Skanska AB (publ)

Good morning, and a warm welcome to the presentation of Skanska's Fourth Quarter and Year-End Report. I'm Antonia Junelind.

I'm the Senior Vice President for Skanska's Investor Relations. And joining me on stage here in our studio today is our President and CEO, Anders Danielsson; and EVP and CFO, Pontus Winqvist.

Shortly, they will take you through an update as of the last quarter, provide you with some further insights on the business operations, financial performance and our market outlook. And after their initial presentation, we will open up for questions.

And there is an opportunity for you to ask questions either if you're joining us here in the room or you can use the telephone conference number provided, and then the operator will put you through to us here in the studio. But more information on that will follow later.

So with that brief introduction, let's take a look at the fourth quarter performance. Anders, please take it away.

Thank you, Antonia. And good to see everyone here in the room, and welcome to you on the web as well.

Before we start the presentation, I wanted to look at the picture here on the slide to the right. We had a very successful divestment quarter when it comes to commercial property development.

And one of the deals was in Port 7, as you can see here on this slide in Prague, Czechia. That was 3-office building that was divested in deal.

If you look at the fourth quarter report, so we had a very good construction margin in the quarter and also the full year. It is on all-time high levels.

So very good performance by the whole organization, and we will come back to that. But all geographies, all units are performing on a very high level.

So that's very encouraging and good. Mixed performance in Residential Development.

We continue to have a strong market in Central Europe, weaker in the Nordic. So we have divested some unsold completed in the quarter with lower -- that was started before the market went down.

And by that, we also have a lower profitability on those. But it's good that we are able to divest completed homes.

Good divestment activity in Commercial Property Development. We managed to divest 8 real estate in the quarter and also solid performance in investment properties.

Operating margin in Construction, 5.6% in the quarter, very, very high, strong. And for the full year, we managed to beat our new targets in Construction of 4%.

So we managed to deliver 4.1% for the full year. Return on capital employed in Project Development, lower 1.8% due to the weaker market, rolling 12.

And return on capital employed in Investment Properties is stable, stable result, 4.7% on the rolling 12 and slightly up from last year here. Return on equity, 10.2%, rolling 12, and we continue to have a robust financial position.

So we are able to maintain that. The Board has proposed a dividend of in total SEK 14 per share, which is SEK 8.5 in ordinary dividend and SEK 5.5 in extra dividend.

And we also managed to reduce the carbon emission in our own operations, Scope 1 and 2 with 65% since the baseline year 2015. Here, we have a target of 70% reduction in 2030.

I will go into each and every stream now, start with Construction. Revenue close to SEK 44 billion, and we have some slightly up from last year, if you look at local currencies.

Order bookings, SEK 43.5 billion, and we have a good order intake. And you can see that we have a book-to-build of 105% for the rolling 12 months, which means we are able to fill up the order backlog compared to how much we produce here.

And the order backlog is continued to be on a high level, historically high level, close to SEK 258 billion. Operating income, SEK 2.5 billion, and we have an operating margin, as I said earlier, 5.6% in the quarter.

So strong quarter result and all markets, all geographies are delivering very good results. So great work by the whole organization and being consistent with the strategy and also able to execute the projects in a very good way.

We -- as you know, we have raised our target. We did that -- communicated that in the Capital Markets Day in Q4.

The target is at or above 4% operating margin, and we have beaten that for the full year. Order intake was good and remains on a high level.

Going to the Residential Development. The homes -- sold homes has been lower than last year.

We have a revenue of SEK 1.7 billion. And you can also see that we started fewer homes compared to the same period last year.

And you can see that we started -- the project we have started is in the Nordic countries. We haven't -- in the quarter, we haven't started any project in Central Europe.

But that's a single quarter. You should look at the full year or rolling 12, and it's still a good market in Central Europe.

And also, it's very encouraging to see that we are managing to sell the unsold completed and reducing that inventory to 358 homes. Commercial Property Development.

Operating income of SEK 670 million gain on sale, SEK 758 million, and that includes the divestment, of course, of the 8 properties, but it's also some release of provisions of already completed project. Return is on a low level, far below our targets on a rolling 12-month basis.

So we are working hard with that and both to increase the capital turnover and also to divest the completed assets we have. We have 16 ongoing projects, which corresponds to SEK 14.4 billion in total investment upon completion.

And we have 21 completed projects, which correspond to SEK 19 billion in total investment. Of those, we have a reasonably high leasing ratio of 72%, which means we are -- we can see that we have a positive cash flow from those assets.

It's good asset, high quality in good location. So I'm confident that when the investor market comes back in U.S., we can see -- we have a good product to offer the investors.

Again, 8 projects divested in Q4, 12 during the year, 2 projects handed over and 2 projects started in the quarter. We started the projects in Central Europe and the Nordics.

And we can see a good leasing activity and strong average leasing ratio in the portfolio of both ongoing projects and the completed projects. Moving on to Investment Properties.

Stable result, SEK 83 million operating income. We have increased the occupancy rate to 85% compared to 83% in the Q3.

And portfolio consists of 7 high-quality office buildings properties with a total property value of SEK 8.3 billion. Very solid performance in Q4 and for the full year.

We go back to the Construction and show you some order bookings here and the order backlog. Here, you can see the blue bars are the order backlog development 5 years back, and you can see the lines rolling 12 on the book-to-build, the yellow revenue, development on the green and order bookings on rolling 12, the gray one here.

So you can see that we have a historically high level of the order backlog, and there's also some currency effect there. So if you compare Q4 2025 to the same quarter the year before, it's actually increasing somewhat in local currencies, around 3% increase.

So we have a good position here, 19 months of production. So you can see that on -- if you look at the different geographies as well.

All geographies has over 100% book-to-build, and that's also encouraging for the future. We have 19 months of production.

So a solid position here when it comes to our order backlog. And we can continue to follow our strategy to be selective in the market and go for projects where we can see competitive advantage and a good track record as well.

With that, I hand over to Pontus.

Thank you, Anders. So let's dig in a little bit deeper into the numbers.

And you can see that we had a revenue of SEK 43.9 billion here in the fourth quarter. That's actually an increase with 1% if you take local currencies.

If you then, at the same time, look to the revenue for the full year of SEK 171.1 billion, that's an increase of 7% year-on-year. The operating income in the quarter increased from SEK 2.1 billion to SEK 2.5 billion.

That's an increase of 25% in local currencies. So quite a good increase here in Construction.

And as you heard earlier, we had an operating margin of 5.6% in the quarter, which is good. But even better, I would say, is the margin for the full year of 4.1%, in line with our just raised targets.

And if you look into the different geographies here, you can see that we are actually delivering a higher profit in all of the geographies and also a higher margin if we compare to the quarter -- or to the fourth quarter last year. Worth to mention is that there is a release of a claim provision in the U.S.

impacting with around SEK 400 million. But you should also remember that this is how we are recognizing our claims.

We are very conservative, and we are releasing them when we are sure that there are no outstanding risks. So in total, I think what you see here is a very strong delivery from our Construction business in the fourth quarter and for the full year.

Going then into Residential Development, is maybe not as good as Construction, impacted by the market. You can see also that the revenue in the fourth quarter is quite much lower than it was the fourth quarter last year.

That's because we are selling less than we have done the fourth quarter last year. And that is, of course, some reflection of the market and also it comes a little bit different when we are starting projects.

What you can see is though that the S&A costs has went down in the quarter from SEK 138 million to SEK 122 million, but even more for the full year from SEK 605 million to SEK 460 million. So I think that is a sign that we gradually has, what you say, adjusted the organization according to the current market standards.

We have also sold quite many of the previously unsold completed properties, and that has an impact of the gross margin because we -- it's good to be out of that stock of unsold residentials, but of course, impacting the gross margin and then the operating profit. So you see in the quarter, 1.8% in operating margin.

That's, of course, not where we want to be. For the full year, 6.5%.

That's better. But as you know, we have a target for this business to reach 10% or better.

Then if you look into different geographies within Residential Development, you can see that the Nordic operations is where we have a weak quarter. And the European operation is delivering a solid quarter, but we have a lower sales rate than we have been used to during the previous quarter.

And that's not dependent on the market. That's dependent because we haven't had any projects actually to launch during this quarter, which means that we cannot have any new sales start, which then takes down the number of sold units and impacting the profit somewhat also in the European part of the residential business.

And here, you can see how this -- that started, then is 376 compared to 620 last year. And that's a result then also of -- sorry, now I mixed, but it's around the same.

You see that we sold 379, and we started 376 units here in the quarter. And if you look then into the homes in production, you can see that the top of the bar here in the fourth quarter, the unsold completed, as I explained, has reduced.

So we reduced from the end of last year from 477 to 358, and we have also decreased that during the fourth quarter as such. And as I said, when we are selling those residential units, that is impacting the gross margin for the quarter for the Residential business.

Going then into the Commercial Development business. As you heard earlier here, we divested 8 different projects, representing a revenue -- or a divestment of SEK 4.6 billion.

And here, it's also worth to mention that these divestments is positively impacted from release of previous -- release of provisions from previous projects. So if you are looking into the Commercial Development portfolio, I would say a more representative profit content is looking into our unrealized values that we have than to take what we actually delivered this quarter.

So it's good, but it's also very good to see, I would say, that we were able to divest in such a good manner in the fourth quarter. So it's the highest number of divestments in a single quarter for quite a long time.

If you're then looking into the unrealized gains, you can see here that what I just explained regarding how you should forecast the coming gains from this business that the top of the bar here has decreased, which means that the unrealized gain within the completed properties is quite low right now. Then if you look into the completion profile of when our properties in Commercial Development will be completed, and you see that in the different bars here.

And at the same time, you see the leasing ratio on the green dots. You can see that then we have around SEK 17 billion of completed properties with a 72% occupancy rate.

It's one quite big property that has been ready in the fourth quarter. So it's taking down the total leasing ratio in the completed properties somewhat.

But if you're looking into the total profile here and if you would -- are interested and compare it with earlier Qs, you can see that it's actually quite a positive development in many of these different assets. So do that.

That's quite fun. And then here, you can see that we had a leasing in the quarter of 46,000 square meters.

And you can also see that we have a higher leasing ratio in the ongoing projects than the completion ratio, which is always a good sign that we have -- we are leasing in the same tempo as we are continuing our projects. So that is good, I would say.

IP, Investment Properties, I would say, quite a calm quarter. We have a representative operating net here.

We haven't added any properties. We haven't done anything with the values.

So SEK 83 million is very representative for, I would say, that portfolio that we currently hold here. What is good, though, is that we increased the occupancy rate from 83% by the end of quarter 3 to now when we have 85% leased.

So a good development there. And then if we are going into the total group and the income statement here, you can see that we had an operating income of SEK 3.3 billion.

Then we have central costs of SEK 281 million. Those are impacted of that we have a little bit less of income from our combined portfolio of asset management and BoKlok UK.

And we also have a negative impact of periodization effect from insurances, that actually was positive in the same quarter last year. I would say, though, that the full number of central costs of SEK 712 million is quite representative for what you could expect going forward if there is no special things that is happening.

Going a little bit further down, you see a financial net of SEK 141 million for the quarter and a tax of SEK 653 million. That's a tax rate of 21%, same tax rate that we are showing for the full year.

And I will also say that this is reasonable, representative with the current business mix that we see right now. Of course, if we have 1 quarter where we have more divestments of properties, that could impact.

And if we have more -- another geographical composition of the profit, that could impact somewhat. But I would say that this is representative.

Going then into the cash flow. Here, you can see that we had a strong cash flow here in the fourth quarter, SEK 2.5 billion, actually the same as we delivered in net profit.

So I would say, a continued good and stable cash flow generation from the business. And an important part of that cash flow is, of course, coming from our working capital development within the Construction.

And here, you can see that the working capital came up from SEK 30.1 billion in September to SEK 31.7 billion here for the full year. And even though it looks like it's a decrease compared to the fourth quarter last year, if you were looking into real cash flow, it was actually an increase with SEK 1.4 billion.

But then we have a currency effect, a negative currency effect of SEK 4 billion for the working capital. So you can also see if you're looking to the average free working capital compared to the revenue that, that is stable with a slight increase.

So solid cash flow generation from our Construction operations. Looking into investments and divestments, you can see that we are actually now in some net investments territory.

We have, for a couple of quarters, been in net divestments, but it's also so that we divested a couple of those Commercial Development properties here in the fourth quarter, but they will be transferred to the buyer and paid of the buyer during the first half of this year. So that will improve then the cash flow from divestments during Q1 or Q2.

If you look into the capital employed, you can see that, that has decreased somewhat from SEK 66 billion to SEK 63.8 billion. Also here, you have, of course, a currency effect.

So I would say, without currency, it's relatively stable. And this cash flow then takes us into, I would say, a very stable situation when it comes to our ability to use funds.

We have available funds of SEK 28.6 billion. And here, you can also see that we have a quite balanced maturity profile of our outstanding debt.

And this takes us then to the financial position, where you can see that we have our adjusted net cash position of SEK 11.5 billion. And you also remember that here, we have a target to below -- to be above the net debt position of minus SEK 10 million.

So the delta there is SEK 21.5 billion. And you can also see that we have had quite a stable development of the financial position here during more than a year.

We ended last year with SEK 12 billion. We have now SEK 11.5 billion.

And it's also then actually taking up our equity to asset ratio from 36.6% to 39.9% by the end of the fourth quarter. So by that, Anders, some comments regarding the markets?

Sure. So if we look at the overall market outlook, it's unchanged overall compared to the last quarter.

But if I comment on the different streams here. Construction, the civil market in U.S.

and Sweden is -- we expect it to continue to be strong. On the building sector -- in the building, its -- the market outlook is stable.

We could see a good inflow of data centers in the fourth quarter, close to SEK 10 billion, which is encouraging, and we expect that market to continue to be stable. The civil market in the rest of Europe is pretty much stable, which is good, driven by infrastructure, defense, investment and so on.

So weaker in U.K., however. And the building market in Nordics are weaker due to the less residential construction and commercial property construction, but stable in Central Europe.

Residential Development, very good activity in the Central Europe. We believe it's going to continue to be a strong market and weaker in the Nordics.

And we can see some improvement when it comes to interest rates decrease. We can see amortization rules are easing up in Sweden.

But I believe it will take some time. And we -- even though it's underlying need for homes in the market we are operating in, it will take some time.

It requires economic growth. So the consumer confidence increases.

But we are ready to start. We already start project today where we see that we can deliver according to our targets.

And Commercial Property Development, stable in Central Europe and in the Nordics. You have seen the divestment activities here.

We also have a good leasing activity. Weaker -- continues to be weaker in the U.S.

market. Recovery is lagging compared to Europe.

But there is a clear trend that flight to quality, so to say, in all markets. And we have very attractive building to offer the market.

And we can see that we have a healthy leasing ratio. But the investors in the U.S.

are still hesitating before they go on and invest in properties. Investment Properties, polarized occupier market.

We have a healthy leasing ratio. And also here, we can see a polarized market.

You have to offer Class A building in a very good location, high quality, and that's exactly what we can offer. So I'm confident in that.

But it's a competitive market, but we believe that the rents will remain mostly stable. So if I ending up this presentation, we're looking into how we're doing compared to our targets and limits here.

4.1% in Construction margin, above our recently increased target, very encouraging to see. Return on capital employed, 1.8%.

We were not satisfied with that, obviously. So we are working hard to increase that return for the project development.

Investment Properties, 4.7% is on a good level to reach. Be able to reach the 6%, we need to see some market increase -- market value increase in the properties we have.

So that's an ambitious target for the future. Return on equity, 10.2%, also below our target.

And we have a very strong financial position of net cash -- adjusted net cash of SEK 11.5 billion. And the payout ratio, as you can see, we have 40% to 70%, but that goes for the ordinary dividend.

And we have proposal, is SEK 8.5 in ordinary dividend, increase from last year, before was SEK 8. And then we have this extra dividend, which gives us an outcome if the AGM approves that of 93%.

With that, I hand over to Antonia to open up the Q&A.

Very good. Thank you for that.

So yes, now it's time for your questions. If you are joining us online, please use the telephone conference number provided and follow the instructions by the operator, and he will put you through to us here in the studio, and you will be able to ask your questions to us.

If you are here in the room with us, then you can just raise your hand. We will bring a microphone, and I will ask you to start by stating your name and organization.

So looking out into the room and checking with our external guests here, it doesn't seem like there are any raised hands at the moment. Or yes, we have one over here.

Yes. Thank you.

Yes. [ Oscar Sandstrom ], entrepreneur.

Regarding Construction, you're growing in the Nordics, but do you see any bottlenecks that could hinder further growth?

I see good opportunities when it comes to the civil market, if you're asking about the Swedish market. So we see increasing investment in infrastructure.

The need is very high on that. And we also see increasing investment in defense.

So that's -- I'm encouraged by that. Then on the lower side in Sweden is Residential construction.

It's not only our development that is on the low side here. It's all, very few new homes that are coming out in the market, and that goes for the Commercial Property Development.

So we are dependent on economic growth as an industry. So I would like to see some GDP growth, and that will absolutely help us.

But we are in a good position.

Excellent. So I will then move over to the online audience, and I will ask you to please introduce the first caller.

I have just 2 questions. And the first question is on capital allocation.

So you have about SEK 11 billion in net cash, and you expect nearly SEK 6 billion in cash flow in the first half of the year from -- transfer from property projects. So that equates to the size of the dividend that you are proposing.

Given that, what can you say about opportunities here in terms of capital allocation? How should you allocate your capital in 2026?

Yes. We don't give any forecast of that.

We have a dividend policy to 40% to 70%. Our ambition is, of course, to continue to deliver good results and be able to be a predictable dividend provider for shareholders.

But we don't give any forecast for this year, obviously.

But would you consider increasing investments in CD projects or potentially evaluate buybacks would be an alternative?

We said in the Capital Market Day that we have -- right now, we have enough capital for the project development operation, and that, we have the same view right now.

Okay. Good.

And the second question is then related to commercial property development and the completed portfolio that you have. So you made quite a lot of divestments in Q4, but you also have this completion in the U.S.

So if I'm not mistaken, your completed property portfolio should be about 80% to 90% in the U.S., including some residentials. What can you say about the prospects for divestment of these assets?

And do you consider residentials to be potentially easier to divest than the commercial buildings in the U.S.

First, I would say, regarding our portfolio in the U.S., you are right. It's reasonably big, and it's both commercial offices and some rental residentials.

But you can say we are evaluating each and every project as such, working with leasing the properties in order to receive a decent operating income from those. Then if we think that we get the price that they actually are worth, we are absolutely ready for divestments.

But because we have a very solid financial situation, we are not interested in any kinds of fire sales, but we are interested in reasonably good deals.

Okay. And you have previously mentioned that when the bond -- 10-year bond yield is about 4%, you see that divestment prospect is quite weak.

Do you continue to have that view?

We continue to have the view that we are following the market. And if someone, as I said, is interesting to buy and pay a decent price, we are interested to negotiate.

Thank you very much. And we will move to our next person in line here to ask questions.

I think it is from Jefferies.

I'll ask 2. Maybe I'll just come back to the capital allocation and try in a different way.

Just on the special that you have announced, would you be able to just provide some color on the thinking around why you felt that was appropriate to propose? And should we take it as a signal that you're relatively comfortable with now the level of net cash that you have on the balance sheet and this is a signal that you're limiting any further buildup there?

And then the second question, I think just back on Construction. I wondered if you could comment on sort of what you're seeing in the early stages of Q1, how you're seeing particularly on the data center segment where, as you mentioned, you had a flurry of good orders in Q4.

We've seen some enormous CapEx numbers from some of the hyperscalers this week. I just wondered if you could comment a little bit on how the outlook for those types of projects in the U.S.

is looking and whether we could expect -- if you're seeing anything in the pipe already for 2026 on that front?

Okay. Thank you, Graham.

I'll start with the first one, and I think Anders take the second question. And regarding the capital allocation, and as I understand your question, it's about our reasoning -- or actually the Board's reasoning when it comes to the special dividend and the ordinary dividend.

I think it's clear, as you see, we rose the ordinary dividend from SEK 8 to SEK 8.50. And then we think that, yes, we have a stable financial position, which allows us to also distribute some extra dividend.

And having said that, that is, of course, taking in consideration to be able to be active in our market and take the opportunity for potential deals that may occur both in CD and RD. So I think it's a balanced adjustment of where we are and what we know right now.

Graham, I will take the last question on the data center. We have been talking about the data center market for quite some -- few quarters now.

And it's a good opportunity, important part of our operation as well, especially in the U.S., but we also see some investment in data center here in Europe. We believe it will continue.

So we have a good pipeline. We have repeat customers, and we saw that the order intake in Q4 was really good, close to SEK 10 billion.

So I'm confident in that, and we are well positioned to take advantage of that market going forward as well.

And maybe just one quick follow-up on the capital allocation. Are you considering any other investment opportunities given your flexibility on the balance sheet beyond your core business lines around Commercial and Residential Property, whether that's in -- you have been in the past in PPPs or some of your peers are looking at data center development itself.

I just wondered what your thinking was around that.

Yes, I wouldn't rule it out, but our main focus is on the core operation, Residential and Commercial Property Development and also that we will continue to invest in the -- our own portfolio within Investment Properties. That's for sure, to build that portfolio just above SEK 8 billion today, and the target is between SEK 12 billion to SEK 18 billion over time.

So that's the focus.

Thank you, Graham. So we will now continue with the next caller.

Sorry, SB1 Markets that would be. But a question on the reversal of the U.S.

provision. Pontus, you mentioned that -- you said it was business as usual when you reverse this kind of provisions when you feel sure enough about it.

So the question is if you could quantify if there are substantial left of these provisions? And how long are they dated?

Are we going back to the 2017, 2018 issues? Or that is too long to go back?

That would be my first question.

Okay, Albin. So I'll try to answer.

When it comes to provisions or potential, this was actually a claim settlement. And you -- what is happening here is that we were not taking any kind of profits when there were claims there that was connected with some uncertainty.

Then when this was solved, this situation, then we released that part of the claim. And there are, of course, other potential claims out in the project portfolio, but it's nothing that we can comment also for the future.

They can happen, and they will probably happen from time to time when we have some kind of issues with our clients. So I would say it's a part of the regular business.

But this was, of course, quite big. Normally, they are smaller amounts, and then we don't think that there are any reasons to comments on those.

But when we have this $43 million, it's substantial, and therefore, we think it's worth for you to know.

Great. And any comment about how old project this was related to?

Was it a new one or older one?

It's completed, I can say.

Okay. And my second and final question was on the starts in Residential.

And you mentioned that we should look upon it on a rolling 12-month basis, still see you have a quite positive market outlook for that business. So I just wondered were there any specific reasons for no starts in Q4?

I don't know what that could have been or -- because maybe I would have expected a little bit higher number for starts. And whether there's a sort of, I don't know, if you can call it, a catch-up effect heading into 2026 because of the fact that there were no starts in Q4?

Yes. I would say that the lack of start in Central Europe in Q4 is not any signs of lower market outlook.

We believe, in that market, we have a good pipeline, but it's -- if you look at a single quarter, we didn't have any project, was ready to start in the fourth quarter, but we are working with the pipeline, and I'm confident in our position going forward.

Thank you, Albin. And I will just check now with the operator here.

It looks like we've come to the end of the list of people that want to ask questions for us here. Can you please confirm that?

Perfect. Thank you very much.

So that means that we have answered all the questions that were here for us today. So I would like to first say thank you, Anders and Pontus, for your presentations here.

And I would like to say thank you for all of those that joined us here in the studio in Stockholm. And lastly, thank you to those of you that watched us online.

A recorded version of this webcast will be available on our web page shortly after this. And we will be back with more comments and presentations when we release our first quarter report in May.

Thank you very much, and have a lovely day.