Skanska AB (publ) (SKA-B.ST) Earnings Call Transcript & Summary

A warm welcome to Skanska's Capital Markets Day 2025, and a warm welcome to Seattle indeed. This fantastic office tower is the result of bringing our strong capabilities in project development together with our strong capabilities in construction. And the result, the quality that you see here is the quality that you see in all our buildings and infrastructure projects. And that is what our customers chooses us for. I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations, and I'm very happy to see so many of you here in the U.S. This is a very important market for us, and our operations here have grown significantly over the past few years. Now representing a construction order backlog of more than SEK 150 billion and SEK 20 billion worth of investment in properties. So today, we will provide you with a firsthand view of our operations here in the U.S., you will get the chance to meet the top management team and learn more about our market, the context that we're operating in and our capabilities here. You will also get the chance to tour this building, along with two very interesting construction sites, namely the Highway Intersection project, the Brickyard and also the Microsoft campus, but we've been collaborating with them for the past 25 years. Part of the day is also going to be broadcasted live. So I would like to turn to the cameras and say to the online audience that you are most welcome. There will be a chance for you to interact with us here on stage later in the program during the Q&A session. But now our U.S. legacy goes way back in time and across the nation. And here to give you an overview of our operations in the U.S. I give you our EVP, member of the group leadership team and ultimately responsible for our construction activities in the U.S., Richard Kennedy.

Good morning. Thank you, Antonio. Thank you, everyone, in the room. Thank you, everyone online for joining us for Skanska's Capital Markets Day. We're excited to talk about Skanska today. You're going to hear a lot about us, where we are as a company, where we're going. But we thought, first, it would be good to start with a review of how we became a fantastic company here in the United States. So I'll kick us off with that. Okay. Skanska, we have a foundation built on growth in the United States. Skanska's first job in the United States was in 1971. I'll get to that in a second. Between 1971 and 2004, we acquired 17 companies all around the U.S. that laid the foundation for Skanska in the U.S. today. Today, we have a national presence, and we are a national powerhouse of construction and development across the U.S. The dots on the map represent our offices around the U.S., 25 offices in total. The orange dots represent markets where we have shared business units, one or more business units, in the U.S. So if you look up at Boston on the right-hand side of the map, we have all three business units there. We're real powerhouse in the Boston market right here in Seattle, across the map is exactly the same thing. The green dots are USA Building offices. USA Building has the largest footprint in Skanska, except for the green Dot in Los Angeles, Southern California, that's a USA Civil office on only today. So where did it all begin? New York, 63rd Street subway line extension. That was Skanska's first project in 1971. And since then, we have completed over $38 billion of transportation markets or transportation projects in that market alone. We have a fantastic Skanska legacy in the New York market. Here are just a few examples. Moving New York forward together, World Trade Center Transportation Hub in the upper right-hand corner, [ Moynihan ] train hall in the bottom left-hand corner, two of my most favorite projects in Skanska, USA Building, USA Civil working together, delivering One Skanska to our market, 7-line extension second avenue subway, two great extensions of our subway system in New York, moving passengers around Manhattan efficiently and effectively. Connecting communities, one bridge at a time. We have a great bridge building and bridge repair company in Skanska. You can see up top George Washington Bridge. We've been upgrading that bridge. [ Cosco-Usco ] Bridge down in the right-hand corner, we built that bridge, that new beautiful cable-stay bridge. Looking in the middle of the panel there, you can see the [ Bayon ] Bridge. We raised the deck of that bridge 64 feet to accommodate large container ships into the Port of Newark. That's a personal source of pride for me. I grew up in [ Bayon ], New Jersey. I saw that bridge my whole life, and I was so proud to stand in the center of that bridge when it was opened to the public in February of 2019. Moving up the coast to Massachusetts. Again, we are a powerhouse in the Boston market, civil building and commercial development. commercial development moved into that market around 2010 and was among the first to reimagine Boston's waterfront shaping today's innovation district. If you have a chance to get up to Boston, go down to the Seaport, when I was a young man, that was an open parking lot now. It was a beautiful new gleaming part of the city created by Skanska. If we move down the coast into Washington, D.C., There, too, we have all three business units, building civil and commercial development. Here's just one example of a school project that USA Building has built down there, the Brooklyn new middle school. It's one of our smaller projects, but building spaces to shape the next generation. Skanska truly builds for a better society. Keep moving down the coast into North Carolina. We have very strong USA building operations there. We've been working at North Carolina State, James B. Hunt Library, was one of our amazing projects. You can see that in front of you. We hosted some investors there back in September of 2024. That was a fun meeting. We've been working for this customer for over 2 decades. We work for Duke University. We work with the University of North Carolina. We have very strong health care builders down there, really great USA Building operation in North Carolina, and we also have a strong civil presence and building civil presence there as well. If you move down into Georgia, that is a U.S.A. building only market, we're taking advantage of a lot of the data center work that's going on there right now, tons of data centers right outside of Atlanta. Our teams are on those projects now. We've also been working for Warner Bros. Discovery. Since 2012, we've completed over 70 projects there, creating spaces to connect people and stories. CNN broadcast out of this campus. I had the group leadership down there in February this year. It was super fun to tour that campus, meet the customer, meet our people see our amazing projects. Moving down the coast, continuing into Florida, strong, strong building operation in Florida, a big health care builder. We've built over six projects for Lee Health alone since then, we're healing and innovation meet to build a healthier future. We also have a good civil presence in the Florida market, and I'll talk a little bit about that later today. Moving across into Texas. Look at this beautiful library we built for Texas A&M University since 2012, we completed over 70 projects, good strong U.S.A. building operation in the Texas market. and we also have commercial development in Houston, and we've done some great things there, delivered some amazing offices with tremendous profitability to the market in the past 15 years. Moving across the coast to Arizona. data center facilities. Great, great data center work going on there right now. I walked a few of those jobs with one of our super attendants ones. And one of them said to me, Richard, we are building the matrix. It's incredible. You see acres of data centers in Arizona. We're part of that. Rush, we also have a very strong building group down there or a civil group down there as well. We'll talk more about data centers later today. Moving into Southern California. Here we have another fantastic project by Skanska, Six Street Viaduct replacement, this bridge replaced an old failing bridge. It is built to withstand a 1,000-year seismic event. It was one of the most technically complex toughest construction projects I've ever seen us build. If you get out to Los Angeles, I always say to people, get out there, put your feet on this bridge. You've never seen anything like it. It is an engineering marvel built by Skanska. Moving up the coast into Oregon. That's a USA building only operation. We've been in that market forever. Semiconductor manufacturing since 1990, over 170 projects. We have a great reputation in that market, great experience there. We're bringing that to bear not only in the U.S., but globally. I'll talk about that a little bit more later. And then finally, back here in the state of Washington, Boeing has been a fantastic partner of ours for over 50 years, building facilities where innovation takes flight. You can see a paint hanger on the right side of the photo there. We built that for them. It's amazing to see a 777 get painted. I recommend it to you, check it out on YouTube. Just one of the many types of projects that we've built for them. Then we look to extension mentioned L300, another fantastic One Skanska USA Civil, USA Building, light rail facility built just north of Seattle to alleviate traffic completed that in 2024, amazing piece of work to build that over an operating highway i5 amazing construction project by Skanska. And finally, right back here at The Eight, completed within 2024, landmark tower, where wellness and creative inspiration meet. This is a fabulous building. It's just one example of what Skanska is capable of doing in this market. So 50-plus years strengthening communities, creating connections and building impact in the U.S. We have an amazing operation in the U.S. I'm so happy to see you here today. Thank you for coming. All of this is made possible by the amazing culture, values and people in Skanska. We have an amazing culture in Skanska everywhere I go, either in the U.S. overseas, Nordics, Europe it's the same. You can feel it. You're going to feel that today. For those of you who are in the room, you're going to feel it online through our presentations. And it's all built and driven by the real values that we have in this company. You feel those everywhere, too. And those values are lived every single day by the amazing people we have in Skanska. Every time I get on a stage like this, I'd love to talk about our amazing people. That's what we're a collection of -- you folks in the room, you're going to have an opportunity to meet some of them today. So welcome to Skanska. Welcome to Skanska's Capital Markets Day. I'll turn it back over to Antonia.

Thank you, Richard. And yes, now it's been 2 years since our last Capital Markets Day. We then met in London in November '23. And a lot has happened since then, in the world and inside our company. So we're going to use this day to provide you with an update, challenges that we're facing and we're going to talk about our way forward in terms of financial targets and our ambitions. And here is the agenda. We will start with the group perspective, and then we will dive further into our four business streams. We will look at the demand deeper into our financials, looking at operational performance, cash flow, balance sheet, capital allocation strategies. And we will have a couple of breaks throughout the morning program, and the broadcasted part of the day will end just before the second break. And I will be back with you with more information on the agenda thereafter. But now to kick off the more formal part of the day, I give you our President and CEO, Anders Danielsson. [Presentation]

All right. Once again, welcome to the Capital Market Day, and I will go through the performance and also the way forward. But before I go into the performance, let's just have a short overview of the company. We are one of the world's largest and leading construction and project development company. And we have operations in different parts of the world, and we are diversified when it comes to geographies. You can see here the split in revenue. The largest market is here in the U.S., but we have a large operation also in the Nordics and Europe, which stands for Central Europe and the U.K. You can see to the right here, the split in revenue also between the stream. So the largest operation when it comes to revenue is the construction stream, as you can see. But all in all, we have around SEK 180 billion in revenue, and we also have more than 26,000 highly skilled employees in the company. So let's start with an overview of the different streams. The construction stream, which is the majority of the operation where we have -- yes, we build both civil construction projects and also building projects for external customers, but we also build it internally, of course, where we develop commercial office building and also residential building. residential development, we buy land. We develop residentials. We sell them to consumer, and that operation is in the Nordic and Central Europe today. Commercial Property Development, where we have the operation in the Nordics, Central Europe and in the U.S. we also buy land, and we developed office building, multi-rental residential buildings and also we divest them eventually to the external investors. And sometimes, we divest them to our internal investment properties, which is our most recent stream that we started a few years back. Here, we focus on highly -- high-quality building office building in the three largest cities in Sweden. And right now, we have been building up a little bit above SEK 8 billion in the portfolio. When it comes to driving the company like Skanska with more than 26,000 employees, you need to have a governance that is very, very clear and also a clear direction of the company. We are a decentralized organization, and I strongly believe in that. That creates a lot of responsible accountability out in the organization, and it's a local business. So that's critical for us. but we need to hold the company together, and we have common values. You can see them to the left here. Common values that goes along the whole organization. Every time I'm out on sites and meet people in the organization, I can see that these values are true. We -- the organization really lives our values, which is really encouraging for me. And those also drives the culture, of course, the performance culture and also the customer-focused culture, and that's key for our success. And of course, it's all about creating value for our shareholders and our customers. EBIT generation is, of course, important part of that. So that -- we will come back to that, how that has looked like. But it's also about revenue growth. And we have seen growth now here in U.S. in the construction, the last 2 years, we have been increasing the revenue with close to 20%. And we have also seen growth in residential development in [indiscernible] and we've also seen growth in commercial property development in Central Europe. And of course, we have all seen the buildup in the investment property portfolio the last few years. And also creating value, capital efficiency. It's -- we will come back to that, what we are doing to increase the capital efficiency to really get the return back on the level we want to see. But before I go on into those issues, I want to present my team, Besides me, we have all -- the whole team is here, so a lot of opportunity to discuss with them and ask questions. But I'll start with Jonas Rickberg, CFO. Please stand up. We have Asa Thunman, General Counsel. Asa and Jonas, they came from recently this year from other industries, creating more diversity in the team. We have Lena Hök heading up sustainability and innovation. Richard Kennedy already met, heading up our construction operation here in the U.S. We have Claes Larsson, heading up the Commercial Property Development and Investment properties. Stale Rd, heading up Construction in Central Europe, Norway, U.K. and Residential Development. And we have [ Tere Tegner ], heading up our Human Resources. Let's go into the performance way forward and the targets we have. So I will start with the history of the performance for our different streams. This might see a bit complicated, but it represent the performance year-by-year for all streams. You can see the dark low commercial property development. And you can see investment properties that we have been contributing already the last couple of years here with positive cash flow and profit. And if you look at the history here, we are a diversified company, which is -- makes us more resilient. So if you look at 2017, '18, we were struggling big time with the construction stream in the company. The performance was unacceptable. But we took some important strategic decision at the time. And we have been disciplined we have been selective for projects we go for. When for projects, we have seen that we have a competitive advantage. We have the right team in place. We have a good track record and a good relationship with the client. And that has really paid off. So the last 4, 5 years, we have been on the target 3.5% that we have been working with up until now. So I'm really proud of the organization who has been doing this during difficult time in the market as well. So that's great. We can see the project development, residential development, commercial development, that has been performing very well, if you look 15 years back. So they have definitely been on our targets, and I will come back to our targets. But the last 3 years, we have not reached our target. So we have been hit by a very tough market and market condition, both when it comes to commercial and residential. So we will address that during this today, and we will also address the actions that we will take to restore the profitability here. I'm glad to see, again, the investment properties contributing to -- already now contributing to the cash flow and profit here. And of course, we have clear operational synergies since we are working in the whole value chain. And that's quite unique if we compare to our competitors around the world. So that we can use the knowledge from commercial development, resi and also investment properties when we start new projects, internal development projects. We can also use that knowledge to be competitive and win projects for external customers as well. So that's a really good position. And we also see some clear financial synergies in the company. We are creating a lot of cash flow free working capital in the Construction stream that we use for project development, so we are in a position where you don't need to ask any bank. You should they want to start a project or buy land. We can decide that on our own. And that is a really competitive advantage, and we can work contra-cycle as well. And of course, it's all about return, profit generation, return on capital employed. So we want to be a reliable dividend provider for our shareholder as well. I'm talking about that. Here, you can see the equity position over time back to 2018, so we have been the blue dark blue bar here. So we have been able to build up the equity year-by-year from SEK 29 billion. Last quarter, we were at just about SEK 60 billion in equity. So the -- we have been building up because as you have seen, we have been increasing the investment in project development. We're building up the investment property portfolio. So we need more equity for that. And the payout ratio, as I talked about, the dividend, has been around 50% the last 5 years. And if you look at the total shareholder return, the last 5 years, we have been on 10% in average, which is competitive. Margin. We just recently sent out the press release that we have increased our margin in the construction stream. And we are -- I'm confident that we -- this is a relevant target. Where you have all seen how we have built up the profitability over the years. And today, we have a really good position when it comes to order very, very high quality in the order backlog today that definitely support this 4% or above targets over time. And you can see the last quarter we were at 3.9% on a rolling 12 months basis. The rest of the targets we have kept, we think they are very relevant for us. We have a return on capital employed target of 10% in the project development, including residential and commercial. The outcome, though, is below our target. And we are not satisfied with that. 1.4%, that is something we will address how -- what is our plan to restore the profitability here. The return on capital employed in investment properties. Here, the target is 6% or above. The outcome is decent, 4.7%. To be able to reach the 6%, we need to see growth in the value -- market value of our properties. And 60% target is also competitive if you compare to similar real estate companies in different markets. Return on equity, we have about 18%. That's definitely something we aim at the outcome right now is 10%. So we need to -- all streams need to contribute and be on their target to be able to reach the 18%. Adjusted net debt limit, we have a limit of minus SEK 10 billion. The outcome last quarter was SEK 9.3 billion in net cash position. So we have a lot of headroom here to take action if we think it's right to start the project or if we want to buy land in good markets. And we also kept our payout ratio on the dividend between 40% to 70%. The outcome last year was 57%. And we also have some group sustainability target and -- when we talk about our own operation and that includes group 1 and 2. We have a target of minus 70% compared to a baseline year 2015. And we had the outcome right now is minus 64%. So we are on the right track. This should be reached at 2030. So I'm confident that we will reached that target, even though we have picked some low-hanging fruits here. We also have a carbon emission in the whole value chain in project development of 50% reduction up until 2030. And here, right now, we are at a 37% reduction. So also there, we have seen some good progress. But the ultimate target is to be net zero by 2045. And to be able to reach that, we need to work with the whole value chain, including our clients, including our subcontractors and suppliers. I see a lot of change and transformation in the industry and in our company, when it comes to digital transformation, and that's -- I think the industry as such has been lagging behind other industries for some years. But now we can see real trend. It is strong. A lot of things happening when I'm out in different projects. The [indiscernible] our challenge, but also the biggest opportunity is how can we scale this up to really take the benefit of this. And that is something we work hard with that we will come back with that as well. So it's about aligning the company when it comes to developing people, processes and technology. So I'm really encouraged what I see here, a really big potential. If I go into the different business stream and switching to the commercial direction. In construction, we have seen that we have been growing, growing the business. But we also see potential for further growth, both when it comes to revenue, but also when it comes to increasing the profitability we're going to deep dive in that in a few minutes. Residential Development, we are in a good position. We're performing very well in Central Europe. And it's a strong market. The market has been slow in the Nordics. And we need -- I think we need to see some growth in the economy. But when the market eventually pick up, because the underlying needs are there, I think we will be in a very good position to benefit from that. And on the Commercial Property Development, it's all about maximizing the value creation in a slowly recovering market. And we can see some positive signs in the market, especially in Central Europe, but also in Nordics. And investment properties, we are building up that portfolio as planned and I'm really encouraged to look at this into the future. We definitely have the competence, we have the pipeline to continue that growth. So now we're going deeper into the commercial direction for the different business streams. And we will start with construction. [Presentation]

Yes. And together with me on stage here with Stale and Richard to go deeper into this construction stream. If I start with the past here, looking 5 years back, here, you can see the bars, blue bars, revenue, the green line is operating margin over time, rolling 12. And you can see that our old target here at 3.5%. And you can see that we have quarter-by-quarter increasing the revenue, and at the same time, we have kept the profitability here, and that's what I addressed earlier. I think that's a really good achievement by the organization. Have been selective and focused on cost management, and we have seen organic growth in strong market. Average has actually been 3.6% on a 3 years perspective. And if we look at the order backlog. You can see the blue bars here represent the order backlog, and we can see that we are now on a historically high level. And we have high quality. We will into that, how it looks like in -- after break, but it's high quality, and we can also see that the book-to-bill rates, the dotted blue line here has been pretty much above 100% all the time, which means we're building backlog. And to the right, you have our market outlook. In the Nordic, we see a stable market outlook in the civil business. The building is impacted by a slow residential and commercial development market. In Europe, it's more stable, both when it comes to building and civil. A lot of EU funding coming into Central Europe creating good projects in the infrastructure. And U.S., we have expected a strong civil market going forward. We are mostly in the traditional infrastructure and we see a lot of good pipeline there. And on the building side, we are -- we see a stable market outlook there. We have a good pipeline both for the building schools, hospitals, airports and also for data center. So with that, I hand over to Richard.

So as Anders said, we've had good strong revenue growth in Skanska over the past 5 years. We've had solid and stable margin development and performance over the past 5 years. And as you can see here on the screen, we have a healthy record backlog based upon a selective bidding strategy. So for our construction stream, we feel like this gives us a very strong foundation to seize growth opportunities in the market. And we see look to the left-hand panel, technology and AI. We see a rapid transformation in those sectors, double-digit growth forecast for those sectors, very exciting opportunities there for us. In the middle panel, demographic and economic development. We see strong fundamental economic and demographic growth in our home markets that's giving us opportunities. And resilient societies. Pre-pandemic, it was just-in-time delivery was the word of the day. Post-pandemic, resilient societies has been more of a theme. That creates lots of opportunities for us here at Skanska. So let's get into those. Technology and AI, again, I mentioned earlier, we've had over 2 decades of data center experience here in the United States. We've had over 3 decades experience building semiconductor plants here in the U.S. We have a proven track record, great customers. Last year, we created a specialized team for this called Skanska Advanced Technology that allows us to serve our national customers across the U.S., combining with our local geographies. So I think it's a really strong and important evolution of the USA Building business that we're able to run across the entire United States and also tap into our local strength in a very good way. So I'm very happy about that. It sets us up well to serve those national customers. It also supports our ability here in the U.S. to help our colleagues in the Nordics and in Europe to seize data center opportunities. There's plenty of data center and also semiconductor opportunities coming there, and we're very happy to share our experience and expertise and knowledge and customer relations as we can. Very good opportunities for us in the technology and AI space. In terms of demographic and economic development, I mentioned strong fundamentals, demographics, people moving into our markets. We need infrastructure. There's a lot of big need for that here in the U.S. In the U.S., I'll talk about that in Florida, in particular. I mentioned earlier, we have a very strong USA Building business in Florida. We've had that for a long time. We've been there as USA civil for many years. We've had our challenges, but we've learned our lessons from those projects. We've incorporated them into our operations, and we've built amazingly good customer relations by delivering for our customers in Florida over many years. What we see happening in Florida today is big population growth a lot of need for infrastructure, what we do, water, highways, so forth and so on. So we're going to take a position in civil, down in Florida, working with some key customers we think projects in the $150 million to $500 million range or our sweet spot there. We're going to build on that from our experience to date. And longer term, what I see, and I talked about this earlier, up in Boston. You see it here in Seattle. We have great One Skanska opportunity down there. We have USA Building, very strong operation. We can build our civil presence there, and I can see really great opportunities in the future, those two units coming together as we have in other markets, including this one. Utah, Arizona, we talk about those as more opportunistic markets. I showed you the slide before our acquisitions over many years. There was a company in Nielsen that we purchased back in 1998. That headquarters was in Colorado. We have people from that region. We've been in these markets before Utah and Arizona. We're actually in Utah or Arizona today with civil. So we have good experience there. We have good customer relations. But we decided to close down that office a few years ago because those markets are cyclical, and we didn't feel it warranted a full-time office and everything that goes with that. But what we see today, as we say here, these opportunities in those markets, you have the Winter Olympics coming to Salt Lake City in 2034. We see some good highway work, some good transit work coming there. Same thing in Utah. We see mining work there. We have good mining customers. We can pivot into these territories from Southern California and from up here in the Pacific Northwest. We have people the experience there and ties there. Really good opportunities for us in Utah and Arizona. And we can see the U.S. civil business, in particular, growing there. So with that, I'll turn it over to Stale to talk about growth opportunities in Central Europe and resilient societies.

Thanks, Richard. As Anders said, the residential market in Central Europe has been really good over the last years. And actually, we see good opportunities in the Central European market going forward. very much being funded by what we believe now increased investments, both national, but also EU funding going forward, that will go straight into, say, traditional infrastructure like highways and rails, where we are very strong today. You can say it's our sweet spot in Central Europe. And it's, for us, very easy in a way to transfer our competence and capabilities across different border there. In addition, we see an upgrade now within energy and the energy infrastructure in Central Europe, partly because of, in a way, the consequences of the war in Ukraine has a lot of investments flying in there. And we believe that in a way, the demand for new housing, that will continue. This leads me over to the right here, resilient societies, as Richard mentioned. And you can say a lot of the investment I mentioned. And you can say the obvious one is that we have actually now to adapt to the consequences the climate changes. More rough weather conditions, more water and flooding, et cetera. And that is now being built into all the projects we see. We have to withstand in a way, the consequences of the climate crisis. It's already here. We have to handle it. As a consequence of the war in Ukraine, all the countries are now more focused on how can we build a resilient and good infrastructure in terms of energy. Both in terms of the grid system, but also in terms of new production, right? Within the next 2 decades, Poland will have its first nuclear power plant. -- right? And that is a sign of transforming from fossil fuel into something else. Generally in all our markets, but also in Central Europe, most of the, say, water and wastewater infrastructure has been built, say, 100 years ago. And there is a huge need to modernize that, to upgrade that to, in a way, meet the future needs. And then we also see that also because of the war in Ukraine invest go into defense. And our geography with Poland, Czechoslovakia, they're all in way close to the Ukraine border. We're in a way, the front of NATO a lot of investments there, and we see work coming up for us, both on the civil side and on the building side to support that. So we're looking very positive tie on the market in Central Europe. And back to what Anders addressed around in a way, having a diversified portfolio, right? Standing in different geographies in different sector, this is a focus for us going forward as well. Makes us less in industry. So looking at this slide here, you can see our sector distribution, both in terms of our civil operation and our building operations. We are spread between different geographies, we're spread within different sector, makes a solid foundation for us going forward. We also have a very clear view on what kind of customers we would like to work for and what kind of customers we have. On the civil side, we have mainly public clients, mainly public clients, mainly public clients that is supporting that. But on the building side, we have more like 50-50, 50% private clients, 50% public client. And out of the 50% private client, we also our client ourselves through our development operations within residential within commercial. We're approximately 10% of that volume. As I say, the portfolio management that we are so focused about very much goes down to making sure that we take on board project where we have the right clients and the right conditions that enable us to handle and control and steer the risks that are embedded in all the projects we have. And that can be related to the different contract types that we have, the procurement route that the different projects have and the responsibility overall that we take on as a company. And you can see here on the right-hand side of this slide, you can see how our portfolio and our in a way, project portfolio has evolved from 2018 to today. Where back in 2018, we had 60% building in our portfolio and 40% civil. Looking at today's portfolio, we have 60% civil few years here, and it's been done by purpose. So then Richard would like to elaborate a little bit more on that and our journey through the last years here.

Thank you, Stale. Okay. So we've talked about this so far. We've had good revenue growth. We've had solid and stable profitability and margin performance. We've got a healthy backlog based upon a selective bidding strategy. We have good growth opportunities in our home markets. We have a good way of looking at our customer types and our contracts, make sure we're getting to the right projects, the right way. So we're ready for some growth in construction. And with all that, predictability remains our priority. If you look to the bottom left-hand corner of the slide, you can go back to 2018. The blue line is our margin performance at a group level at that time. Obviously, it was unacceptable. We were sub-1% and we came together as a group leadership team, and we committed to bringing this back based upon a dual strategy of profit before volume and selective bidding. We can't say that enough. And I'm very proud to say that we've done what we've promised. I mean we brought this back, you can see the blue line. We came out of '18. We brought ourselves back to profitability in '19, '20. Our teams did an amazing job pushing through COVID, through the pandemic to deliver high profitability in 2021. And then you can just see it's a strong, strong margin performance, '21, '22, '23, and now we've turned it up. So we've done what we promised to the market. We've brought construction back to profitability. We feel very good about that. And at the same time, we've lowered the volatility in the system. If you look at the gray area around the blue line, you can see our standard deviation around our margin. We've just slowly narrowed that over time. We're in a perfect position right now to grow this business. It gives us all the confidence we need to set this new target of 4% or greater over time. We think it's a relevant target as Anders said, and we can achieve it. And the activities that have led us to the performance that we have today are listed here on the right-hand side, and they're the same activities we will follow going forward because they work strong customer focus. Andrew has mentioned it before. We've always been a strongly customer-focused company. We have about 300 people who've come into Seattle for this week. We have a big meeting tomorrow and the next day, it's called our leadership meetup. We're going to spend a lot of time talking about customers. We have a great customer focus today, and we're going to get better. Resilient portfolio and deliberate business mix. Stale just talked to us about that. We know how to profile our customers, our clients, our opportunities, make sure we're getting into all of our projects the right way, with the right margins and setting up our teams for success. Growth and selective bidding. These two things have gotten hand-in-hand for us over the past 8 years, and they're going to continue to do so. selective bidding is our north star. We're going to continue to follow it because it works. And then the final two bullets, cost management focus productivity and efficiency. For me, they go together and they apply both externally to our customers and internally to us here at Skanska. For our customers, we have to be cost competitive. Budgets have been -- or costs have escalated significantly in the last few years. Our customers' budgets have been challenged because of that. We need to help them to get into their -- get their projects into budget. We've been doing a great job of that. Focusing on productivity and efficiency in the field, the way we deliver. This is what we do every day to create value for our customers. And we do the same thing for ourselves internally. We need to have a tight machine in Skanska. We need to be fit for purpose out there in a competitive landscape. Always keeping our S&A tight. Our teams continue to focus on that, and we're going to continue to focus on that in the future. And we see some digital technologies we think that can help us do that as well for some back-of-house functions. We have a really good tight ship today, and we're going to keep doing better. And Jonas is going to show you some of that later in terms of our gross margin and S&A development over several years. I talked about digital tools just a second ago, we not only build semiconductor plants and data centers that create the digital tools that are powering our economy today. We are also consumers of those tools in Skanska. The key for us as a consumer of those tools is to find the right ones that enable our teams to be successful, predominantly out there in the field and also in our offices. And we need a tight, efficient, productive workforce and digital tools help us do that. You can see this photo here on the right. Drone technology. We've been using that for many years. There's nothing whizbang about that in terms of technology. But there are a lot of software programs that are coming out, allowing us to harness that technology in a better way. One example is doing flyover of our project sites on a daily basis that feeds back information to our teams, they can see in real time what's happening, they can plan better for the next day, help them be more productive more efficient. This is it. Anders talked earlier about scale. We're harmonizing our platforms across Skanska, across the global company so that we can help our teams gain the benefit of the knowledge that we have in all of our different local operations. decentralization is a strength. It can also be a hindrance too, if you can't scale it. So we're finding ways to scale all the knowledge and experience that we have in Skanska and use it for the benefit of the company as a whole. Leveraging insights and knowledge sharing across our markets and disciplines. We have a really good focus there. We're going to continue to get better. We see momentum building, and I can see this becoming a more and more important part of our construction delivery in the coming years. With that, I'll turn it back to Anders to wrap up with the commercial direction.

Yes. As you have seen now, we have a great potential. We are in a really good position in the construction operation, and we have a great potential to continue to create value. And we will continue to secure a diverse and resilient portfolio because that makes us less vulnerable. And of course, as we have been talking about, we see potential to increase the profitability even further. And we are positioning ourselves to growing in different segments, sectors but also in geographies. Delivery on customer demand for sustainable environment that I can see that a lot of customers require a high standard when it comes to sustainable products and projects, and we can offer that. We have the competence in-house. And of course, productivity efficiency and digital transformation. That is our own challenge and opportunity. That is something we can impact ourselves. So that is a great opportunity for the future. So with that, we will go into the residential development stream, and I hand over to Stale. [Presentation]

Presenting the commercial direction for our residential development. I'd like to start with somewhere around this project that you can see on the picture of the animation behind me here. This is a project in Central Europe. It's in Prague. It's called [ Muransky Sukarat ] and it's a very good example of a project or the type of project that we like to do in Skanska and that we're really good at doing Skanska. This is a multiphase project. It's converting previous brownfield into a new fantastic residential project. It's been very attractive in the market. We have a good sales rate, and we are approximately halfway through this project now with the third phase ongoing here. You can see the part of the legacy here with the chimney from [indiscernible] area. And this is a good example of how we are, say, converting cities to new residential areas. The next slide here shows, in a way, the geographical footprint of our presence now and going forward, where we are focused in the three largest cities in the Nordics, both in Norway, Sweden and in Finland. And in addition, we have activities and a strong foothold in Central Europe in Poland and in Czech then in Warsaw, Krakow and in Prague. And you can say that we -- the housing market is very often exposed to demand cycle. And those demand cycles, they very often follow the economic cycles in the different markets. And the Nordics have been heavily affected by the cost increases and the inflation and in addition, the interest hikes that we've seen over the year. And also in the Nordics, actually, you say the global uncertainty has affected the market a lot. So there's been a weak market. And as a consequence of that, the consumer confidence in the Nordic is quite low. To the opposite, the Center European market has been really good, really good for us. And in general, we see it really good also for others. We have had, say, good sales in all our projects. And this is because that the unemployment rate in Central Europe is extremely low. It's extremely low. And there's a good underlying economy. In this market, we find a lot of cash customers who come to us actually to place their cost into new homes. With in a way, the solid, say, economic foundations that we see a lot of private hub here, a lot of our investors in new homes, they are actually, say, scaling, bringing up new quality in their homes, moving from old premises into new premises that we can offer on attractive location. There is a population growth also in Central Europe. And this is a market where we see that development continues to be strong. It's a market where we actually see that here is a potential to grow as well. Looking at the next slide. This starts with in we show in the history, building a little bit on what Anders showed previously. And this shows in the revenue in the different markets, the Nordics, which is the dark blue here, and then you see the Central Europe, which is the gray one. And you see the return on capital employed, that is the green line that varies here. And we have built up our residential development activities over years now to deliver approximately 6,000, 7,000 homes every year. And through the last years, we've seen the deepest and longest downturn in the market for decades. And we've done a lot of actions that I'll come back to in a way to adapt to those market situations. But the fact is that the sales now are approximately half of what we had when this was on top. So the actions we have taken, as you see here, we have a low-cost segment called BoKlok, and that segment was spread across the Nordics in Finland, Norway and then in Sweden, and we also were in U.K. But as a consequence of the markets, we have exited Finland. We have exited Norway. We also exited U.K. in terms of the BoKlok segment. So the only market where we still have BoKlok is in Sweden. We have also exited some geographies within the different countries. As I say, we are mainly focusing now on the three larger cities in Norway, Sweden and Finland. And that's where we see that, in a way, the demand is there and say, the financial or economic fundamentals are expected to come back faster, and that's the market we want to be in. Then we have done a significant job trying to adapt to the market situation. With revenue going down, we have to take down our cost base, and we've done a great job of that over the last 2 years. We are also focused on making sure that unsold completed units are not growing and getting old on our balance sheet, right? That's tying up a lot of capital not making value for us, not making value for our shareholders. Despite the tough market, you have seen and probably seen that we have started projects. We have started project in this difficult period in markets that support it. And just to elaborate a little bit more on the cost reduction that we've done over the last years, we have taken down our sales and admin costs related to residential development by approximately 50%. That's a significant achievement being done by 2 years. But that allows us now to have, say, a very efficient cost base that is based on the revenue and the volume we have now, and it gives us an opportunity to have return on capital employed that is going the right way, as you can see on the green curve here now. The next slide, you can see the distribution of our residential development portfolio over time. The blue bar here is the land bank that we have, the gray bar here is the ongoing production. And then the green bar here is the unsold completed unit. And you see how that has developed over time. As a consequence of the difficult market, the ongoing -- construction ongoing production has gone significantly down, as I said. But at the same time, the land bank has been more or less stable. We have a very attractive and solid land bank today. And the good thing about that land bank is that, that land bank is very much sold. So when the market picks up again, we have a lot of good land that we can deploy to the market, starting new projects, generating more profit going forward. As I said, the [indiscernible] completed unit that has grown over the last years, but we are focused hard to make sure that, that say, portion of capital employed is not growing old on our balance sheet. Going forward now, we don't intend to deploy more capital into the stream, but we will focus very much on rebalancing the portfolio. starting new projects in the right locations with good business cases, say, converting the land that we have in our land bank into new production and new profit. That's our ambition going forward. and making sure that we're not in a way, building up more unsold completed units. So that is our strategy going forward. And looking at our market, right? You say understanding the customer need is the starting point for our offering in all the markets. And we're focusing very much on understanding what is it our customer needs and what are our selected customer target groups in the different areas, in the different locations, in the different geographies. And we're building up an offer on the basis of that. We have a trusted brand, and we have satisfied customers. We see that from the feedback we get from our customers that buy in our project that they are generally very happy with buying from Skanska. And we see that in a sitting on both the development side and the construction side here that we can build in quality in our project, and we can adapt to the needs that our customers tell us that they want. We're very much focused on placemaking. The project we love this multiphase project, where we can convert parts of City into new different areas. For example, we are going to Norway, they are focused over many years for what we call empty nesters. People who today sit with their large villas. And they come to a, say, a phase in life where they would like to convert that into more easy living, nice apartment, good location, good amenities, and we can offer that to the market. And when you have those offering, then you can actually withstand some of the cycles that we've seen with slowdown in the market because that customer target group they are not so affected about the changes that we've seen in the market in general. We're also focusing on building in sustainability features into our project that, in a way, meets the running cost of our customers, right? We want to help them to reduce the running cost therefore, focusing on building energy-efficient buildings, some of them actually also with energy production with solar panels, that has helped reducing the energy bill to our customers. And in Central Europe, where water is a scarcity, our gray water solution is also highly appreciated by our customers. So summing up our commercial direction, we will position ourselves not for a normal that was behind us. We don't believe that the market will come back to how it was pre-pandemic, at least in the foreseeable future. We will position ourselves for a new normal in the market, and that is our focus going forward with, in a way, focusing on capital allocation to the strongest market, where we can see return to our expectation. We will start projects going forward, converting our good land bank into production in markets that support it. And there is an opportunity now with -- where we -- with our balance sheet can have an opportunity to actually buy land that would normally not be available in what you can say, a normal market. So having a strong balance sheet can give us that opportunity. We have make sure that we deploy our pipeline and keep our financial flexibility. As you can see, we have taken down production quite significantly over the last years. But with a good solid land bank that is already very much zoned, we are ready to start fast new projects if the market returns. So that's our strategic direction or commercial direction for residential property. Now we will focus on the commercial direction for commercial properties, and I'll leave the word to my colleague, Claes Larsson, to present this. [Presentation]

So over to Commercial Property Development, and I would like to start with this picture. But in a nutshell shows our customer offering to our two customer categories. We have the tenants that leaves us the premises from us, and you have the investors that buys the completed projects. And this is all about. You need to pick prime locations, obviously. It's very hard to fix that later if you get it wrong. Prime location for us is central locations or if not central, close to public transport like metro station, et cetera, very appreciated by both tenants and investors to keep property value over time. Then we pack these projects with innovative solutions to enhance customer offerings or experiences. And of course, wellness amenity service is super important, healthy indoor climate, outdoor space is here, gym, et cetera. And then, of course, the sustainability aspect is super important to design these projects from the beginning with the right kind of material, low carbon footprint and energy-efficient solutions. But it has been a rough ride the last 5-plus years to be a commercial property developer. You all know the history about this. We had a terrible pandemic, obviously, completely unexpected, first one for 100 years in the world. And that caused then the new concept of hybrid work to surface. And we still have a lot of post pandemic effects in the market. So companies are struggling with how to get the people back to the office? Is it 3 days a week, 4 days a week, completely flexible or back full time every day a week. We will not go back to where we were before the pandemic. We need to adapt a new normal here. But we see that companies are striving to get people more back to the offices to create company culture, creativity around the coffee machine inspirative environment, et cetera. Then we had the terrible invasion of Ukraine and shock waves in the older supply chains, causing material prices rise, construction prices rise, very hard to underpin new business cases for us, and we had cost increases in existing ones as well. So we have to adjust that as well. And then on top of that high inflation, high interest rates and the effect of that is obviously, for any investor that need to put debt most of them on their purchases. The cost goes up for debt, then you need to have a higher return on your investment, which puts the yields and cap rates going up and then puts pressure on the market value, which is another hit for us as a developer. Having said that, there are some bright spots here, and I'm really happy about the 57% leasing ratio in ongoing projects. That is a really solid number. We have 60% invested, meaning that we are investing at the same pace as we are leasing in the ongoing project portfolio. 77% also in completed projects, that is projects not belonging to an investment property portfolio that I will cover later, 77% leased. I think a pretty solid number, given some of these projects has been completed fairly recently. Talking a bit granular about the three main markets here, wealthy markets. Central Europe, may be the best one for us right now when it comes to leasing. We see a strong demand and what tenants see is that there is a supply gap coming here. Very few developers has started lately. And you can see the next 2, 3, 4 years, what are the completions in my market. So if you're a tenant wanting quality space, you need to hurry up to secure that basically. So we feel a strong demand here, definitely. In the Nordics, maybe a bit slower. We see it as a stable market. You can see vacancy is on the rise. But it's a polarized market. So it's a quality game, and we're in the upper segment. Most of the vacancy increases we see in wrong location and inferior products, and that's not where we belong. Also in U.S., I would say there are bright spots. We have secured a couple of really good contracts in the last couple of years here. And it's, again, flight to quality that matters here. A lot of companies would like to downsize and upgrade so they can pay much more rent per square foot per square meter to get more qualitative space to attract people back to the office. Having said that, it's the weakest market we have is in the U.S., but I feel good about the development when it comes to leasing in the U.S. And enabling factors, we offer top quality projects, sustainable, innovative, top location, et cetera, customer mindset. So if a tenant is looking for space where we have a presence, we are always in the game. And then, of course, in these shake times, if you sign a lease with Skanska during construction, if you buy a building from Skanska during construction, we will be there to deliver on time and quality, and that's an extra add-on factor for our customers. Moving then to investor market. And also here, I would say Central Europe sticks out as maybe the strongest market for us. And you see that we have taken up our arrows to stable markets in Europe when it comes to commercial property development. We see raising demands from local capital in Central Europe here actually. And you saw here last week, for instance, we secured a core divestment of 100% leased property in [indiscernible] Poland, sent to prod in Phase 2 with a repeat me that we also did business with in Warsaw last year. So very good strengthening of the market in Central Europe. Also a lot of Nordic capitals. Germany is still a bit hesitant, but they are starting to look back and especially then, you could say, in Warsaw. Nordics, I would say, stable transaction market. There are core deals done. They are picky want the right location, high leasing ratio, high top quality, et cetera, but it's a stable market. If you go over to this part of the pond, it's a completely different picture. It's still very much dominated by opportunistic money. Would like to see distressed pricing. And that is kind of the core reasons why you haven't seen us active in the divestment, and I will come back to that later here. Actions then is to be very active trying to divest and actually divest as we have done this year, properties in Europe. When it goes to the U.S., we are focusing on completing the asset, we're focusing on leasing the remaining space and we are focusing on being razor shop in asset management. And then we need to backfill the pipeline with new starts obviously. So we are starting projects here on a selective basis where we can meet the fundamental that is in the market today. So everything we have started the last couple of years, I feel really good about. Then you are probably interested in our big portfolio of completed projects, which actually is bigger than what we have in investment properties. 22 in total here you can see the leasing ratio is actually, as I said earlier, fairly good. It's 75% here in the U.S., 79% is Cental Europe, 84% in the Nordics. And we have several projects that are 100% leased. For instance, three projects in Copenhagen office, 100% leased. We have a bunch of them as well in Central Europe, a couple of them in Prague, et cetera. But the big part here is in the U.S., 68% of the capital employed is in the U.S., SEK 3.1 billion. And I bet your interest, you can see the breakdown where they sit. So a lot of it in the capital city here, Washington, D.C. and adjacent markets, which is Northern Virginia we cover also here, Tyson core and the Arlington corridor. So there where we have most of the capital also in this region, which consists of [ Sete ] and Bellevue, which is sort of the twin market in the [indiscernible] region here where we sit today. and the rest then is allocated to Houston. Mainly office projects, you can see the right, but also some rental residential or multifamily as we call it here. Then you see two other stuff here in the legend, Boston and Life Sciences are sort of connected. We are between activities now in Boston. It's just more a timing issue. We have had a fantastic run with all our Boston projects so far, but nothing completely nothing ongoing. We're working really hard with a fantastic land bank within life science office and multifamily for the future, most on super strong locations. I feel very happy about that as well. Then this one, I really love. This is the completion profile of our ongoing projects at present. And these are the ongoing projects not sold segment-wise. So we have the exit risk, and we have the leasing risk on this. But look at the green dots here. The blue bars height is obviously capital employed up on completion for each and every project here. And you see the first one of the office one is 42% leased end of Q3. It's actually approaching 60 as I'm standing here. This is a project in Warsaw, Studio B, fantastic location. The only one that has a bad location is probably ourselves Skanska. I feel very confident this will be a leasing success, and we have until Q2 next year to complete. Then you have a 95% completed product in leased product in Copenhagen, 57%. That's our next headquarter in Sweden, 100% leased in Budapest. You have to go to Q4 2027. That's 2 years ahead before you see something that is a low leasing ratio. You see the stripe small bar there. We actually started that product this quarter in fourth quarter. That is fifth phase of a project in Boston, Regina City in Poland, where we had a tremendous success on the previous 4 phases called Novae. So the last one to be commenting up on here, and you might wonder I'm so happy with 12% on that one. That's a multifamily project. And it is designed very low leasing ratio to begin with, we start leasing those just before completion. And the game is then to lease up to stabilization within 18 months. So we have plenty of time to do that. It's a completely different leasing profile while we like to lease offices, if possible, during construction. So let's talk a bit about the capital allocation. I know there's a big interest in the audience for that. Let's explain here a bit what we have story showed a similar breakdown for the residential before. The blue parter is land bank. That's the raw material strategically important to have future product. We need to have a big land bank. I feel also good about our current land bank in commercial property development. When you start a project, you move that piece of land the book value for it up into the gray area. And then you add whatever is invested on top of that for the project. Once completed, moves out on the gray, moves up to the green and when we divest it, it moves out from the stacked bar. So that's sort of the transition from start to finish for a project. So the problem here right now with the allocation, and you'll understand this, I guess, is that land gives no visible returns. You get returns from the completed if you have leased them. And if you are at least them fully, you get a higher return, obviously. So depending on the profit content, the leasing ratio and the location, you have our product, you might get 4% to 7% or something in return on investment in the green port, far below the 10%. So the magic occurs in the gray part. We need to shrink the green part, we need to increase the gray part, and we need to have a healthy size of the land bank. So that's the game we're playing right now. So we need to sell in a responsible way from the green part here. And I mean, the U.S. market, I touched upon it earlier. it's very muted right now these opportunistic actors just wanting to have distressed pricing. Look at this building. The ones here will to it later today. We don't want to sell a top-quality asset here at distressed asset prices. We have stuff still vacant premises in some of them. We focus on that and asset management. When the market is back on more stable levels, we will start more active divestments in this region. Through responsible divestment from the green and also selective product start from the gray. That is what will increase the return on capital employed over time. Focus forward here. geography is super important. We constantly assess and evaluate our geographies, which cities should we be present in, but also importantly, which submarket in each city. So we pick the submarkets that are sustainable over time and not just have a quick peak and then they disappear. And when it comes to product allocation, here you can see the history. We used to be more or less an office developer, we have stepped up in rental residential lately. And then if you see to the stack bottle right, this is when depicting the total investment of all future products in the current land bank we have, then there will be a big distribution between almost equal distribution between office, life science and multifamily. And then we also have in the Nordics, we do logistics and occasionally hotels. But this is a snapshot of the land bank as of today. Saw the commercial direction forward. Anders alluded to maximizing value creation in a slowly recovering market here to have patients with some of the assets in the muted market and really make sure that they are ready to divest. Maintain this good leasing momentum. We are in the quality trophy premises game here and attract the tenants that are really pick here. And we have had successes in the last 2 years. but we have more to lease here, and that's a very strong important priority for us. Capital efficiency, redistribute a bit between asset classes to drive returns upwards. But also right now, we are moving much more into selected project starts. We have the financial capacity to start products, very few others have. We are the one that can solve the supply gap in the market and give the solutions to the tenants. And then, of course, I talked about the U.S. assets. We need to continue to just maximize the value creation and wait for the moment to realize that value. And of course, when we do asset management in the U.S. or in Central Europe or in the Nordics, we take all the help we can get by knowledge transfer from investment properties since Asset management is core business in that part. And there are other learnings to leverage from investment properties, and I will be back on that to stay tuned for the final [indiscernible]. Investment properties, we actively manage a portfolio of [Presentation]

So last chapter of our commercial direction for the four business streams investment properties. And as Andre said earlier, this is completing the value chain. So we are one of the unique actors in the market that actually have construction development and asset management, and that is a very, very big strength. . So what is it all about? We are developing, designing, executing, leasing in the commercial property development part in the CDN in the Nordic part here. And then we can select to divest office products in the three biggest cities in Sweden to investment properties. That's a decision taken at the moment we go for divestment here. And you can see there are a couple of criteria that needs to be fulfilled in order to transfer them. We would like most of the leasing work and moving in tenants work to be done in the commercial property development. So 80% leased is a requirement, 60% occupied is another requirement. And we like to have a lot of talents in the building, increasing the tenant interfaces and get a lot of tenant insights for the future. And then geographical cluster, that's all about getting an efficient asset management and to become relevant in each submarket. So for seven projects have passed the eye of the needle here. Foreign Malmo in Stockholm and in Gothenburg, and you might have picked it up on a move that the capital employed is quite equally distributed within markets. So different product sizes. Target is SEK 12 billion to SEK 18 billion. We are approaching the start of that range. And the idea is then to have a very efficient asset management in each city and that you can have if you reach these levels of capital employed. Revenue is building up here, not a big surprise if you keep adding projects all the time or 4.7%. Anders talked about that earlier, is the rolling 12 current return on capital employed. And as Anders said, we needed to have market value increases because these are top quality assets value at a yield of maybe around high 4%, 5% currently. So if you're just picking up the NOI from fully leased buildings, you will never get to 6%, so the game plan here is that over time, also create additional value. It's a very strong portfolio from a quality standpoint. Of course, we have an environmental certificate everywhere. It's completely inflation adjusted when it comes to rental levels. 110 tenants right now. They are the most satisfied tenants in the Swedish real estate market for medium-sized category, which was the sort of achievement we got last year from the biggest survey in the real estate industry in Sweden called [indiscernible]. And we thought that after 2.5 years in operation, yet these recognitions was really inspiring for us. In economic occupancy rate could be higher. We're working really hard on that, obviously. And then a pretty new ratio for [ Manuvie ] surplus ratio. That's a pretty important one showing the net operating income divided by the revenue. So basically, how much leakage do you have on sort of the cost side. We think this is a pretty solid number as well. And we attract tenants from all kinds of businesses, which is really encouraging as well. And if you see, I mean, then we also have a lot of IT in lease lengths. So when you see the expiration profile of when we need to renegotiate and keep our tenants, et cetera, make them shrink or grow or whatever, it's very even spread over time. So this will be part of the core business to constantly try to keep the tenants help and keep them in our building. And the commercial direction here is to continue to build up the portside state here. Then one of the really big here, I would say, synergies and advantages with having this business in Skanska is that now we get a much longer-term relation with the tenants. We can see how they thrive in our building, hopefully, and constantly have a dialogue, how can we make you more successful in Skanska buildings. Maybe they would like to change their footprint. We have actually cases where we moved from one building in [ IP ] to another because they have some changed demand and we serve them helping with that. And we can also potentially know that they might need a new location somewhere we have a presence maybe in another country where commercial property development then can help this tenant to make them successful in the other Skanska project. Leasing vacant premises, obviously a high priority. And then this clusters for long-term creation. This is something that we also pointed out as a big, I would say, advantage. Because we feel when we buy big pieces of land, we do the place making, we start the first product, we divested and then we have completed a full campus someone that bought the first phase here will get the big value increase because that building is now sitting in a much bigger and completed context. So everything equal, the market value will go up. Now we can keep that value potential for the future within Skanska. We have several big sort of land areas that might be potential candidates for investment properties in the future. And then I talked earlier about a bit of the synergies like in management competence transfer between the units. We also have a lot of data that we will collect from all the properties under asset management phase data that we feed back, see what went wrong, potentially, what was right, how can we adjust and fine-tune for the future in order to become a much better developer and contractor. And with that, I would like to hand over to Lena Hök for drivers for sustainable investment.

At Skanska, we want to create buildings and infrastructure that stands the test of time. In both public and private sector, there is an increasing demand for solutions that deliver more efficient and more resilient performance. Today's customers face a growing pressure to increase their own operational efficiency, including infrastructure and buildings that are using less water, less energy, conserving water and also optimizing the use of materials. Additionally, there is an increasing concern when it comes to the extreme weather event and their impacts on the built environment and society, making it a top concern for decision-makers. Climate [ adaption ] is by that, moving up, becoming a strategic priority in order to safeguard people's lives, livelihood, but also the asset values. You can see here some of the projects that we are doing that is significant for this. The ETEN road in the northern part of Norway that are pursuing the excellent -- the [indiscernible] infrastructure excellent certification. The Eight where we are now, significantly higher energy efficiency levels than market standards and also lead platinum level. And to the very right, you see [ Slussen ] in Sweden, the giant bill water gates that control the flow of water and protect the Lake [ Maeve ] from the Baltic Sea. This is safeguarding the water supply for 2 million people. That's the impact of our projects. And the impact of our sustainability offering in our portfolio. We achieved 25% higher energy efficiency levels than market standards in our project development portfolio. That's both residential and commercial. Looking at the rolling 12 months. We have 100% certification certifications of offices in our commercial development. And in Construction, SEK 62 billion comes from projects that are pursuing certifications this at a rolling 12 months basis. That's our offering. That's our impact. We do this by engaging early with our customers, helping them to get the ability to make smarter decisions and gain greater efficiencies. The use of data plays a critical role here, unlocking those insights, improving the sign, but also precision when it comes to planning, gaining greater operational efficiencies and long-term performance. We are well positioned, just like you could see from the numbers to make an advantage of our position here. We do this by using emerging technologies and digital tools applied in design and planning for efficiency of materials and energy. We are also increasing our capabilities of using low-carbon and circular solutions, including refurbishment and renovation of existing buildings, making sure that they are being updated for modern demands and needs and efficiencies as well as prolong their lifetime. Last year, refurbishment of buildings stood for 8% of our group total revenue. And also, of course, making sure we are increasing the efficiencies of the buildings by using building management systems, where you are able to monitor, control and optimize the use of a building. All of this with a focus for us to save carbon and save costs both for us and our customers. For us, being present throughout the value chain also means that we can gain the understanding where these savings best can be made. We are gaining the expertise and also transferring the knowledge how to design, build and manage for more efficiencies, smarter solutions, resilient and also sustainable performance. This is our competitive advantage. How to turn knowledge into the performance and performance into long-term value for our customers and our shareholders. By that, I leave over to Antonia.

Thank you, Lena, and everyone that has been on stage thus far. We are now ready for our first break. We've gone through the commercial direction and our strategies and our priorities going forward. So now it's time for some well-deserved coffee. You will find coffee and other refreshments at the back of the room and just outside through the doors here. And we'll gather back here at 9:45 in 15 minutes for some further insights into our group financials. See you at bit. [Break]

Welcome back. I hope that you had a chance to grab some nice coffee. We're now going to continue with the group financials. And right after that, we're going to open up for questions. So we'd just like to turn to you that are following us from a distance. There will be here be an opportunity for you to engage with us here than just use the telephone conference number that is provided on our global web page under the Capital Markets Day event, and you will get put through to us here at the stage. So moving over to group financials. Now we will take a closer look at our operational performance, our cash flow and our capital allocation strategies. And to take you through this, I give you our EVP and CFO, Jonas Rickberg.

Thank you, Antonia. Yes. Today, I will take you first through the business streams here from the financial perspective, and then I will go into the different parameters of the group financials and so on. And now I need a clicker, I realize. Thank you. It's easier. So I will start then with the construction business stream. If it works well. Yes, here we have. And as you have heard here today, we have a lot of big ambitions here in order to sharpen our performance within this stream right now. We have increased the target to 4%. And of course, a little bit we have heard about the in order to be delivering that. And from a financial perspective, you know that it's only the gross margin and the SG&A that build up the EBIT. And over the years, we have been very stable here of 7.5%, 8% of the gross margin. And then on the S&A level, we have been on 4%, as you can see here, hovering around. . As a company, it's very important then when it comes to S&A to focus that we are very working with active management when it comes to if volume goes down, of course, we need to readjust and focus on the cost side and take that down as well. And as you can see here, it has been very -- we have been very successful of doing that lately here. Also, you can see that on the left-hand side, there is a little bit on the dip there close to 2025 here. And that is actually our ability right now we have managed to increase revenue by keeping the same cost and actually get the leverage of the situation we are into. Long term, we think that 4% of S&A will be the standing point, and that is very much driven by the fact that we are a big company with a big footprint, and we, of course, need to reinvest in the new areas that we believe in strongly here. What we have set up the company for her latest years is to set up a company with a very effective system. And when I say that, I mean very much connected then to the bidding strategy as well as execution way of how we have executed the project and so on. And our focus when it comes to that is very much on the gross margin. And I will just now open up a little bit, so you can see how we are internally then looking into some of the parameters that we are judging here. Here, you see the bid margin as well as the most likely margin as an average here. And that is actually then corresponding then to 450 biggest project that we have in Skanska more like 70% of the total value. Most likely is all of these, we are seeing all the products here. They are actually in the beginning of the phase and the mid and the end of the project phase. Also here, the most likely margin is actually what we think will be the most likely outcome of the project that we are reviewing quarterly until it's completed. Also, when we are -- you can see here the bid margin, that is actually the margin that we are entering to project with as well as when we are reporting margin, we have a little bit more of a precautious view, and that is actually that we are keeping contingencies for risk or unforeseen event that could happen during out during the project. And that's the never we'll talk about later on even more. Look at the graph here, I would like you to pay attention a little bit to the blue line here. You can see that the bid margin has increased from with more or less 1% up to 9% there. And that is actually our ability to look for the risk and make sure that we get paid for them in the bidding phase. And also the strong development here of the most likely margin that has increased by almost 2.5%. And that is actually our ability not only to foresee the risks when we are bidding, but also making sure that we are executing on them. And that is a very good strength, of course, of the Skanska, how we have been developing then. And as you remember, maybe the graph that targeting then to the 4% that we are into. So this is the fundamentals that we are working with, within Skanska if you open up some [indiscernible]. If we move on then to continue then to look into construction, but also for the future, if we open up and look into the order book, here, we have divided the order book into different margin categories. And with a different time period, as you can see there, focusing and starting on the bottom there, you can see that it has been shrinking from 6% right now to 1% to where we are right now. And that is the project that we -- that are below 0 or 0, so to say. And that has, over the years, come down to a very good level, I would say, right now. And that is one of the reasons, of course, that it's getting better profitability here. Other thing that is important to look into here actually the gray bar, that is the strong development that we can see in the good projects that we have, that is a margin that is more or less 8.5% or more. So you can see how that has increase that share. And of course, that is the strength, of course, also here within our order book and the potential we have here. Worth mentioning is also the mid space here. That is actually according to plan, I would say, due to the fact that there is, as we were into earlier, different types of contracts as well as customer mix but also a different level of S&A connected to it. So that are actually playing according to what we would like it to be. All in all, it's very much that we are working then with a portfolio and working very hard when it comes to the risk and reward balance within this area, of course. So this is very much what we can see in the future. Also moving on then to the top line of Skanska you can see had been a very good trajectory. And if you remember what we talked about in Capital Markets Day in 2023, when we said that there was a funding boost into U.S. and then maybe mostly into the civil and civil work and so on. And that has also then been translated into this revenue streams, as you can see here. also mentioned today, we were very much into how to position ourselves for new growth. And that is very important for us. Even if you're focusing extremely much on stable performance within the construction stream. We are looking at them for the growth opportunities that we can see here and mentioned in the tech and digital infrastructure and then the demographic and economic growth, as we talked about earlier as well. and then the resilient society. All in all, these will build up to new possibilities for Skanska. Opening up a little bit. You can see there in the light blue, that is a snapshot for next year. And you can see that order right now, we have a revenue in hand that is corresponding then to 68% versus -- rolling 12 compared then to Q3 and so on. And that is good number, I would say. If you compare to the latest 5 years, it actually has been in 60 to 65. So we are in the higher end here, preparing them for the future. Leaving construction business stream and moving in then to a residential area. We can see that this is an area that we talked about earlier. We are targeting a 10% return on capital employed. Right now, it will take a little bit time. You can see here in the graph that from the top to the bottom, we have lost a lot of revenue, of course, and that is mainly connected then to Nordic that has -- that we had challenges with. And of course, we really need this to come back going forward. Also paid a little bit attention then to the green line there. [indiscernible] was into it. We have reduced the cost with more than 50% here in this area. And you have seen that it has taken us to a level that it's a little bit higher than the mean in average there, and that is actually a situation that we are quite clear right now that we are having an organization that are prepared for more revenue to come, so to say. So we have reset the structure, but we are ready for more to come going forward. And of course, it's very much that we need to see that the central market -- Central Europe that has increased in the volumes. And of course, we need to refill the land bank there even more because that is what we are looking for, the profitability areas. Revenue and cost is not, of course, everything when it comes to the profitability. So if you open up a little bit and look into the -- what we can see in the stock for -- on the margin side here. We have actually then within the residential development looked into the different time parameters here, you can see in the bottom and the margins. And we can see that 2020 then was very profitable situation. And 2023, it was a very challenging situation for the residential and right now we then are in Q3 2025. Also, you can see the color there and starting then from the below, you can see that margins that are below 10% or below has actually then come down a bit from 2023. But still, it's a fact that we have some assets that are a little bit diluting the margin that we have right now. On the other hand, you can see that going down from 2023 to -- on the gray bars, you can see that we actually then coming to a better situation with most likely margin that is coming out in a better place, and that is mainly driven by the fact that we have started many new projects. Going ahead, we are focusing very much on the capital turnover and make sure that we also then taking out as much as possible when it comes to the project that is not supporting the margin, of course, as well as we are continuing to developing the pipeline with new solid and good business cases. So with this, I leave the residential stream and moving then to commercial development. And here, we can see the unrealized gains over a time period and our unrealized gains is of course, the difference between what we see is the market value as well as the total investment at the end date that is needed. And you can see that has been over the year, coming down to a situation we have right now of 10% in Q3. And of course, comparing them to what we had when we were in the super good days on 20%, it has been then a little bit of a challenging situation. Of course, we need to start more project here. And it was very much connected then to the interest rate, of course. If we take the situation we have right now in Q3 and look into what we have there, let's see, here is actually the situation with -- that we have divided things ongoing and completed and it's 10%, as I said. There is a difference there, as you can see. But if we play a little bit with the numbers and you will see pure mathematically here right now what the potential is if we see a yield change. And this is very important for us that will explain things going forward. So let's take a look here at what we have. And if we then increase -- if we have a yield compression of 50 basis points, you can see that we are actually then increasing the value to billion. Most important also that you're coming back then to a situation of almost 20% when we had on a very good market situation. So only with these few basis points change, we can see good values on -- in the returns, I'd say. And this is giving us, of course, a little bit of a situation that we are having a patient strategy for these assets. These are -- as Claes was into a very key, good assets for commercial development. And they are so good. And of course, we would not like to fire sale here in a way. And you can see just the fact that it's increasing quite good there. And also, we have, of course, the opportunity then to take advantage of the fact that we can increase the leasing here into the situation. We are not 100% leased on all the assets right now, but we could also take that time advantage into our play here. Closing the chapter of the business streams and moving in then to the financials even more, then we look into the cash flow and the capital allocation. I will then start with the cash flow. And you can see here on the dark blue that has very much contributed very good to the case cash flow as we were into because that is free working capital. And our way of working with advanced payments here. It has been very successful over the year. Right now, we are on 18% in relation to revenue. And we as I mentioned here earlier, we had a good portfolio of almost then the SEK 264 billion. That has a very good and healthy business mix to generate this good cash flow here. Also, you can see in the light blue, and that is a different dynamics around that because that is connected then to the project development that is connected, of course, to we are in the cycle of divestment or investing things here in the area of the project development. So that is more of a sluggish movement there. Lastly, but not less important, I would say, that is actually then the going forward when we have built up that it will be revenue or cash flow generation into our business, equally important, but not in a magnitude of course, to the construction that we can have and using this capital into other things within Skanska. Moving forward to what we have here in capital allocation. You can see that we have had the growth trend over the years. And then we had it on hold for a bit. And right now, you can see that we have a situation that we are on SEK 54 billion. And the gray bar there, connected 10 to RD residential development has come down a bit. Going forward, of course, we would like to start new projects where we have seen -- there we see good transaction opportunities, of course, but also that we are focusing on regaining the profitability in line with the targets that we have here. we don't really see a growth agenda here for this area when it comes to the capital employed. We have an appropriate level of capital employed already right now for the project development going forward. Moving into the strong net cash position that we have, we are very happy with that, of course. You can see that we are in the Q3 here, SEK 9 billion. And that gives us then a headroom then to the limit of minus SEK 10 million in debt of SEK 90 billion that we can use, so to say. Going forward, we have very much a strong focus here on maintaining the good working capital ratio, of course. But also, we would like to make sure we need to have enough cash to navigate the uncertainties that can happen in our industry, of course. But also taking a good advantage of if we see good opportunities here and so on. Also important is that we are keeping the credit ratio equivalent then to investment grade going forward. But that is very important for us as well. Moving on then to the equity position. Anders [indiscernible] to it. We have a great development here over the years. And right now, we are on the level of SEK 61 billion, then a corresponding and to 38% equity ratio. And this is very much depending on the strategy that we have had here over the years, how we have worked with construction, how we have worked with also the PD business and so on in order to generate all this. Of course, when we set up the need here. We look into internally here what we see is, of course, important when it comes to the underlying requirements, but also looking into a risk buffer, what do we actually need there. And we see that we are very happy with the situation that we have right now here. Also, looking into return on equity, you can see that we are right now on 10%, but we have the target then of 18%, and it will take time to get there. the most important thing is that in order to get there, it's very important that all the business streams are delivering according to the targets. And I just want to reiterate that we are focusing on this return on equity here. Moving on then here to the dividend and the good track record that we have here. We're focusing on the dividend in a way that we have a very stable and predictable, and that is very important for us. And one example of that is actually then if you look into the following the pandemic there that we cut the dividend, that was then connected and that we took it back then later on. And of course, over the years, we can see that we have a dividend around SEK 17 billion over the last 5 years. And of course, you can see here also when it comes to the gray ones that we are working with extra dividends and it has been utilized early and, of course, to distribute excess capital and so on. Finalizing here, as we were into, Anders showed this in the beginning. It's very much connected into the way we are working. We are focusing here on the EBIT generation. It's very much profit that we are focusing on. We're also looking into the revenue opportunities that we have going forward with our where you're working here with the different areas that we touched that was important for us. But also when it comes to the capital efficient to really make sure that we internally distribute the money to the most profitable areas that we can see here. All in all, of course, it's very important that we continue then to have a total shareholder return and focusing on that and the different aspects around that, I would say. With this, I hand over to Antonia again.

Thank you, Jonas. So now we're opening up for questions, and I will invite the entire group leadership team up on stage. . And I will take the opportunity to remind those of you that are watching from a distance. If you have a question for us here, then please use the telephone conference number provided and follow the instructions by the operator, and you will get put through us here on stage. And for everyone here in the room, if you have a question, please just raise your hand, and we will bring a microphone to you. And I will ask you to start by stating your name and organization. And we will start with a question over here.

Keivan Shirvanpour, SEB. First of all, a question on the new margin target, 4% EBIT. Could you maybe elaborate what's the upside potential to this market? How much could you potentially have above that 4%?

It's a target is 4% or above. And you can definitely see some more opportunity to increase both to go for segment where we have seen high profitability growth in the past here, but also by being more efficient internally. But I won't be able to quantify what's the potential. But it's a relevant target. I'm confident that the strong backlog we have, high-quality backlog support that.

And could you maybe say something about the different markets, how the margins will develop there?

Yes. If I look at last quarters, we have been performing well in all geographies. And that's also important to be able to reach a very high target, ambitious target. We need to perform in all geographies, and we have done so. In Q3, if you look at the performance, it's quite even distributed. So I would say all geographies needs to contribute.

And also, I have a question on the commercial property development. Because as you mentioned, you have a quite low activity in the U.S. market. And you have quite a lot of projects that are completed but not yet sold. And some of these, you have consistently written down the surplus values in these projects, which is now 5% for the completed project and then it's 20% for the ongoing projects. Could you maybe elaborate first of all, of the difference between the ongoing projects and the completed projects? And yes, we could stop there.

Yes, I can take that one. I mean the last 3 couple of years here. So that's why you see a much higher margin than that. And when it comes to the completed, I mean, we took quite a bit of value adjustment in the fourth quarter of 2023. So you can see a range from -- I mean, the ones we wrote down, then the book value is equal to the market value and the surplus value everything equal would be 0%. And then you, of course, have stuff in there that is more than 5% and an average is 5%. But the key thing is that the difference here is that we start healthy project, and we still have a backlog of projects that were subject to the write-downs and decrease of surplus value in end of 2023.

But some of these projects, would you say that there are potential projects that are loss-making or have a 0 margin, given that this sequence remark there at that point of time, right? .

So yes, there could be any range from the surplus value to higher surplus well than 5% in that, but we don't comment on individual projects.

Very good. We have got another question of here.

Graham Hunt from Jefferies. I've just got two questions. I'll start with construction. So you talked a little bit about the strong demand you're seeing in data centers in Georgia and Arizona. But it's something we haven't seen come through into the order book in the last few quarters. So just wondering if you could comment on that and when we could see that demand come through into your orders?

So if you look back to last year, we had very strong order bookings in building for data centers. It slowed down a little bit this year. We had a new administration come in. There was some volatility in the market. We're also working with our clients, so they were changing some of the technology, cooling technology, how we cool these data centers, these hyperscalers. So -- but we're in constant conversations with them now, good opportunities on the board, so we expect our orders to pick up. But they have been staffed off in a little this year after a very strong 2024.