Skanska AB (publ)

Good morning, everyone. It's 10:00.

I am André Löfgren. I'm heading up Investor Relations at Skanska, and I would like to welcome you to the presentation of Skanska's 6-month report for 2018.

The presentation will be held by our CEO, Anders Danielsson; and also our CFO, Magnus Persson. After the presentation, we will open up for questions.

And with that, I hand it over to you, Anders.

Thank you, André. If you look -- before we go into the figures, you can look at the picture here.

It's a picture of our project in Lund, European Spallation Source, ESS, which we are building. It's funded by 15 European nations.

Let's go into the figures, 6 months' report. Year-to-date operating income declined 41% to SEK 1.9 billion.

And in addition to previously announced restructuring charges and the write-downs in our Polish operation during the first 6 months of this year, we had the write-downs of SEK 520 million in our U.S. operations in the second quarter.

The comparable period includes the divestments gained from our stake in Poland's A1 motorway that was divested during the first quarter last year. On the plus side, our construction operation in the Nordics remains strong and stable during the quarter.

The residential market in Sweden and Norway remains slow. Later in the presentation, I'll talk more about it.

In our commercial development stream, high levels of divestment and project starts continued. At the beginning of that year, we launched a number of strategic initiatives across Skanska to reach our target operating margin, and these initiatives are proceeding well.

Also, we continue to maintain a strong balance sheet, which allows us to respond to shifting market conditions and capitalize on any opportunities that arise.

Construction. Construction revenue increased 6% over the last 6 months' period, just over SEK 75 billion.

Order bookings decreased 15% to nearly SEK 72 billion, and our book-to-build ratio and order backlog also declined. These decreases reflect more disciplined bidding and also in line with our strategic actions.

Operating income rose 6%, although there were large write-downs in the prior year's 6 months' period, distorting the comparison. Our operating margin remained below 1%, largely due to the charges and write-downs I referred -- referenced earlier.

Our Nordic operation continued to perform well. The SEK 520 million write-downs in U.S.

Construction in the second quarter mostly relates to additional cost overruns in the civil project due to low production rates and delays. The recent write-downs in the U.S.

demonstrates again the need for the action we've been implementing to mitigate future write-downs and to rise our margin to an acceptable level. We are seeing initial results in Poland, where our operation has stabilized during the quarter, even though we have -- we are in the middle of a major restructuring program and that will be completed mostly this year, but we will also see some action next year.

Residential Development. Residential Development has -- the revenue has decreased versus last year to SEK 4.2 billion.

The homes sold declined 37%, while we started 8% fewer homes in light of current market conditions in Sweden and Norway. And operating income decreased 44%, although our operating margin improved slightly.

Return on capital employed stood just above our target level, but is down substantially as a result of lower profit and higher capital employed. The growth rate of the residential markets in Norway and Sweden, that's our biggest market, remain well below exceptionally high levels in earlier years; however, the Finnish and Central European markets are still good.

Also, the underlying housing needs remains good, strong in the longer term, which is why we plan to continue to grow in this area of our business. Related to this, we will use our balance sheet strength to take advantage of current market conditions, including land bank opportunities.

Let's go to the Commercial Property Development. In our commercial property business, operating income increased 6%, with a slightly higher gain on sale over SEK 1.8 billion.

Return on capital employed increased to nearly 17%, well above our target level and despite the higher capital employed. During the 6 months' period, we also saw a high level of project starts, bringing total projects to a number of 48.

And the investment value at completion stands for SEK 31.8 billion. Occupancy and completion rates are at good levels.

Leased space grew 5% to 428,000 square meters on a rolling 12 months' basis. And across our home markets, there is still strong demand from tenants and investors based on our current demand forecasts.

We plan to continue growing this business.

Infrastructure Development. Operating income turned negatively, mostly due to the earlier communicated restructuring charges of SEK 120 million and higher selling and administrative costs.

Also, their revenue is uneven across reporting periods due to the nature of this business. And related to this, the prior year also included the divestment of A1 motorway in Poland.

The NPV and surplus value of our infrastructure portfolio both rose, while return on capital employed was much lower at 13.1% for the reason I just mentioned, but still above our target level. Lastly, the financial close of the Rv3 PPP project in Norway represent a new addition to our infrastructure portfolio.

Construction, the order situation. Here, you can see the order bookings, rolling 12, comparing to the order backlog and also revenue, rolling 12 months' basis.

As you can see in this graph, our order booking and backlog are trending downwards. We are taking a more selective approach to bidding in order to better avoid taking on project that becomes unprofitable.

This, together with a greater operating discipline at the project level, are intended to raise our operating margin for Construction.

So if we look at the order bookings per geography, here we can see that the decrease in order bookings is mostly related to the U.S. market, where the bulk of our write-downs have occurred in the recent year as well as the current quarter, requiring us to be more selective bidder.

In Sweden, order -- the bookings are slightly lower, but the pipeline looks promising, so it's nothing I am worried about. In Europe, the upward trend in booking was offset by a decline in Poland, where we have substantially reduced the size of our operation as part of our restructuring initiatives.

Magnus will now review the business streams in more details. Please.

Let's start with the Construction business stream then and the income statement here. We accumulated revenues in the first half of this year to the value of SEK 75 billion, which is up a bit then, 6%, from the same period last year.

And if you note the graph on the top part of the slide, there, you can see that on 12 months' rolling basis here, revenue is still increasing. You just heard that our bookings are coming down a bit, around 15%.

So this will, everything else equal, translate into revenue going forward here.

We had operating income of SEK 540 million in the first 6 months, a fairly large currency effect to that of minus 12%. And then we come down to operating margin of 0.7%, which is then the same as the same period last year.

But the big math during the quarter is, obviously, the write-down here of SEK 520 million in the U.S. Construction business here, mainly related to one civil project, productivity issues and design issues, leading us into delays here.

We think some of this is recoverable, but it will take time. But we are, of course, protecting our contractual rights in this situation very hard here.

As Anders pointed out, there's been quite a lot of movements in the first quarter here -- or the first 6 months of this year. And if you take together all the sort of project-related one-offs here, with write-downs and the release of the money from the claims settlement in the U.S., we had a negative effect in the first 6 months of SEK 900 million here in the Construction stream, and that is basically the same effect as we had the first 6 months last year here.

Then we should not forget the nonoperating one-offs here in the first 6 months either, which are the restructuring costs in the first quarter of SEK 430 million and also the positive effect of the curtailment, basically the closing down of the U.K. pension trust here that gave us SEK 300 million in the first quarter.

Important figures to keep in mind if you want to do an analysis of the underlying development of the Construction business here.

So moving to the different geographical markets. You can see here that the Nordics are performing very, very well.

Margin in the first 6 months of the year of 3.9%, higher than last year. And in Sweden alone, 4.6%, in the first 6 months.

The quarter isolated for Sweden was even better than that, 5.3%. So very strong business here in the Nordics.

In Europe, very tough first quarter, as you know, but -- so the margin here for the first 6 months is negative. But in the quarter isolated, we're actually back in black in Europe now.

And as Anders pointed out, it's a tough situation in Poland, but the problems here are more ring-fenced now and they are easier to address. It will take time to fix this and return to sort of where this business should be, but we do feel better in terms of the status of the operations there despite the very disappointing development.

In the U.S., obviously very negative in terms of the write-downs here of SEK 520 million. The quarter alone is quite similar to the quarter last year of around minus SEK 170 million here.

And in total for the first 6 months, as you can see, the margin in the U.S. business was 0.7%.

Let's move over to Residential Development. And this business stream is, of course, impacted by the market development here.

And as you can see, we have a revenue decline of 48% first 6 months this year compared to the same period last year. And the biggest drop here, we can see, is quite expected in Sweden and in Norway, while Finland is a secure and stable market there.

So there's a big difference in the market situation across the Nordics right now. Very, very strong gross margin in the first 6 months this year, 23%.

Here, I want to point out that we have an unusually high positive effect of reserves that we have released in the first 6 months this year. And if you adjust the gross margin for those reserves to sort of a normal level here, we are about at the same level of gross margin as we had for the comparable period last year then.

Selling and admin at the minus 8.4%. That is quite, obviously, too high for the current volumes of this business here.

We are obviously watching here the market development very closely. And if needed, we are prepared to sort of act on that, to have an organization that is rightsized for the market here then.

I want to take the opportunity also to comment a little bit on our revenue recognition principles in residential development because different actors in the market do this differently. Our principle is that we recognize revenue at the contract date.

Some see this as sort of aggressive. We would disagree, and I think it's quite transparent.

Because as an external spectator to our numbers, you will very quickly see how the market is moving when you read our numbers, which is sort of very good if you want to understand where the company is going here. But because we do this, we also carry risks over sort of the entire completion period for each of these projects here, and that means that we set aside reserves when we start these projects to cover these risks.

As we complete the project and sort of handle the risks, we successively release the reserves here. Now when the market is very good and we have a well-performing business, we end up in situations where we have big reserves left at the end of projects here, and this is the situation that we are in now.

So when these projects approach completion, we will have bigger effects of reserve releases here.

If we then move to the geographical markets and look at the Nordics, we had an operating income for the first 6 months of SEK 550 million, of which Sweden then SEK 340 million. The European business here, SEK 70 million, performs very well on a very good market here, 14.5%.

It's not a very old business this for Skanska, so a very sort of a solid performance here.

Quarter alone, I want to highlight then the margin in Sweden in the quarter alone, which you can see in our report, but you can see this in this presentation, which is 21.4%. The majority of the reserve effects that you see are in the Nordics here and in Sweden.

If we look at the homes started and sold, you can see that we sold around 1,500 homes this year now versus 2,400 last year. So that's around minus 37%.

Started around 2,000 homes versus 2,100 last year. And if you look at the growth at the top, you can see that sales are coming down, and we are also reducing the number of starts here, but not at the same pace.

We have done sort of various selective price adjustments on some projects and units in a very measured way here.

If you look at the number of homes sold also at minus 37%, you can relate that to the revenue decline of minus 48%, very quickly realize that the sales price per unit is coming down here, which is quite normal if you reflect on the situation because an increasingly large share of our sold units are coming from the BoKlok, which is operating in the more affordable segment of the market. So the average price for the portfolio comes down.

For the other units, you can say that the market is weakest in Stockholm and Sweden here, so the relative share of apartments sold from the Stockholm market also comes down, and that is the market that has had historically the highest prices. So these 2 things together explain the shifts here in the price per unit.

If we look at the homes in production, we currently have around 7,600 homes under production, little bit less than the same time last year, 7,700, of which we have sold 71%, down from 80% same time last year. We'll come back to that on the next slide and comment a little bit on that.

Unsold completed homes is usually a very important metric to keep both our eyes on and yours as well, basically the same as the same period last year. We increased this with 11 units, which is not a lot given all sort of the -- given the situation in the residential market here.

These 11 units are in Sweden.

Now if we look at the next slide here, you can see the development of the sales rate in our portfolio over time. And as you note, it has been increasing then from the beginning of 2014 steadily up to the mid-part of 2017 and then it is coming down.

Our view on this is that when we were up touching around 80% here, from a commercial point of view, that is actually too high. We would like it to be a bit lower.

And the 71% we are at now, we're quite comfortable here. We are not worried in the sense that we have too low part of the portfolio that is presold there.

And also think it's important to point out that the right level of sales rate in the portfolio is quite different across different geographical markets and also depending on which business model you are in here.

We move to Commercial Property Development then, very solid performance here. We are keeping our own expected pace in this business.

And following a quite fantastic performance in the first quarter of the year, Q2 was also good but a little bit slower. We have made 5 transactions in the quarter.

Gain on sale in the quarter was SEK 700 million, and for the first 6 months, SEK 1.8 billion. In the quarter alone, we had a development margin here of 21%, which is slightly lower than what you are used to seeing, which is more 23%, 25%, something like that, but I want to emphasize that this is only due to the mix of properties or a mix of assets that have been divested during the quarter.

So it's not to be interpreted as any trend that you should sort of change your assumptions based on that here. We still expect that this year will be roughly the same levels as for 2017.

If we go to the next slide, we have today 48 ongoing projects in the business stream. We have invested SEK 16 billion in those over total of SEK 32 billion that will be invested at completion.

Of these 48 projects, 14 are already divested in the segment reporting here, representing a market value a little bit over SEK 5 billion here. So we have a very sort of good situation in terms of expecting continuing divestments going forward here.

And if you look at the graph, you can see the revenue from divestments here in a rolling 12 months' basis, which are at the very high level. And the green line then represents the operating income from divestments, also that at the rolling 12 months' basis.

For the first 6 months of the year, if you do the math of the table at the bottom here, we have a development margin of around 25%, which is, I would say, more of what should be expected.

Unrealized and realized gains, we continue to build up our unrealized gain in the portfolio here, and it is this development that leads us also to want to continue to invest in this business. We create these gains by doing project development work and leasing of that lease.

And of course, as we transact, sell these properties, we tap out or realize these gains from the portfolio. In total, today, we have about SEK 9 billion in unrealized gains, of which SEK 7.7 billion is in our ongoing projects here.

Leasing, which is one of the most value-creating activities here in this business, as you can see, leasing is still at a high level. It comes down a little bit in the second quarter, but the leasing market is still very good out there.

You can also note, if you look at the red versus the green line, that we now have leased 45% versus 52% of completion rates in our portfolio. Looking at the relationship between these 2 lines is a very good way to understand sort of the risk profile in the portfolio.

Now we are -- have a higher level of completion in the projects than we have leased out the spaces we have developed, but that is us taking the opportunity to work in a very good market there, so we think we're good -- well in control here of the portfolio.

If we move to Infrastructure Development then, the main event in the quarter here was that we closed -- had financial close for Rv3, which is the Norwegian motorway that Anders highlighted as well. We have then received success fees for that.

And in addition to that, you may want to know that we have released some of the provisions that we took in the first quarter in this business stream, which impacts S&A. We've also divested partial the Rv3 to the Norwegian pension trust, which then shows up as gains from divestment here.

In terms of the portfolio for Infrastructure Development, very small movements. Obviously, we have added the Rv3 to the portfolio, but the big change here is the derisk basically, the change in the time value of money here in the portfolio.

Apart from that, no major changes to that.

So we come to the group level. We take all the business streams together.

The operating income then amounts to SEK 2.4 billion compared to SEK 3.8 billion last year, but then you need to recall also the divestment of the A1 motorway, which was done in the first quarter of 2017. That distorts these comparisons quite a lot there.

Central line, minus SEK 454 million, includes then SEK 100 million of restructuring costs to get that comparison correct there. Net financial items, we had -- we have had the effects of revaluations or fair market value of the interest rate swaps.

That impacts us here. That's the main part of that impact.

And in terms of taxes, as you can see, the tax rate here is at 18% versus 9% last year. And to forego questions on that, we can say that the previously mentioned divestment of the A1 motorway was made in a very tax-efficient way last year.

So it's -- the change here is basically due to the mix of where the profits come from. So profit for the period, SEK 1.6 billion versus SEK 3 billion last year.

We move to cash flow. I'll say, so a little bit uneventful cash flow here, which is good from a CFO perspective.

We continue to hand over residential units and commercial properties, and we do expect to gain another -- get another SEK 3.1 billion in inflow of cash during the second half of the year from commercial properties that is sold but not yet handed over.

We have a strong position in the working capital for the Construction business stream. We remain high at 14% in relation to revenue accounted on a rolling 12 months' basis.

And if you look at the absolute terms, we do have now around SEK 23 billion, up from around SEK 20 billion in the comparable period in terms of what we call free working capital, which is a good way of both protecting ourselves in project circumstances and also a good source of financing for the group here.

If we look at the investments and divestments, the top chart here, you can see that we have been in a net investment territory since the beginning of 2017, which is entirely according to plan. And we're continuing to invest in the different project development streams here.

We have increased capital employed with around SEK 4 billion since year-end here. Short to medium term, of course, we are, as I said before, looking closely at the residential development market and how that develops.

But long term, we were very set on continuing to grow this part of the business here.

The financial position for the group, we're still in a very good position. We increased our net debt somewhat to SEK 4 billion from SEK 1.1 billion at the year-end.

Our own measure of dry powder available, which is the operating net financial assets and liabilities, comes in at SEK 6.5 billion versus the SEK 9.7 billion at year-end. And we have a very comfortable equity-to-assets ratio of 23.4% versus 24.8% at year-end.

With that, Anders?

Thank you. I'm going to talk about the market outlook in our different streams here, starting with the Construction.

In the Nordic, it's unchanged. We have a mixed picture in the market in Sweden on the building side.

The residential market is slowing down somewhat, whilst the commercial construction is still strong. It's a stable building market in Norway and Finland.

It's a very strong civil market in Sweden and strong market in Norway, but with a fierce competition. The civil market in Finland is stable.

In Europe, the Poland building market is stable. The Brexit continues to impact the U.K.

nonresidential market on the building side, commercial buildings. We still see a strong, stable civil market in U.K.

and Poland as well; somewhat weaker in Czech Republic though. We can see rapid cost escalation in Poland and Czech Republic overall due to very overheated markets and very low unemployment rates.

U.S., it continues to be a good market. Fierce competition.

Very strong civil market and also strong building market in the segments and areas -- geographies where we are operating.

Going into the Residential Development. In the Nordics, it's slowing down, more continued to be uncertainty in the market in Sweden and Norway.

Slow sales pace in Stockholm. We can see that Finland is steadily improving.

The economy, the GDP growth has improved the last years. In Europe, it's a robust -- continued robust market in Central Europe.

Let me go to the market outlook, Commercial Property Development. In general, there's a strong demand, tenants -- from tenants and investors.

Vacancy rates are low. In the Nordic, we can see a high interest from investors and low vacancy rates in -- especially in Sweden.

Finland is improving. You can see the market.

Europe, we have a strong demand in Poland and improving in other parts of Central Europe. And then in the U.S., we have a strong investor appetite and good tenant demand, and we're also looking for more market opportunities there on the West Coast.

Market outlook for Infrastructure Development. It's a good market for PPPs in the U.S., but the competition is considerable.

It's tough competition. We can see a thin pipeline in other markets.

We have a couple of projects in the pipeline in Norway, which we won one of them, so -- but otherwise, it's very thin.

All right. Thank you, Anders and Magnus.

And now it's time to open up for questions from the audience, so please follow the instructions from the operator. Thank you.

I've got 3 questions, please. The first one is on your residential margins.

Can you clarify that the impact from releasing provisions was actually SEK 230 million, so this would take your residential margins in Q2 to 7%? And how does this fit into your full year expectations for residential margins?

Okay. In terms of the Residential -- I'm sorry, I have an echo here.

In terms of the Residential Development margin, what we said was that the underlying margin for the Residential Development stream this year adjusted for the unusually large positive effect from the release of reserves was approximately the same as last year. And in terms of how that fit into our full year forecast, that I would like not to comment to.

We don't give any guidance on that.

Okay. Can I just have a follow-up question then?

In Construction, I believe your previous guidance was for like-for-like decline on revenues due to exiting Poland and the other businesses. Your like-for-like is still up.

So when should we expect a decline in top line? And maybe if you could quantify how much you are expecting this over the next, 1, 2 years.

The strategic decision on -- in January earlier this year will be executed during 2018 and some of the actions in 2019. So that's the action point.

And you can also see on -- that we see already some result on the order intake, that we are more selective when we bid for projects in certain markets. And regarding Poland, we are in the middle of a major restructuring where we basically cut the company and the Polish operation in half.

So we're going to concentrate on 6 to 7 cities where we have ceded the operation on all the operations.

A couple of questions from me as well. Could you please start out with the U.S.

and sort of help us out here? Could you elaborate what -- well, you talked a little bit about the write-downs, but what were the triggers?

I mean, this was a project which you already had progress in, if I understand it correctly. When will it be finalized?

How will it impact the sort of dev revenue? And why is the underlying margin in U.S.

improving when you adjust for these write-downs?

This -- the project where we took a write-down now in the second quarter is an old project that we have seen problems before. It's a large project, so we still have a few large projects with so-called dev revenue that will continue during 2018, '19 and also 2020.

So that still remains. And that the -- so we are not satisfied at all with the margin in the U.S.

operations. So we are much more careful today which projects we bid for.

We have done and analyzed it going back 10 years and looked where we have made money, in what segments, which projects, types and which geographies. So we know where our sweet spots are.

And we are focusing on bidding in the sweet spots going forward, but it will take some time to increase the profitability in the U.S. operation due to the large backlog.

And just a follow-up on that note. I mean, if we should look at the underlying profitability or, well, [indiscernible] since it's part of your [ own ] business, of course, but if you adjust for this large write-down, we still see some improving profitability.

Could you elaborate why this is coming right now? Is it loss-making projects that is -- well, excluding the write-downs, that is decreasing?

Is it that their underlying profitability on the sort of projects that come into the portfolio? Could you help us out, please?

Yes, we have -- I mean, the majority of the U.S. operation are performing on an acceptable level, but we need to get away from these write-downs, and we need to work through the problem projects.

And we are very careful. So we make sure that we are bidding for projects where we can see we have a competitive advantage.

And I expect the margins to increase over time.

If I may also go to Sweden, I mean, in the construction stream, as you mentioned in the presentation, very, very high and strong margin in the second quarter. Was there any provisions, reversals and/or finalization of some large projects that come in with onetime positive effects in this quarter?

Or how would you sort of characterize the Swedish underlying profitability?

Niclas, this is Magnus here. I mean, any given quarter in a construction business, you will have different projects that are closing out, and you will have various sort of provision releases there.

So obviously, that is part of the strong margin, but I want to emphasize here that the Swedish business is performing steadily at the very high level. And this sort of level of margin would not have been possible if we had not had that situation here.

So you can't really attribute it to one single project or source here.

Okay. And then one final question, if I may.

With same peers, both Veidekke and NCC continue to do losses, although they're not quantified fully, related to Norway and the sort of problems on the infrastructure side. What's your status in Norway and the risks or challenges as you see it?

It's stable. I would say the performance is overall stable.

And we had some issues there, if we go back to 2011, we introduced a major turnaround program at the time, which means we are again more careful which projects we go for. We make sure that we have the right team with the right competence before we bid -- even bid projects.

We also have improved a lot of processes -- core processes that you need to have in place to have profitable construction operations. So we have done that work in a systematic way for several years in Norway.

So we have a stable business there now.

I would like to start the follow-up regarding the U.S. write-downs.

And I mean, I understand that you will continue to see dev revenues having a negative impact on the margin. But can you say anything about the risk of more write-downs of the magnitude we saw now in Q2 this year and we also saw in Q2 last year?

We always take all costs and all write-downs that we see, and we have done that. We went through the projects very carefully, including this one on the -- we are taking everything we see right now as always.

Okay. And regarding, I think, your largest project ever, LaGuardia Airport, can you say anything about the status of that project?

Do you see big risks of problems with the profitability in that project?

It's a large project. We are in the middle of it, getting close to 50% completion there.

And it's a tough project. We have put the best organization we can come up with on that project to make sure that we deliver to the client, the ultimate clients, on time and within budget.

So we are -- it's a tough project, but we are -- we're having the best. We have a lot of attention on it, and we have the best people we can come up with.

So we are determined to complete the project successfully.

Okay. And regarding the Swedish construction operation, you turned from quite strong growth in revenues in Q1 to a decline in Q2.

Should we expect revenues to continue to decline in Sweden? Or should we more look at the outcome from the first half?

Tobias, this is Magnus. No, I don't think you should sort of continue to expect that decline.

I mean, it depends on how the bookings are panning out over the year when you start and the burn rate in some big projects here. So the market in Sweden in the big parks is fairly good, and we have a very solid backlog of large infrastructure projects here that are building up in completion here.

So I wouldn't see that as a sort of worry, if I were you.

Okay. And regarding your free working capital, which you talked about, we saw very strong improvement in this quarter.

But given that you expect revenues to decline when you leave parts of Poland and also segments in U.S., how big impact should we expect on the free working capital in relation to that?

Yes. I mean, obviously, these 2 things are connected here, so -- and the size of the impact depends on the size of the business when we are completed with these strategic initiatives here.

I know that we guided you in Q4 to the size -- the expected size at that point in time of that and then you can sort of do the math. But you need to also to recall that the underlying operation -- the sort of operation that we would like to stay in really be strong and then continue to be, and that is also shifting here over time.

But I mean, you're right in that, in absolute terms, the working capital should, of course, follow the revenue development there.

But should we expect the shift in free working capital to be larger or smaller compared to the shift in revenues?

You mean relatively speaking? No, I think you can expect it to be approximately the same sort of percentage, then you will see some lags when revenue goes down in comparison to free working capital because you get more projects that are at the late stage of completion when you sort of down-scope the organization.

Okay. And final questions, regarding Residential Development, if I may.

In this quarter compared to Q1, you see strong growth both for revenues, EBIT, production starts and sold units. Is this like temporary volatility between the quarter?

Or is it related to an improvement in the market? And what should we expect for Q3?

We have a strong quarter in Residential Development and that's due to the fact that we have seen and completed projects that have been very successful. And we have released some provisions that we have because we are -- have the segment reporting.

So going forward, we are focusing on the segments where we can see the market is trending. And it's also we have seen the market is -- the lower affordability segment is growing.

So BoKlok is a higher part of our sales this year compared to last year.

Yes, but the increase of number of sold units of 43% quarter-over-quarter, is that because you haven't been more active lowering prices? And I mean, is that the reason?

Or is it something else?

Tobias, Magnus again. You're referring to Q1 versus Q2 or -- I didn't really understand your question, to be honest.

Yes, the number of sold units in this quarter compared to the previous quarter in Q1, it was much lower activity.

Okay, yes, okay. Then I get the question.

Well, you can say that the residential market in Sweden, that takes off basically sort of May and then even more in June before it slows down before the summer. It's a lot more active than the early parts of the year there.

I have 3 questions, please, the first one on the U.S. and the comment that you are making that you possibly can do some recovery on the write-down.

We did see some positive signs in Q1. Were there any recoverable amount in Q2 or they will come kind of lumpy, so you will let us know when that happens?

Albin, this is Magnus. We commented on that in Q1 because the size of that claim recovery was so large that it distorted the numbers and we wanted to give you sort of a sense of where are our underlying business.

We will obviously do the same if that situation comes back here. Then, I mean, claims and claim settlement, that is, in a way, a normal part of the business, but at smaller amounts.

So it happens all the time. But if we get such a big chunk again, we will very likely go and comment on that to give you a direction of where we are underlying.

Okay. And then on the construction stream, in general, obviously, now looking into the remaining part of the strategic period to 2020 and then the comments you are making about the projects you have with debt volumes, is 3.5% margin target still relevant, you feel, for this period?

Or have we kind of lost so much in terms of volumes not generating [ EBITA ] is not really doable?

I think the 3.5% target is ambitious, but still reachable. But it will take some time before we can get there due to the fact that we have a [ hot ] backlog, especially in the U.S.

operations.

Yes. And then finally, just, Magnus, the comment you made about commercial property for the full year expecting a similar level as last year.

Was that referring to revenue? Or did it also include EBIT?

It refers to the profit and loss.

The first one, I just wanted to ask for an update on Infrastructure Development. Are you perhaps working now on some new divestments in that division for the rest of 2018 or perhaps for next year?

Is there [ anything new ] on the Karolinska Hospital project perhaps with respect to a potential divestment? And number two, I would just ask perhaps just to follow up, obviously, on the topic of provision reversals in the residential business.

And I realize that you generally don't provide much of a guidance, but is that, assuming stable market condition, similar market conditions for H2? Is that an effect that we should expect to continue to some extent into next -- in the next quarter, so that was more or less like a one-off impact in Q2?

Thank you. I can start with the Infrastructure Development question here and the divestment.

We don't have -- we don't see any divestment during 2018. And when the rest of the project portfolio divest, we don't give any forecast on.

And can you take the residential one, Magnus?

Yes, sure. Marcin, Magnus here.

In terms of your question of -- or the impact, can you expect that sort of impact from the release of reserves also going forward? I would say, no, you can't count on that as being sort of the -- any type of steady state.

It's a lot less normally. There's always some because if you close out profitable projects, you will have some, but a lot less.

Should it happen again, we will make sure to sort of highlight that. It is important, I think, to give the message of where we are underlying.

A couple of questions from my side as well. First of all, on the U.S.

write-down, you mentioned that there have been delays in this project before. What is the major shift in Q2 versus Q1 forcing the write-down?

It's further delays due to low productivity and also design changes. So that's the major issues that triggered this write-down.

And given those explanations, why should we feel confident that there are no further risks related to this specific project?

We have analyzed the projects and identified the risks that we can see. We also made careful forecasts how to complete the project.

So we have a plan for that, and we also put more resources into the project and made changes in the senior -- some leadership.

And then moving over to the Residential Development unit. You started around 2,000 units in the first half compared to 1,500 sold units, and the number of employees grew by 10% year-over-year.

Why are you starting more units than you're selling? Is this because you believe that the market will improve and/or is it related to that you're noticing that you're able to sell whilst you get close to completion?

The latter factor is, of course, quite important because it's a lot more difficult now to sell something that will be completed 2 or 3 years ahead in time. That's not really interesting for consumers any longer, which means that you need to have a higher -- sorry, lower sales rate on the average in the portfolio in those markets.

But when you do that and where you can present consumers with that option, that is a sort of a relevant time frame from today, there's actually quite some interest in the market from them. So that is part of that.

We are coming from a situation where we have had very little to sell off the shelf. And therefore, we need to compensate for that, to some extent, at the same time as we are watching the market development very closely because here we need to be forward [ length ] enough to make adjustments depending on where we think the market will stay.

If it stays low for an extended period of time, we need to make certain adjustments, obviously. So that is the reason to why you see this gap between sales and new starts here.

But given that there are more projects reaching completion in probably in the second half, shouldn't that also be a positive impact on sales in the near future?

No, but you're referring maybe to my comment before about the release of reserves, I guess, and reserves are not held at the portfolio basis. They are held at the project basis.

So you can have very profitable projects that are coming to completion even if the sales rate, on the average, for the portfolio has come down.

All right. Well, then, that it's from us as well and just want to thank you for your attention, and enjoy the rest of the summer.

Thank you.