT and how it has developed over time. And the bars, the blue bars are the net sales, and you can see the scale on the left hand in the slide. And in the blue box, it's the EBIT. And we -- as you know, we had a terrible year in 2018, with EBIT of minus 4.1%. And then we have steadily improved our EBIT. And now in Q3 2023, rolling 12, we're up 2.7%. And if we look at year-to-date, we are 2.9%. And then as Tomas was mentioning, we have -- as you know, probably that we have sold an asset. And if we include that one as well, we are up 3.7%. So what have we done then to improve our EBIT and what's important for us going forward? Well, first of all, we have increased our focus as Tomas was into as well, we divested a lot of business and infrastructure, it's over SEK 3 billion. And for the rest of the business we have, we have a special focus now on prioritized segments. And I will come back to that. But simply, it is we have a good track record here and expertise and the market is growing. So we want to do, of course, more of those kind of businesses. Then we have strengthened our core competencies and competitiveness. We have been working now systematically with operational action plan to -- and we have actions there with that -- basic actions that should be in place in every well-functioning operations. And we've been working for the same of those within 5 years, kind of a continuous improvement there. And also we're working systematically with its strategic direction, which is more our development over time. We also work -- developed organization. We have now, since a couple of years back, we have a large share of new manager on top 11 and management matters. And also extensive training efforts both on leadership trainings, but also more core competence trainings in kind of basic trainings. Then we've developed our project portfolio, and we have significantly reduced our risk. We have increased our share of partnering projects with early involvement. And Tomas was talking about this early involvement. I think that's really important because then we are together with the customer in early phase development -- develop the project in design, planning and so on. And then we get a much more predictable project. So that is one advantage. But also in these projects, it's a low-risk renumeration model. It's often cost plus in those kind of projects. And we have increased that share, and we have now a lot of projects in early involvement. We have water treatment projects [indiscernible], we have [indiscernible], Margretelund. So that's water treatment plant projects. And also, we have [indiscernible] and so on. But they will not get order bookings until we get -- until execution. Then we're gradually phasing out old projects with a lower profitability. And as we have said before, that we have some old projects that are diluting our margin. So the prioritized segments that we are working with, they are growing and they will do so for a long time as well. If you look at the water treatment plants, water treatment. In Sweden, it's a growing market. And if you go to Denmark and Norway, it's going to be a healthy market, a healthy level and that for a long time. The electricity production and distribution as in almost all countries, there is an increased need for electricity. We talk about 100% increase in maybe 15, 20 years, something like that. That's one of the segments that we focus on as well. Then we have efficient transportation, which is road and railroads, and that will be on a high level, both in Sweden and Norway and also pretty fair in Denmark for some time to come. Also climate change, which means weather-related issues, like cloud burst handling and coastal protection, and that will also grow over time. So these are the segments that we are focusing on a lot. And the market there is good going forward and that for a long term. So these segments, they are important for us going forward, and they represent more than 50% of our net sales. And the criteria for those segments is not just that there's a strong market going forward. It's also so that we are having a strong record in those segments and also segment expertise. And we can see here that there is a good potential to increase the profitability. And the benefit of specialization, it's, of course, a general benefit to whatever you do. But of course, it creates advantage in key areas. I mean, if you work with the same kind of product and customer over time, you got better customer insights and you can find and improve cost efficiency in technical solutions and so on over time. And that is important for us now in our segments, and we're really working with that in a systematic way. I will go a little bit deeper in one of the segments. It's water treatment plants. And the market growth, which is driven by now, it's aging, the aging water and sewerage system. I mean the life length is coming to an end. And also urbanization, more people coming into the cities and the growing population that is increasing the demands on the system. Also new environmental rules and climate change. And as I said, there is a strong market for this for many years to come. And you also saw that a large share of the projects have this early involvement that I talked about, which is good for the customer and also for us as contractors. And there's often a low-risk renumeration models in many of those projects. And what's important for us is that we have here a unique offering. We are the only construction company if you compare to our peers, that has both competency process and construction. That makes us unique in the market, to be differentiated in the market. And what's also good that many customers, they are valuing this kind of cost competence. And when they chose contractors, they look at both competence and fee, that's how they choose who they should work with the customers. And this makes it so with some of the customers that can give us a higher fee than our competitors to win this project, which is, of course, very good for us. And we have an exceptional track record here. We have 35 projects done since 2015 and with the healthy margin. If we have a general look at the market going forward, we think that it's a continued good market [indiscernible] market, nonrelevant countries. And in our prioritized segments, as I showed you, we are likely to see a very strong market going forward. But as Tomas said as well, there are some variations in the market. But in general, we have a good market and -- especially in the segments. So summary right then. We have a steady improvement of the profitability since 2018. And going forward, this is good market, but especially within the prioritized segments. And we will continue what we have done up till now with project selections, work with the segments continued at, operation improvements and organizational development.

Thank you, Kenneth. You didn't say that you have improved margins 20 quarters in a row, but I can say that. That's pretty impressive. You can say. We wanted to talk about -- we talked about growth. And we just wanted to look at one of the areas that you touched upon. It's Catarina, if you can come up as well. Denmark is one of the markets that we are growing in and not focused just on Sweden. We just wanted to give a brief outlook on Denmark.

We're growing.

Yes. The NCC in Denmark is growing. And now it's actually so that the Danish operation stands for 20% of the -- about 20% of the group's net sales. So we have a strong operations in Denmark in total. You can see the orders received is on a healthy trend and also growing the net sales. And best of all, of course, is that all in all, we have a healthy margin in Denmark. And all business areas there contribute. You can see that on the right side of the picture here. Building Denmark is the largest, and then you see the distribution between the other business areas.

The Danish economy is actually the strongest economy in that Nordics region at the moment. With an inflation rate of only 0.9% in September, an interest rate that is actually significantly lower than the rest of the Nordics and an unemployment rate of 2.9%, it is a strong economy. And as you probably know, 2 of the main drivers for this is the health sector and the pharmaceutical industries. We see 4 major growth areas for NCC in Denmark. First of all, Copenhagen and the areas around Copenhagen, where there's plan to invest more than SEK 50 billion in new city development areas, new infrastructure, new water treatment plants, et cetera. And we see a lot of possibilities that fits our segments in that area. As I mentioned, the pharma and health sector, so a lot of investments in that as well. It drives construction in new production facilities and new offices. Green Energy, coming to that, it's estimated that in Denmark, they will raise their electrical consumption with 100% from now to 2035. And you can just imagine what that goes -- what that means to energy production, Power2X, how we have -- i.e. turning wind power to, for instance, hydrogen and then power distribution, and we see a lot of opportunities in that as well. And last, but definitely not least, the infrastructure plan 2035, there it's a political decision in Denmark to invest more than SEK 100 billion in infrastructure investments from now until 2035. So that, of course, is also a lot of possibilities for us in NCC -- the whole of NCC. So what does this mean for building Denmark? We are in the forefront in many of these segments. And I would say with our expertise, and our experience of building these complex projects that I just addressed, I would say that the future looks bright for building Denmark from a market perspective.

And infrastructure?

Yes infrastructure. We have a highly specialized organization in infrastructure, and they have been working with these segments for a very long time. And you can see the segments here and they are in line with what I've been talking about before the segments that we have as such for infrastructure. [indiscernible] and distribution, as you said, it's growing heavily in Denmark, the need will go heavily in Denmark, most likely. And district heating, there's actually so that it's 600,000 households in Denmark that are heated by oil and gas. And there is a transformation going on in Denmark. So that's probably going to be a good market as well. Water treatment plant in Denmark, I said, that's on a healthy level going forward. And then we have this cloudburst and coastal protection. And in Copenhagen, they are going to do -- have investment in the cloudburst handling, taking care of the proposed weather -- tough weather and rain going forward.

Thank you. It's [indiscernible] which one was Danish sometimes, but it's good. It's a growing area. We talked about the north of Sweden and Denmark, 2 important growth areas. Thank you very much. Thanks, Kenneth. We will continue to look a bit more on the building areas. They're not competing in parallel sports, but they are on very similar size at the moment, Building Sweden and Building Nordics, both in terms of net sales, EBIT and order backlog, but we will start with Catarina Molen-Runnas in Building Nordics, but first to look at some of the projects. [Presentation]

Thank you. As you said, Maria, Building Sweden and Building Nordics are quite similar with similar development, but I'll just talk about Building Nordics. So we are present in 3 countries: Finland, Denmark, Norway. We have approximately 2,400 employees and a little more than 200 projects. Our share of net sales is approximately half comes from Denmark, a little more than 1/3 from Finland and the remaining 16% from Norway. Our biggest segments are refurbishment, public buildings and residential. And they represent a big part of our business today, but there will be a shift, and I'll come back to that a little bit later. 2022 did not turn out the way we had planned. We were hit by inflation and exceptional cost increases in some of our projects and in some of our geographies that we could not fully mitigate. And to some extent, we still suffer from that and the effects from that. Our net sales rolling 12 is SEK 4.7 billion -- SEK 4.9 billion with an EBIT of SEK 300 million. And year-to-date, it's just below SEK 11 million net sales -- SEK 11 billion net sales and a little more than SEK 200 million. We have been growing. We have been growing steadily. And we have a CAGR of approximately 5% on both earnings and net sales. As I said, we are present in 3 countries, and there are many similarities. And over the past years, we have increased harmonization. We have shared -- we have increased knowledge sharing and learnings across divisions and departments. But there are also differences. In Denmark, we have our strongest division. We have a leading position in the market and healthy margins. As we said before, there is a very strong market in Denmark driven by pharma and energy, and we believe that we are well positioned for growth in Denmark. Finland is our second largest division. In Finland, or should I say Helsinki, we have the toughest market at the moment, especially in residential and commercial buildings. In Finland, we also have a strong focus on improving profitability, and we have taken a lot of steps to accomplish that. we are convinced that the improvement measures that we have taken will have a positive effect on the margins going forward. Then to Norway. Norway is our smallest division, but our fastest growing division. With a book-to-bill of 1.8x year-to-date, we have managed to build a good backlog. In Norway, we have a strong focus on building on selected segments and operational excellence to really manage to deliver a profitable growth. We still see a clear demand in our selected segments. And this also shows promise for the future. We have, over the last years, focused on laying the foundation for growing earnings and profitable growth. And to achieve this, we have taken some important steps. One of the steps is really to choosing the right projects. We have 7 segments that we focus on, and we strongly believe that specialization and building and developing our strength is key to building for the future. And as you can see from this picture, we do not have all the segments in all divisions yet, but it might be possible in the future. Another thing that we have done is to deliberately change the weight of our portfolio from projects with traditional pure price competition projects to projects where our expertise and knowledge bring value to our and to our customers' benefit. As Tomas said and also Kenneth mentioned, there's a strong correlation about the projects where we can -- where we are involved early and the success for both us and for the clients. And this is a shift that we have been working with. Looking at this pie chart, you can see a big change between 2023 orders received and 2022. Other buildings and -- other and public buildings have increased from 40% to almost 70%. And you could easily [indiscernible], that's because of our residential going down. But I would say this is really a conscious, strategic decision and plan that we have been working with all along. So to sum it up, we have managed to build a good backlog. We focus on selected segments and building on our strengths. We have made a deliberate change in our portfolio, not only by project but also by contract models. And we focus on operational excellence and there is a market out there. There are possibilities, especially in Denmark. Thank you.

Thank you, Catarina. Before we move on, I just want to say I'm getting some questions here online. I see them. I will get to them. So don't worry, they are not forgotten and they're not lost. We'll get to the Q&A session soon. We will continue now with -- to put the building perfect, get the full picture with Henrik Landelius, who will talk about Building Sweden, also after looking at some projects. [Presentation]

Building Sweden, a lot of similarities with Building Nordics, as we said. We are geographically present all over Sweden, from Northern Sweden to Southern Sweden. We have some 400 ongoing projects annually. And we have been able to withhold stable margins despite challenging market, and I'll get back to that, obviously. We've also been able to maintain a strong order backlog, and that's strongly connected to the next bullet, which is how we actually stay close to our customers, continuously measure how they feel about us and how we deliver. And I think that's one of the key elements of why we compared to some peers have been able to withhold in terms of order backlog. Our customers remain being evenly distributed between public and private customers. However, obviously, as you will see soon, the public customers are growing more than the private ones. And we employ 2,700 colleagues of mine out there all across the country. So what about the order backlog and our earnings? As I said and as you can see in the charts, we've been able to withhold the tougher market climate and remain on a strong order backlog. Last year was as obvious downfall in terms of EBIT and, of course, a miscalculation of what we aimed for. It was strongly connected, as Tomas mentioned, to a few residential projects with poor project management. But then again, obviously, the price increases, we have not been able to mitigate all of that. And that is still some sort of a burden this year. Even though, as you can obviously also see that we've broken a negative trend and we are back on track going towards the margin goals that set from now. We've done this through a strong focus on action plans in the departments and on operational excellence with leaving a few unprofitable markets, active choices by us as management and also reorganizing our portfolio over time to make it more resilient to what we saw last year with the residential projects. We have adjusted the portfolio very actively and according to plan. And I think that's also demonstrated by the remaining high order backlog, even though the market has shifted strongly. So speaking about the portfolio adjustment, everyone knew that the residential market would slow down. Obviously, it has for us as well, even though it's not dead, also demonstrated by the graphs, we actually add a few residential projects every quarter up until now at least, through these strong and close customer collaborations that we have. But we've also increased our public buildings orders received strongly, which has given us obviously a shift in the portfolio similar to the one that Catarina showed for Building Nordics. And that is also contract types with more cost-plus contracts. So that makes us more resilient as well over time. We prioritized a number of segments. And speaking of education and schools, we have finalized to have or have 100 schools ongoing in Sweden throughout the last couple of 5 years. As per today, we have 25 school projects ongoing. That's given then that you can -- if you share knowledge between all these projects and invest in a center of excellence on a BA level, can facilitate sharing of knowledge between all these projects and obviously also with Building Nordics. So we don't repeat the mistakes and that we instead repeat the best practice. This has also helped us to improve our hit rate in terms of when we tender and win projects significantly. So investing in a center of excellence centrally helps us improve our hit rate, obviously, good for the future. Health care, I would say that we're leading in the health care sector in Sweden. We have 2 ongoing mega projects, one in Eskilstuna with a high completion ratio and one in the planning phase, we just started up investing, it was SEK 3.5 billion hospital, but we've also finalized some 10 projects throughout all of Sweden in the last couple of years. Again, as an effect of investing in a center of excellence on a BA level a number of years ago, and we're now looking to expand that knowledge also, of course, to the other Nordic countries moving forward. Swimming facilities, many similarities to Kenneth's presentation on water treatment. They're outdated in many cities around in Sweden, need to be updated. We have a 30% to 40% market share of swimming facilities in Sweden throughout the last couple of years. Again, with the same ingredient centrally placed group of experts in the center of excellence that are always involved when we build swimming facilities around the country, also collaborating strongly with Building Nordics, obviously. Offices, I think we will get a good view on offices when [indiscernible] comes back on the PD. Of course, we work closely together with PD, but also on the open market and market in a slowdown. But the close collaboration with PD is, of course, extremely important to us. And then as a final segment, a strongly growing segment, I will spend a minute or so on the demand for security classified buildings. And it's obvious why the demand increases. We have Russia's invasion of Ukraine. We have Sweden going to [Audio Gap]. So the unstable national and international security situation also drives the demand where NCC can deliver. So we have more projects today exposed to both the national protective legislation, police houses and prisons, as Tomas mentioned, custodies that were built around the country to mention a few examples. We have the new European security legislation that will also drive the need for our competence in this area. That's also possible to grow. So we are also building a center of excellence or competence center for security classified buildings. As per today, we have some 40 ongoing projects connected to these sorts of legislations. I think we have a very good opportunity to grasp an even bigger market in that sense. So more to come in this area for, I think, all of us to see. To summarize, strong order backlog and improved earnings back on track. We have a leading position in the prioritized segments, and we are very well positioned to meet the clear demand in all sorts of public buildings.

Thank you, Henrik. Very interesting and difficult security classified buildings. We'll move over to the final building -- or not building, property development with Joachim Holmberg, who will present the Property Development, but also, of course, after looking at our projects. [Presentation]

Yes. Property Development, we are a developed, focused and specialized business area and we are active in the Nordic capitals and the major cities. Our core segment is commercial development, mainly part of that is office with high quality and in prime location. We also have a smaller part of logistics projects. In Q3 now, we have 7 ongoing projects, around 130,000 square meter with a completion rate now 56%. And you can see it's in Finland and also in Sweden, and there are 6 office projects, and we have 1 logistic project ongoing in Gothenburg. And then move over to the completed projects. In Q3 now, we have 4 completed projects, around 87,000 square meter. There is 1 office project in Helsinki and also 1 in Stockholm and 2 in Gothenburg. And these 4 projects are top-class assets with high quality and a good mix of tenants. As you all know, the Nordic transaction market is considerably down now compared to previous years. And if you just look for the quarter here, it's more or less down 60% compared to last year. And if you go to 2021, it's down to 80%. And year-to-date, the first 3 quarters, it's -- the same period here, it's down 60% compared to last year and close to 70% compared to 2021. In this market, it's our core now -- our core objective is divestment of completed projects. But now we are adapting the way we work to ensure that we maximize the property value of our completed project in the portfolio. NCC has a financial strong position, so we are now keeping our completed projects until we feel the market is back. And we will not sell at any price. We have started 1 new project year-to-date this year and the letting ratio now in our ongoing portfolio is 34%. The leasing market is still slow. But in Q3 now, we start to see some more activity coming up. Three of the 7 projects are presold in this market. And if you move over to our completed portfolio, we have an occupancy rate on 87%. We profit recognize our projects when they are built, let, sold, paid and handed over. And you can see we have had a stable profitability the last 3 years. And now year-to-date, we are around SEK 200 million more same level that last year. We had also increased our investment now in the ongoing portfolio the last years and -- but you can see now in Q3, completed project is a big part of capital employed. So to summarize here, we have a high-quality portfolio of ongoing and completed projects. NCC is financial strong now so we are keeping completed projects until we feel that the market is coming back. And for a while now, to start new projects, we need to have high level of letting and secured exit. And about the value creation, we continue focus on -- focusing now on letting and be really close to the tenant market and also about developer pipeline backfill the land bank and progress our zoning.

Thank you, Joachim. Thank you. We have time for a couple of questions I have. At least -- we can, at least, bring Tomas up because I definitely have a question for you or someone does. And then we can see if we have any other questions in the room from -- or online, yes, for the business area managers or for Tomas. But starting with -- I have a question from a viewer on the green industry transformation, which is a very good question. How do we expect to set up that operation by transferring resources from other business areas or by M&A? Or how will that happen? And how will that grow?

The main idea is to transfer resources from our ongoing operations as a core and then recruit externally. We do not rule out M&A.

That's good. That's the answer for that. I think we have a question in the room, Stefan?

Stefan [indiscernible] from Danske Bank. A follow-up on that. Maybe I'm a little bit slow, but I need some more information here. What is the difference between -- I mean if you set this up, there will be competition between your historical business and the new business for some projects that are borderline. How do you split who is doing what?

I decide.

So you'll have a lot more to do that.

I mean the green transition projects are a pretty clear cut on what's included. We don't see a gray zone. And we've made sort of a definition of what's included in the general business that -- so for example, electricity transmission, that's infrastructure project. Harbor would be in infrastructure, but a steel mill would be a green industry transition project.

And will they buy -- will there be any transactions internally to buy resources? Or will they manage on their own fully?

Probably, but on a small scale. The main rule is that GIT will handle their own business.

And what I kind of had expected from the construction industry as a whole is to take a better grip on building more environmentally friendly using new technique. You've done quite a lot on the wood side. Steel, there's lots of incentives there. Will this division take that on as well? Or is it just focusing on the end customer being in the transition?

I mean our job is to work with our customers and suggest solutions. But in the end, the customer will have to make the prioritization on where they want to go with their building.

Could I add another question?

Of course, fire away.

Just a little bit curious, Nordic Building there, 25% of the order intake was what you called other it's a big increase. Is there any way you could maybe indicate what happened there? What kind of projects is it that has increased so much?

I'll give you an example, high safety psychiatric wards...

And also a big hotel in the industry order backlog. We're...

And my final one, sorry. On the fee, we just saw there on development side. On the occupancy level on the ongoing production was 30 -- I can't remember 35 plus minus something percent. But you had 3 projects that were already presold. What kind of occupancy levels are on the presold ones? And if they are low, is there any commitments given to the buyer of those?

Yes, these 3 projects is -- one is a really long time with the joint venture we have in Gothenburg, which is completing in 2027. And one is in Gothenburg also. And with completion, we need letting ratio and occupancy rate around 60% to 70% when we have with that kind of condition. And one is the logistic project, but that is already sold with full...

With no commitments.

With no commitments.

There is a question from Simen Mortensen as well on -- who's posted online, saying, how do you evaluate keeping -- and this is a question we get. How do you evaluate keeping the completed PD project versus cost of capital? Do you feel that your financing costs are competitive in the current market to sit and hold on to this for a longer time? It's really a question [indiscernible], but I'll let Tomas talk.

On a daily basis, we do think about it. And it's not as straightforward. We don't have a specific threshold because it depends on commitments. It depends on the current situation. It depends on our financing situation. So far, we have not received any bids that were even close to consider.

One more question in the room. And then after that question, we'll break for coffee. We need a break. So we have a question there. Erik Granstrom?

Erik Granstrom, Carnegie. I'll just -- a short question before the coffee break then. Given that you're obviously starting a new business unit because of the sort of Northern Sweden Klondike that I expect everyone is assuming is showing up. Since you don't have the expertise and you're starting to sort of try to get that together, what's competition like for these projects? And what's it going to be like in the next 5 years as everyone rushes north in order for us to dig for green gold, I guess?

Competition will probably be hard. But I think that we have a good position because we know more about than most on large projects. We've been operating in this area for a long time, and we have good customer contacts in this area.

We'll get back to more of that. I think it's -- we all need a break. We'll have a 30-minute coffee break, and we will be back with all of you at 3:15. Thank you. And for those of you in the room, there's coffee outside. [Break]

Welcome back, everyone. I hope you had a good little break. I think you guessed from what's on this film, what will come next. But before we invite Grete, we had a question that I missed or that we didn't get to before the break about how much of the order backlog -- existing order backlog that may be transferred to a new business area. And the answer to that is nothing. It's nothing in the existing order backlog that will be transferred out of the existing business areas. It will stay where it is. And with that, it's time for Grete, who joined NCC 1 year ago, almost today, I think. So you on the block, welcome.

That's right, 1st of October, and it's my pleasure today to present to you the business area industry. And in this business area, what we produce and deliver is a lot of stone materials that goes into all these projects that you have seen, of course, but also those run by our friends in the industry. asphalt production and asphalt paving. And when you look at the geography of the Nordics, there are more than 270 production sites and quarries owned by NCC and run by NCC. And that is, of course, a huge value to our company. The product mix is around 1/3, is stone materials while the rest is asphalt. And the geographical distribution is so that most of our products are made in Sweden, of course, it's around 53%. And then it's pretty evenly divided between Norway and Denmark. And still a small production we have in Finland, where you probably know that we sold off our asphalt production entity, but we still do stone materials. Around 2,600 employees is what we have in the business area. We produce every year a bit below 5 million tons of asphalt and a bit below 30 million tons of stone materials. And as you can see from this graph, the volume graph is that it's been a pretty stable market for a long time. The demand is pretty stable. We have new construction of infrastructure, of course, and buildings, which this stone material and asphalt goes into. But we also have in all the Nordic countries, we have a huge maintenance deficit and maintenance step that we carry with us, it's increasing year-by-year. And this, of course, represents business to us in our business area. Beginning in 2021 and strengthening in 2022 was this cost shock that hit our business severely. That was represented, of course, by the war in Ukraine, the energy crisis and the general inflation. And that was the reason for our rather bad result last year. And that was also the reason why we had to enter on a severe turnaround journey in business area industry. Just to repeat why and how this all happened was that historically, this is a very mature market hasn't really been storming a lot in this market and in the business, it's been possible to be there, to be present and deliver the produce to the customers without having too much disturbance. But then in 2021 and 2022, the world changed severely, and this caused a huge negative effect on our business. And then as we quite frankly show you here, the result of having been in a stable market that we had been for such a long time, sort of resulted in maybe a lack of sense of urgency in the organization, in the industry, I think we have seen as well and a slow reaction to that. Weaker customer and cost focus than what is necessary in a situation like that and also maybe a lack of management capacity to deal with that. And just to give you a concrete example of what I mean by this is, for instance, when you see that your costs are increasing with 1,000%, you need to go and enter into very serious dialogue with your customer because you have contracts that you have entered into with your clients that you can't any longer defend and you are losing money on delivering. So this led to a weak and very unsatisfying development, and of course, the financial performance was unsatisfactory. So what did we do then? What have we been doing the last 12 months? First of all, I will say that we have secured a sense of urgency that understanding that this is in our hands. It's our job to handle this crisis that we are in the middle of. So we have been working with the organization. We have been shortening the reporting lines, making sure that everyone knows the responsibility, what's the target that we are a profit-driven business. We have improved our cost management with all the tools available in the toolbox. As you know, producing like we do -- we are a true industrial business. So handling your cost is essential. It's a low-margin business. So handling the cost side is essential for us to keep our margins. And that also goes for our supply chain management. Of course, we have large categories that we buy continuously, for instance, bitumen and energy Danish gas, Norwegian electricity, et cetera. Second, is the customer focus and the price focus. Coming from a long history where things have been stable, it's easy to take things for granted. To assume that they are as they are. But we have now been pushed into working very proactively with the pricing of our products and deliveries. And that means that we need to go into dialogue with our customers based on our contracts and based on the long relationships and traditions that we have with our customers. I would say with huge success in certain parts of our geography and segments and lesser success other places, but that only means that we are in the beginning, and we will continue this work with our customers. Also, contract management, making sure that the contracts are balanced that we are not taking on risks that are not -- how can I say fair, maybe? What we learned was that we had taken on the risks that we can't be expected to be -- to cover up for. And then lastly, the selection of the customers and the projects. I can say that we have stopped paving the Scandinavian roads for free. We have done that for a long time, we have stopped doing that. And just sending that message to the organization is very important, that we will not do that anymore. And then lastly, the organizational development that has a lot to do with leadership, a lot to do with understanding the responsibility you have and what you can and what you cannot influence. And I will point out that NCC has a strategy that focuses a lot on being a knowledge company, and that's of huge importance for us in NCC Industry. As what we are dealing with is huge purchases, huge contracts, quite complicated pricing structures due to the production and the production entities that we are owning. And maybe last but not least, a lot of logistics. So the turnaround result, you might wonder what that is after this introduction. And we would [Audio Gap] in our third quarter report to -- to the left, you can see our net sales and how that has developed? And then if you remember the stable volumes, we believe that what we can see here is a quite certain result of the increased pricing that we have gotten from our products and our customer dialogues. And to the right, you see our rolling 12 compared to 2021 full year and 2022. So we are on an improvement journey and I do believe that what we are doing is working. When it comes to the future and what we believe about the future, we do believe that the volumes are expected to stay relatively stable. And that is not at least due to the huge maintenance step that we see in all the countries, as I already mentioned, but also that we have ambitious investment plans, specifically in Denmark and Norway, but still also stuff is happening in Sweden when it comes to infrastructure. So the market, we think that's stable. We will see, of course, that maybe specifically the municipalities will be sort of a bit more insecure due to the financial situation. And when it comes to the stone volumes, it's, of course, important to be aware that, that is a bit affected by what we see in the residential area. We will continue to select our projects and our customers, and we will not start paving the roads for free again. This is the market segment mix in -- within asphalt. I -- if we took the stone materials, it would look pretty much the same. And what you see here is, of course, what I already mentioned about the maintenance and the new investments. That's maybe the most important thing. The private market here is, of course, mostly us delivering to other private companies that might, in the end, still work for the public sector. I do believe that we are on stable grounds now, not meaning that improvement work will not continue, but more meaning that we have managed to turn around significantly low-performing units. They are now delivering results. We have managed to get a more sustainable pricing on our products and deliveries. There is a good activity in our markets, and we have a strong position in NCC. And we have even increased our target, I would say. We have decided now that we want to outperform the market development. So to sum up the turnaround journey and what we believe is the way forward for us. We are back to more normal profit levels. We are doing that by amongst other very diligent cost management with staying in tight contact with our customers and dealing with our contracts in a firm way. We will continue to work with the pricing and the customer segmentation. And lastly, I will just mention, since you understand that mainly we are competing on price, there is also now a possibility for us to compete more on quality. Norway has been introducing climate criteria in their [indiscernible] for a couple of years. We have now received the first proposals or tenders -- proposal for tenders in Denmark, in Sweden. We are also talking to the road authorities about increasing their criteria so that, that will count more in competitions. And that is a way forward for us so that we can also compete on quality and not only on price. Thank you.

Thank you, Grete. Great. And it's great to see those numbers. You ended on climate, and Catarina can also come back up here because someone said out there that they felt the green industrial transformation was our green industrial transformation. It is actually not the new business area will handle the needs of society, partly because the needs of the green transition in the construction injuries very much happening on our watch and as part of our ongoing climate work. So we thought we just touch upon that as well before we move further. And we have, as all of you may have seen, as Tomas told you before, we have targets for our climate emissions for Scope 1 and 2, 60% reduction from 2015. We're at 58% now. And for Scope 3, 50% reduction to 2030. And there, we are focusing on categories that are really -- that are most important, one of them being concrete. And we thought we'd bring you some updates on how we're actually working with that asphalt and concrete in industry and in the construction business, starting with Grete. You have done the most reduction, but where does it come from?

Yes. But also, we have to do the most because we have the biggest emissions in the industry. And what you can see on the screen here is mainly where our emissions come from, they come from our yellow machines and our crushing plants. They come from the machines that we use within our asphalt production and the paving and they come, of course, from our asphalt factories and our ships. And this is, to be very concrete, this is an asphalt plant.

You're very welcome to come and visit one if you want to.

Yes. I'd be happy to take any of you around. It's a good way of learning what it means in practice. Mainly, there are 3 ways of reducing the emissions. First of all, there is energy optimization. Here, you can see that exemplified by low-temperature asphalt and moist reduction. That means that the stone that goes into the production, it's kept under a roof so that it doesn't become so wet because if you put wet stone into these mills, that, of course, demands a lot more energy for it to be produced and come out as asphalt. Second, it's cutting the use of fossil fuels. And here, that's exemplified by green -- using green electricity but also by biofuels. So we are using biofuels to the extent possible in our plants. And last but not least, it's about saving natural resources. And here exemplified by using recycled stone material or wrap as we call it. And I think we touched upon it earlier. But when we do a paving, we also take away the old layer before we put a new layer on, and that old layer now usually goes straight into production again. So -- and that is where you can save the most of your cost, but also save the most of your emissions.

So a heavy action list for asphalt and stone materials.

Yes. And I will not go through all the actions here, but what is important for me is 2 things, actually, First of all, to -- just to remind everyone that in this field, NCC is really in front. That's also the feedback we get from all our customers is that they know that we are a spearhead in reducing emissions from our production within NCC Industry. And secondly, that the action list is long. There are several buttons that we can push and we're working very diligently with this to do more.

Yes. We still have way to go. We haven't reached our target. And then a couple of words on concrete.

Concrete, a fantastic building material. And it's really the most worldwide used building material, and you have -- it's everywhere. It's in buildings, it's in bridges, it's everywhere. And it's very good. It's strong. It's rather cheap. It's multiple, so you can really -- it's really versatile, but it has a big impact on the environment. I will just show you a couple of examples to understand what we're doing, and you probably get the hang of it quite soon. Starting with Kungsörnen in Helsingborg, there's 2 things you can do first. You can actually -- we can go out and buy the best low-carbon concreting we can buy, and then it's really working with optimizing the structure, making sure that we have the right quality where it should be the right quality and using as little concrete as possible. That's what we've done in Kungsörnen, and it reduced the climate impact with concrete with 50%.

Or it's maybe a begin of Sweden.

Yes. Going to Copenhagen, we did more or less the same things, low carbon concrete working with optimization, minus 24%, also quite good. Granåsen, you can also see here that there are improvements from the suppliers every year. This is the -- on the latest ones, it's minus 5% to 55% due to low carbon concrete and really working with once again optimization of structure, but also making use of the waste concrete in parts of construction where it's possible. And last, but definitely not least, Västlänken infrastructure project in Gothenburg, 350,000 cubic meter concrete, like feeling more half of the globe arena. We reduced the impact from that concrete with 30% by more or less doing the same things that always -- that I already mentioned. So it's really our skills in optimizing the structure and then working with and challenging the suppliers.

Thank you. We wanted to bring you some of these examples not to just get stuck in the climate data, but actually talk about what is it that we do that makes these results come true. Thank you. Because we will move on to another topic. Climate data is very much on everyone's agenda. And that's one part -- rather small part of the digitalization journey. And I've saved -- come up, Susanne Lithander and Ken. Susanne in her role as Head of IT, mostly, a little bit CFO as well and Kenneth Nilsson. I've saved the question here because we had a question earlier that I didn't take. Regarding digitalization, it seems like NCC will aim to take more data-driven decisions. What other actions in the scope of digitalization are NCC aiming to do? And what do we expect to accomplish. And I couldn't have done that introduction better myself. So over to you. What are we doing?

What are we doing? Yes. And I'll come back a bit to what Tomas said in his introduction regarding the decentralized industry that we are working within. In some areas within the construction industry, we have a very advanced technology and digitalization, but that's on the engineering and it is a very different situation in many other areas, and that really stems from the fact that we have a very super decentralized legacy. Small units doing their own thing and their own systems and their own platforms. Some of the examples we're going to give may sound really basic to an outsider. But that's really depending on the fact that we come from the history where we come from. And the journey that we are on to become more data informed stems out of the fact that we have put all of our IT operations in one organization, but with a history of very decentralized ways of working and systems. Many of those systems are end of life, or really close to end of life and had to be switched out. At the same time, we know that this industry with -- that IT is in is moving so fast and we really have to also benefit from that. We cannot just switch out the old c*** and think that we're good, we need to also look at what's happening in the front end. So what we did is that we created a plan, a road map, a common development road map for the company. And we looked at several fronts. And those are the fronts that we have on the slide here. And these are the aspects that we had to consider while doing it and that we are working diligently on right now. First of all, we had to future proof -- we have to future proof our platforms and our IT so that we can continue to do business. We have started -- we have actually closed around 20 initiatives. Some are really small and -- but quite valuable with lots of benefits. We have 16 ongoing initiatives. Some of them are really big, like ERP introductions and other large changes in the systems. But we also see huge business opportunities by being a data-informed company. As Tomas said, that is part of our strategic direction to become data informed -- we truly believe that by controlling our own data -- being able to share all of the data, we generate so much data in all of our projects. And really be able to create insights by using all of this new technology that is out there, like business analytics, like AI, for instance. We really think that we can create a competitive edge. So that's the business opportunity side of the matter. Some of the projects that we have developed and rolled out are within the category operational development. It really supports the sites and the projects out there to become more efficient, improve their productivity to spend less time on admin stuff and concentrate on project management. And finally, like you alluded to, there's lots of demand coming from governing bodies and authorities that we have to abide with to be able to track data digitally and also trace it to have audit trails on it so that we can prove that we are reporting the right things just like we do in regular finance. And also our suppliers and customers want to cooperate. They want to cooperate digitally, less and less by paper. So more and more digital. So today, right now, we are putting or we have been since we created the plan 3 years ago, been putting a lot of resources to really make this happen for the company. And we really think we fit in with the new make it happen statement.

We do. We talked about business benefits. So Kenneth, you are the one who's supposed to see them.

We are supposed to harvest them all. I think it's important, of course, that we are doing these initiatives to do better business. More profit, also improve our health and safety work and also climate work. And to give you some examples that we have recently launched. One is a site introduction. And it's important to know that at our sites every year, around 100,000 persons are coming to start working at the site. And the whole way of doing this is that people come at site. And we have some management at site that -- which they meet and they get the introduction and we get some information from the guys working at -- coming to site. Now the new way of doing it is that we will do it in a digital way before they enter the site. So they get some information of the site and also give some information to NCC and that, for obvious reason, gives less administration costs at site. But also for -- when it comes to health and safety, we get verification that they've done the health and safety course and we can also see that they got the certificate needed here. And also another benefit is that we get the control of the supply chain and we can see that they actually then are paying the taxes and have collective agreements and so on. So that would be a benefit for the sites going forward.

And this is being rolled out. So it's not in the future.

It's been rolled out. Another thing that is about to be rolled out. And as you said, we're having a lot of initiatives. They had to choose some of them is construction file management, which is a digital assistant for documents. And if you are on the construction side, especially a large construction site, there's a lot of documents, drawings and other documents models and so on. And by using this tool, we have a simplified access the people working for value product information and also reduced risk of error. I mean if there are changes in the project. And if you have this in this system, you do it in one place and everybody gets updated on the right information. And also when it comes to information security, that we know now who had access to which information and shall have access to the right information in the project. So this will also reduce administration and lower cost. And we have -- here, we have used some -- in the organization used other file management system, but now we are unified that. And you should remember, we have like -- in infrastructure, we have 1,500 projects ongoing. I think in NCC 3000, it has an impact for sure. The third one is business analytics. And we are more and more now using BI tool to collect data from the systems that we have. and we are feeding now more and more with initiatives, more and more data, and we expect more to come as well. And then we can tailor made the analysis we want to do. And I think this year is really one place where we can benefit of being -- utilize the benefit of being a large company. I mean when we do 100 projects, smaller companies do maybe a couple of projects, and they can never copy the information that we get from those 100 projects. That's a benefit we have, and we need to take more care of that going forward. And we are -- I would say we're in the start of this. We can, of course, do some analysis right now, but I think more is to come for the future. But for instance, what's interesting, for instance, is that I mean we will be able to, in a more easy way to see which projects are we -- the profit level on different projects size of projects, customers, contract forms and so on and combine them to see the profit level and draw conclusions from that. We can also compare between different departments and learn from best practices. I think that is actually a benefit of being a large company. We will also be able to another -- to be see early warnings if we see that there's a trend somewhere in that project to see it's going the wrong way, and can act upon that as well. And also get learning from project to project, I think that's super important getting forward to get the knowledge to learn from different projects and also maybe especially in the segments. So I think we are in the beginning of this journey. We will be able to make super interesting analysis and act on that. And this is definitely an area where we can benefit from being a large company that can't be copied from a smaller company. At least in the they will have a hard time.

They will have a hard time. And we have some -- yes, we are geared to also take a benefit from AI opportunities and others. We are getting towards the end. Thank you, both. There's one thing that we haven't talked about yet, and that's actually the one defining asset that is supposed to leverage on all these things that we talked about are people, Marie and Tomas. There's one thing that is necessary for the large company -- there's one thing that we said many times now that NCC is a knowledge-based company -- a large knowledge-based company. And our foundation is managing the complexity of construction projects. And I know that there are many out there who compete for the title, the world's toughest job, probably TV series have been made about that. But one competitor at least could be our project managers, right?

Yes. And actually, it is all about people. We have so many projects out in our Nordic countries, and they are led by these people. We have 100 mega project managers -- they are leading mega projects, huge projects. And we have actually 400 project managers leading large, not huge, but large projects and we also have 1,200 site managers and all of them have very tough jobs.

And this is why you should care about this.

Yes.

Yes. And I think it's also because if you go back to what I said in the beginning that the profound change is the realization that leading our customers, taking our customers through the complexity of the process is where we create value. And that is done by people. And that's why this has become a top priority.

Yes. So we've done a lot.

Yes, we have done a lot. We have actually a mind shift, I could say, a mind shift to work towards project management when it comes to competence development. We work in a very structured and systematic way with this now, and we have done that since 2020 something and doing a lot of efforts into this area, we still work with other competence development. Of course, it's very important that our line managers that we work with leadership, and we have top class even there, but a lot is about project management. We have our NCC Academy and we have a broad portfolio of a mix of things. We have trainings. We have longer programs. We assess people, we have networking things going on. So a broad portfolio with development, and we are working with the very best. So we combining research-based development with NCC needs to really, really good programs.

That's really good. And it's a good summary to sum up what we've talked about today, talking about being a large company, talking about being the best at managing complexity and about the people. And we're reaching -- we're coming close to the end of this session. But now it's time to please stay here to open up for further questions in the room or online, if anyone has a question.

Markus Henriksson, on any topic to anyone.

Perfect. I was a bit curious on infrastructure. You discussed water treatment and that you are market leading within that type of project. But I'm also a bit curious on the kind of core initiatives going forward where you have so far post 2018, been underperforming, delivering subpar margins, but you still believe or are market-leading or it's a big part of your core initiatives to grow that business segment further. So any other segment.

Are you talking about water treatment plants?

Exactly. So please...

I think I can split that up. Totally, we are below our target. That's mainly because the margins are diluted from large projects started way before 2018. and the margins in the water treatment are well above.

Exactly. So you are market leading within water treatment, you deliver well there. I'm a bit curious in other segments where you are under delivering and not the projects we already know about, more or less projects that have started post 2020 where you think you are delivering well, but so far have not any projects you could highlight for us?

I think we -- I mean, we are all the time striving to increase our margins in all the segments, and we will not give kind of what we are delivering in each and every segment. We're striving to improve all the time.

But your question is really going back to the segments that Ken spoke about. You have electricity generation and distribution. That is one where we think that we can increase and where we are delivering good margins and we can increase that. It's sustainability or water, what is it flood...

Water treatment first. Cloud bursting power...

I'll say protection, all of that being more selective for roads, being more precise in what we do and that was the meaning of efficient transportation.

So a fair assumption is to look at the segments you want to focus on. That's also the segments where you're delivering healthy margins currently.

Absolutely.

Then one more question on Industry. I asked it a bit before, but I can see from the previous presenter, that there is some more improvements to be made in the short, medium term that makes sense, but still we're quite far off from the 6% or 12% return on capital employed, that you think this business segment should deliver over time. So could we get a bit more in there how we're going to reach that level?

Well, we do believe that we've delivered quite a good Q3. And as I already touched upon, we will continue with the measures that we have been enforcing so far where the priority is the cost management and the strong steering of the supply chain, making sure that we have as efficient production as possible. And the second one being the price increase that we have succeeded with so far. And also then hopefully, with the help of the climate criterias that will make it easier for us actually to compete as a large professional actor in this low-margin market.

I think it's also well worth mentioning and to get us as management we've taken huge steps towards meeting the targets. We are not there on a rolling 12 basis. But rolling 12 includes the fourth quarter last year, which was a really poor one. And we expect to continue the positive development towards the end of the year as well.

A question here, Erik.

Thank you. I also have a few questions on sort of business area targets. You have 3.5 for both construction and infrastructure. And I was wondering, GIT, will it have the same profitability target as the other ones?

Yes.

So 3.5 once they're up and running. And tied to that, are you expecting to have any sort of central costs related to the start-up of this unit short term?

We will have central costs, not huge, but we will have central cost. And that is one of the reasons why we are costing that centrally because it's a buildup phase. And to make sure that the business areas that we have today are there's no excuse for not performing as it is today.

Okay. And then moving on to project development. You have the 12% return on capital employed I believe, still as a target. Obviously, this year, it's been clearly lower because of the transaction market being closed. But even if we go back, let's say, 3, 4 years, it's been in the 6% to 8% range in a market where divesting property assets was extremely strong and profitable. Is this a relevant target going forward as well?

Yes, I think it is. And I agree, we have not met it in a market where we should have done it, and that's the reason why Joachim started in the company. And they started to -- and I think it is built in, in the traditional model of doing property development that NCC has had. Joachim and his team started to change that, and we're making great progress, but then we had the pandemic and the recent development of interest rates. But I think it's clearly relevant, but it will take some time.

And then I guess my final question then is on industry, you have the 6% target, which was placed a few years ago when we learned that, one, the industry was expecting to be very stable over time. and two, you were paving the Nordics for free. Since then, things have changed. And going forward, do you think that this is relevant now that you are actually pricing paving for one. And then also, it seems to be an industry that's seen a large sort of transitional movement. Is it fair to say that 6% is unlikely to happen in the short to midterm as you stated, when it came to the overall EPS target.

I think it's fair to have 6% and purely from the fact that we have lots of fixed assets in the business, we need to get there. And most of our units are actually on that level. So we think it's a fair to have again.

Thank you. Any other questions in the room? No questions on the telephone, and I think I've -- yes.

Stefan on. It's a difficult one to answer maybe, but the order intake, we see that one. But of course, the order intake is a result of months of work for you guys to get those orders. So trying to see a little bit into the future, how at the moment, residential is dipping dramatically, and I expect office buildings, as you are saying, you're not starting anything and many others are not doing that either. So that's dropping. When you look at the discussions you have, so how much of that can you offset with other projects?

Two are the ways of answering that. One is that we've managed to offset it quite good so far. And we have a larger proportion of early involvement projects, where we are expecting to transform that into order intake in the quarters and years to come. And the second is that we'll get back to the fourth quarter in January.

Any other questions today? If not, we're getting towards the end of this Capital Market Day. I want to thank everyone who has joined. I will leave to Tomas Carlsson to summarize. Thank you Marie. But before I do that, I just want to tell you all that this has been recorded, and it will be available online at ncc.se or ncc.com actually from tomorrow. And we really appreciate you all joining us and those of you here in the room are welcome to stay and hang around with some more. With that, I hand over to Tomas to bring this to a conclusion.

And I will make a really short conclusion now. I hope that you've understood that we're working hard with operational excellence and focus for our business, but we are at the same time developing the company. So my 4 bullet points that I want to conclude with is this. We are well positioned in the right segments for the market now and for the market future. We are actively deleveraging the risk in the contracts with a higher proportion of early involvement and competence-based contracts. We are investing into long-term value creation through competence and digital, and we have a strong financial position in the current market. Thank you all for coming. Thank you all for listening for all this time, and I hope that you have appreciated it. Thank you all.