Peab (PEAB) investor relations material

Strategic direction and market outlook

• Maintains focus on four synergistic business areas, leveraging local presence, collaboration, and strategic assets to differentiate, with strong emphasis on sustainability, digitalization, and adapting to megatrends such as urbanization, demographic shifts, and climate adaptation.

• Expects continued growth in infrastructure, energy, and defense sectors, supported by significant public investments and increasing demand for security-classified projects across the Nordics.

• Housing demand remains high in Norway and Finland, though new construction is recovering from a low base; company adapts by reducing exposure and cost base, while maintaining readiness to scale up when demand recovers.

• Sustainability and digitalization are central, with increasing customer requirements for emissions, circularity, and traceability, and ongoing investments in AI, automation, and efficient processes.

• Sees stable macroeconomic conditions, with inflation and interest rates normalizing, and anticipates moderate GDP growth in core markets.

Financial performance and targets

• Operating margin target remains above 6%, with recent results at 5.0% and strong performance in Industry and Civil Engineering, despite challenges in Housing Development.

• Capital-intensive segments now contribute 66% of operating profit, highlighting a shift from residential to industrial focus.

• Net debt/equity ratio is maintained within the 0.3–0.7 target range (currently 0.5), and cash flow has strengthened, supporting ongoing investments and strategic flexibility.

• Dividend payout has been below 50% for two years to prioritize financial stability, but management signals readiness to return to higher payouts; in some periods, payout exceeds 50%.

• Non-financial targets show progress in customer satisfaction (index above 75), workplace quality, safety, climate impact (Scope 1 & 2), gender diversity, and employee engagement above industry benchmark.

Business area developments and investments

• Order book and backlog have grown, with a shift from residential to infrastructure, defense, and public sector projects, and around BSEK 17 in potential future orders from phase 1 contracts.

• Major investments in automation and sustainability in prefab factories and industry segment position the company as a leader in low-carbon construction materials, with 35% of net sales from sustainable products.

• Industrial segment benefits from price increases and efficiency, while volumes have stabilized; prefab and rental units face challenges but are being upgraded.

• Project development emphasizes controlling ownership, low new investment needs, activating existing land bank, and increased focus on public properties and attractive microlocations.

• Integrated business model, strong local presence, diversified order book, and high share of public customers (56%) provide resilience and competitive edge.