NCC AB (publ) ($NCCB)

Good morning, everybody, and welcome to this presentation of the first quarter for 2026 for the NCC Group. I'm Tomas Carlsson, CEO of NCC. And with me here, I have Susanne Lithander, the CFO of the NCC Group. And Susanne will come back and give you all the details of this quarter. I will start with something I have never done before. I will start with the readers manual of the Q1 report because there are some things that may confuse in understanding what's going on. And what is important to understand is this, you need to separate the different business areas that we have or business models that we have. And I'd like to talk about Contracting, Industry and Property Development in particular. Contracting business. We have an operating profit earnings that is good. It's SEK 177 million. And that despite the fact that revenues are down heavily, and that's because we have managed to get rid of a number of large projects with 0 margins. So what happens is this, earnings is the same, net sales is down and margins goes up and continued good market demand, and since Contracting represents roughly 90% of the revenue in the first quarter, Industry, as we always have low earnings in the industry in the first quarter, we have slightly more in this quarter. And that is for all practical purposes related to stone sales in January and February. In March, it came back to normal patterns. We don't see that, that is -- will have an impact on the full year, but it has an impact on the earnings in the first quarter. So Industry always strongly negative earnings in the first quarter, a little bit more now, but we know the source of that. What I'd like to point out is this, we have really strong orders received. We have that for the group, but particularly for Industry with 17% higher orders received compared to last year, really well positioned for the rest of the season and a really strong demand in the market. And then Property Development, stable on a very low level, just like we've seen it in -- for a long time now. We have no profit recognitions from sale of projects. What we have now is the lease -- the result we have now is from the lease of the properties that we have. So that's the readers manual, understand it that's Contracting connected to revenue, Industry connected to winter. It's a pretty normal and stable start. So that brings me to the key takeaways. High levels of orders received, SEK 14.8 billion, up 5% compared to last year. And if you compare it over a very long period of time, it's the strongest orders received we've had in a very long time. Overall, solid demand, particularly in our prioritized segments and in Industry. So overall solid demand in all our countries. We have stable earnings in Contracting on the same level compared to last year. And then the group operational earnings EBIT reflects a cold winter, particularly driven by the stone sales in Industry in January and February. And that brings me to my second additional slide. Industry, we have a really positive outlook for the year. Earnings reflects the cold winter and the normal seasonal pattern. We have a really high demand for state investments in roads and a positive expectation of the general building demand driven by infrastructure. And that is evident from the orders received that we have, SEK 4.6 billion in orders received. And we have now a high level of operational discipline in the organization compared to 2022 when we saw the same type of volatility in the market as we see now, we are way better prepared. We have a better operational discipline in the organization [Audio Gap] of last year, which means that we have a better quality of the order backlog for the group. Some examples of projects that we have won and that are part of the orders received for the quarter. We have a framework agreement for the national authorities for paving in Sweden. We've won a project of renovating a historic city block in Copenhagen. We have a new office space for Hagglunds in Ornskoldsvik, part of the development of the defense industry. And we have a new water works in Ostersund in Sweden. So some examples of the type of projects that we have. Net sales is lower on the back of phasing out 0 recognized mega projects. So lower sales, but earnings on the same level means that we have better margins in the Contracting business. Financial targets. Earnings per share still remains at SEK 16, but we need to have some kind of contribution from property sales, like we've said before, but we expect that the remaining or the other business areas will contribute more. Right now, on a rolling 12 basis, we are at SEK 13.4. Net debt, still very low at 0.8 compared to our target. And then the dividend policy of roughly 60% of profit after tax. The Board suggests SEK 9 plus SEK 2, which is the same we had in 2025 and SEK 9 in ordinary dividend is approximately 65% in line with our policy. Health and safety targets. LTIF4 have been stable for some time now at 3.6 for the year. We continue or we maintain the target of 2.0. One business area actually achieved that or are below 2.0, but the other business areas will have to continue to work with that. And then we have the climate and energy update. We have now a net zero emissions target for 2045. And the target for 2045 is minus 42%, both for Scope 1, 2 and 3. And for those of you who remembers our targets since before, the only change that we've made is to change the base year to 2024 to be compliant with the sustainability reporting requirements. The ambitions have not changed at all, and the actual reductions has not changed or has not gone back. So we are now for Scope 1 and 2 at minus 39%, which is very close to the minus 42%. And for Scope 3, we are at minus 10%. Conflict in the Middle East. I guess everybody is thinking about this, what kind of impact will it have for industry in general and the macroeconomic situations. We do as well. What we see and expect to see going forward is increased energy prices and high volatility. And the high volatility is actually the most complicated to handle. This may have or will probably have some kind of impact on transportation and material costs initially at material costs where you have a high degree of energy use like cement and steel and things like that, but it have potential implications for the broader economic environment. In general, we monitor this, but more important than that, we do things. We are super proactive in terms of what we can do in terms of procurement, in terms of what kind of tenders we [Audio Gap] distribution, et cetera. We see a strong demand for asphalt and stone in all markets, but commercial properties and housing remains slow, and I think it will remain slow for some time going forward. And with that, I hand over to Susanne.

Thank you, Tomas. Let's start with the contracting units. And Building Sweden show really good improvements when it comes to earnings and margins. We see a very stable development in both Building Nordics and Infrastructure. Green Industry Transformation has started project work with both our customers, LKAB and SSAB. This slide shows the backlog and rolling 12 net sales, and we have a book-to-bill for the Contracting units of 1.2 for the quarter. Both our building units have a backlog that is above our 12 months of sales. Infrastructure slightly below, mainly due to the fact that we had to remove the mega project in Gothenburg last year. They still have a lot of early phases projects in their pipeline that they are working hard to convert into orders. When it comes to net sales and margin, it looks like this. Infrastructure has lower sales that is impacted by the fact that we, last year, at the same time, had really high production in our mega projects in [ Gothenburg ], but at no margin. Our margin, on the other hand, for Infrastructure is very stable, seasonally stable, I should say. Building Nordics, sales volumes are down, driven by currency, Norway and to some extent, also Finland. Denmark, on the other hand, are showing solid growth. Earnings are on par with last year, but the margin is improving, and that's also driven by Denmark. Building Sweden's volume is down due to the fact that they have had a very disciplined approach towards project selection. So they have picked the right projects, and we see the effect in a better portfolio reflected in the margin. Industry, this will be a repetition of what you've heard from Tomas, but nevertheless, they have -- as always, they are negative in the first quarter as the asphalt business is basically at a standstill. This is, however, this year, been amplified by the cold winter and impacted stone material much more than normal. They have a very high demand and the orders received in the quarter was really good. And we see that the increased funding from public investments support the asphalt business moving forward and also the expected construction activity increases, we think will support the stone material business. Here are the volumes in tonnes for industry. And as you see, the asphalt tonnes are insignificant as always in the quarter. Stone material, as you see, is clearly impacted by the cold weather. Earnings are down compared to last year. And as we have explained, it's due to the cold -- not water, but winter, cold winter. For the stone material, it also had an impact for asphalt in Denmark that impacts the lower earnings. The margin, however, is on a good level, 6.7%, above target level. Return on capital employed, 21%, really good despite the fact that they have increased capital employed driven by investments in operations. The portfolio for property development has not changed. We still have 6 completed projects and 3 ongoing projects in the portfolio. And as Tomas said, the commercial market remains really slow and the letting for the quarter is unchanged. NCC, however, has decided to relocate the headquarters of our own -- to our own premises in Bromma Blocks. That will make the letting ratio go up to 90% for Bromma Blocks. And the letting ratio, we actually signed contracts of about slightly above 1,000 square meters in the quarter. However, that was offset by lease terminations by [ Bral ]. So we actually had a net letting of negative 350 square meters in the quarter. Our letting ratio is 82% for the total portfolio, and that's before increasing the ratio in Bromma Blocks with our move. And we have a completion ratio in our portfolio of 69%. And we didn't have any profit recognitions of projects in the quarter. So our earnings come from the property management that we have in our completed projects, and it is at the same level as last year. The capital employed is down to SEK 7.3 billion, even though we are building more on our 3 ongoing projects, but that is due to the fact that we had to write down or we did write down 3 or some projects in the end of last year. And the last segment, other and elimination, slightly lower EBIT than last year. That is driven by the elimination of internal gains where we eliminated the profit, the construction profits when we build in our property projects. And since we have more production of the 3 ongoing projects, that is more negative this year. And in pension and other adjustment and elimination, we have slightly higher adjustments and eliminations in this quarter. So the segments add up to minus SEK 237 million in EBIT. Our financial net is higher than last year due to the fact that we have a higher average net debt. Our tax ratio is high. It's 26%, and that is due to the limitation of deductions for interest. And we have earnings per share of SEK 13.4 on rolling 12 when we exclude the items affecting comparability in the quarter and an earning profit for the period of minus SEK 186 million. And our cash flow is seasonally low, and it's extra low this year due to the lower earnings, but also due to higher paid taxes. That is what is impact or explains the difference from previous year. Corporate net debt has increased to SEK 1.1 billion, still on a very low level. The reason we had such a low net debt last year was that we sold 3 properties in the end of '24. So we entered '25 with really low net debt. And our net debt-to-EBITDA ratio is 0.81, which is really way below our limitation of 2.5x. So with that, Tomas, I hand back to you.

Thank you, Susanne. I have only 2 slides to wrap this up. We have an Annual General Meeting coming up on May 5. That's next week. We will be in SPACE in Central Stockholm. So please join us if you are shareholders in SPACE on May 5. And my main message for this quarter is this. The important thing is high levels of orders received, SEK 14.8 billion, generally good demand situation in all our prioritized segments and in Industry. Stable earnings actually increasing margins in Contracting and the operating profit reflects the normal seasonality and then an additional touch of the cold winter in Southern Sweden and Denmark impacting industry. We don't see an effect of that going forward. So with that, operator, I open up for questions.

[Operator Instructions] The first question comes from the line of [indiscernible] with ABG Sundal Collier.

It's kind of a weird noise. But yes, on industry then, the industry margin came down in the quarter because of the cold weather. But I had a question. Could you please quantify is there -- how much is because of the weather? And how much is because of underlying pricing or cost inflation? Or is it purely on the weather? And a follow-up is how should we think about the Q2 recovery? Is the volumes lost? Or is there a catch-up effect?

First of all, the impact on the industry is the normal seasonality, which varies a little bit depending on how much maintenance we have to do and particularly after a strong season like last year, we have a little bit more maintenance to do, but that's a normal variation and the rest is weather 100%. And the catch-up for Q2, we don't expect that this lost lease -- lost volumes will have any impact on the rest of the year.

Okay. Perfect. And then on kind of the residential market for building. Do you see any early signals or anything turning around? I think we have seen some early signs in the Swedish market, but is this something you see in '26? Or is it further out?

Not really. You can see increases, but an increase from almost 0 becomes a lot of percentage points, but I have a very cautious outlook on residential going forward.

Okay. Okay. Perfect. And then just on the capital allocation, and you have talked earlier about M&A. Any comments about the pipeline or anything going forward? Or is it stable?

No, not really. We're continuously interested, but there are a lot of stars that needs to be aligned before you do M&A. It's both -- you need to find a buyer and the seller, you need to find a cultural fit, you need to find a business fit and there are many stars to be aligned, and we will be very careful when we do that. But we're equally interested as before.

Yes. And is it the same segment that you have talked about before? I know you have mentioned the industry and maybe some energy. Is that still?

Yes. And also in general contracting if we find the right target.

We now have a question from the line of Granstrom Erik with Carnegie.

I can't really hear the operator. Was it...

It's you.

Was it Granstrom Erik...

Erik, it's you.

It's me. Okay. So it's me, it's not you then.

No, it's you. Your time is not up yet.

Okay. I'll try to keep my questions short. Could you perhaps quantify a little bit on the volumes? You mentioned volumes coming down in Contracting because of large projects leaving the order backlog. Is this only related to infrastructure? Or is this related to building as well? And if so, how much on a year-over-year basis was affected within infrastructure?

It's primarily infrastructure. And I would say it's more than SEK 1 billion on the infrastructure.

Okay. And obviously, this will, I assume, then slowly become smaller as we move throughout the year...

That's the expectation. And my estimate is that sometime during the second half of this year, we will see that revenues coming back.

Okay. That's clear. And then on increasing energy prices. Could you -- Tomas, could you explain to us what you expect in terms of the effect both for volumes, but also cost? And how do you actually handle it in your Contracting? I assume this is mainly within Industry.

It is -- the most immediate and largest impact is within the Industry, and it has normally 2 types of -- 2 general types of impact. One is for bitumen that we use a lot for the asphalt business. And the other one is general energy that we use for asphalt production, but also transportation. So that's the impact. What we are doing now is that for bitumen and also for transportation cost and energy cost, we are trying to make sure that we have index clauses in our contracts. We keep the -- or if we can't do that, we try to hedge energy to the best of our abilities, both energy and bitumen. We keep the -- our proposals to our customers have a very short duration, so we will limit the risk exposure during that time. We are determining the energy prices in our offers only minutes before we send them. So that's sort of the big thing that we do. Right now, we don't see any impact at all. And fundamentally, we think that we will be able to handle this situation quite well over the year, but there's an increased risk that we will have an impact from increased prices that we cannot cover towards our customers, of course. And there's also a risk that demand will go down, but we don't see any sign of that so far.

Okay. And in terms of demand, do you mean that, for example, municipalities have a fixed budget in terms of something like paving and that budget will be affected...

Exactly. And they have a minimum area that they want to have paid during the year and then -- but they also have a fixed budget. And if they have remaining budget room in their budget towards the end of the year, they will have additional orders. And there's, of course, an increased risk that, that will impact demand towards the end of the year, but we don't know.

Okay. And then I have 2 more questions. The first one is on property development. Now that Bromma Blocks is 90% fully let. Do you see an opportunity to sell anything during this year? Do you have a selling process ongoing? Or do you wait until the market improves?

We have continuous dialogues, and we have had that for a long time, but we have -- we think that the probability or the opportunities to sell it has improved.

Okay. Good. And then my final question is on the tax ratio. The deduction limitations, I assume that, that will be affecting you throughout this year. And going forward, could you give us a little bit of a guidance what you -- internally, what you expect in terms of effective tax ratio?

26% is what we expect for the year with no profit recognitions for our properties basically because that's what -- it's the local tax we have to pay in our Sweden and Finland where we have property fully that we have lots of loans for.

But that changes if we sell anything.

Changes if we sell anything.

We now have a question from the line of Sandberg Albin with SB1.

Sorry, I didn't really know how to disconnect from my line. The question about the tax was just answered, so that's fine for me.

We now have a question from the line of Shirvanpour Keivan with SEB.

I just have a couple of questions. The first is related to the falling net sales in your Contracting division. So you mentioned that it was most affected in the infrastructure division. But could you maybe say something about the trend onwards for Building Sweden and Nordics given that the backlog is at the same levels as it was last year? Do you expect a similar type of year-on-year decline onwards in -- for net sales in these divisions as well?

We expect to have a slightly lower but still decline in the second quarter and maybe into the third, and then we expect it to come back towards the second half of -- sometime during the second half of the year. And that is partly projects that has ended, but it's also an effect of the prudent tendering that we've been working with for a long time. So we -- but we expect it to go up sometime during the second half of this year.

Okay. And you also mentioned that this is -- could maybe also positively affect the margins in these divisions since you have some lower-margin projects that you are now done. What could you maybe say about the margin trend onwards? Do you expect a similar type of improvement as in Q1 or to what extent?

We improved -- we expect the margins to improve on the exact margin that we will have for an individual quarter, that depends on a lot of things, but we expect them to go -- increase going forward.

Okay. And then just last question on Industry. So you mentioned that higher energy prices have had a quite limited impact on Q1. But based on what you know with your current orders and the hedging and so on, do you expect a significantly lower margin in the upcoming quarters due to the effect that you can't really offset to the end client? Do you expect like is it more of a minor impact in coming quarters as well? Or do you expect that it could maybe be material?

Given what we know now, we expect that we will be able to handle this. The most important part for the total earnings in the quarter is whether we have a dry and warm November month.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Tomas Carlsson for any closing remarks.

Thank you for listening in to this presentation of the first quarter of 2026 for the NCC Group. I hope to talk to you later on today. I hope to see you at the Annual General Meeting next week. And if nothing else, I hope to talk to you again for the second quarter report in July. Thank you all.