Good morning, everyone, and welcome to Bonava's year-end report presentation 2019. Speaking is Louise Tjeder, Head of IR, and beside me and presenting also today is Joachim Hallengren, CEO, and Ann-Sofi Danielsson, CFO, both who will present operational and financial highlights from the report. After the presentation, we will, as usual, open up for a Q&A session where you have the chance to ask your questions, either via the operator on the phone or type your questions on the web. With this, let's begin. Please, Joachim.
Good morning, all, and welcome to Bonava's year-end presentation. Well, let me start by saying that 2019 has been a challenging year, not least the fourth quarters, especially in relations to the Nordic segment and Finland. We have already taken a lot of measures to improve both cost control and governance. Let me get back to that. Starting with our biggest unit, Germany. Germany is moving according to plan. We have a solid performance when it comes to profitability and margin. We have, during the year, focused a lot on starts. The starts have been slower and lower than last year. It's clearly a bottleneck within the municipalities handling zoning permits and building permits. We have many quarters ago started to mitigate that by, in parallel, preparing and applying for multiple projects.
We see that during the second half of the year, the number of building permits and zonings are improving, so we're picking up speed. We expect this trend to continue, that means that we can start more units in 2020 in Germany. Let me again be very specific. The lower numbers in starts is in no way related to a weaker market. The market in Germany is very strong when it comes to demand for residential. It is a bottleneck. Continuing to Sweden, our second-biggest market. Really satisfying to see that the consumer market is getting back its confidence.
We can also clearly state that the market is now stabilized, confirmed by a lot of visits on our showings, a lot of interest around our projects, not least, very strong sales in the consumer segment in Sweden, especially in the end of the year, Q4 was really strong. If the market conditions continue, we expect to be able to leverage on that by starting more units during 2020. Back to Nordics. In a very late stage, multiple projects in Finland showed heavy cost overdraw. We reacted immediately, did both deep and broad investigations and analysis into that. We're already taking a lot of measures, including better or enhanced processes, toll gates, governance. We also changed a few key people, both in projects and high up in the organization.
We realized looking at these projects that multiple projects were tied to a geographic region, the region of Oulu, we are therefore planning to close down that region. In the beginning of January, we announced a package or activities related to a turnaround in Finland. We took a write-down of costs related to plots or real estate that we will no longer build. It was related to, for instance, design cost or planning cost, now planning to leave a specific geography or on plots that are not part of our core strategy. We decided to write that off as sunk cost. Looking at starts of newer projects in more recent time, we have profit margins according to our expectations when it comes to profitability, but we still have a couple of bad projects that needs to be finalized during 2020.
We have also a few of those in Denmark. Measures taken, they still need to be finalized to be recognized with the soft margins. You can refer to that as some kind of dead turnover. You still have the net sales, the margins are on a very low level. That will impact the margins in the Nordic segment in 2020. Going back then to the starts and the future, we are confident that we'll be able to increase the starts both in Germany and in Sweden during 2020. Highlights starting with the fourth quarter. Net sales more or less on par. EBIT is down to 693. That is excluding the restructuring costs of EUR 50 million in Finland compared to 899 last year.
Part of the explanation to the lower EBIT compared to the net sales is that we are now handing over and completing units with price adjustments, especially in the Swedish market. Profit of land amounted to SEK 181 million compared to SEK 61 last year. The main bulk out of that is profits coming out from five land sales in the Djursholm area in Stockholm. Let me be very specific and say that that is the end of earlier sold large pieces of land that was just waiting for a zoning and closing. Going forward, we don't have any forward committing larger land sales, nor do we expect to have gains from land sales on this level, but on a substantially lower level. Selling land will be part of optimizing our land bank and portfolio, but it will be on a substantially lower level.
The net profit SEK 368 compared to SEK 762. Looking at the full year, we had higher net sales, SEK 15.5 billion approximately compared to SEK 14 billion last year. EBIT excluding items affecting comparability, SEK 1,202 compared to SEK 1,654. As I talked about before, the profit from land sales amounted to SEK 272 compared to SEK 245. This is not a level that we will be on going forward. With the closing of the Djursholm deals in Q4, we leave that behind us. Net profit SEK 615 compared to SEK 1,265. The EPS SEK 571 compared to SEK 1,174. The board has decided to propose a dividend of SEK 3 divided into two payments, spring and autumn. Doing a more deeper dive into the sold and started units. Starting with the quarter, we see that consumer sales were slightly down, 1,193 compared to 1,386. Investor deals were substantially down.
That is not in any way a correlation with a change in market. That has more to do with timing. When do we get building permits or zoning? As I said, many times, sales to investors are not evenly distributed during a year. They don't even reflect the calendar year. That is nothing that keeps me sleepless at night. Looking at the started units, we started 1,000 units compared to 1985 last year. Majority of that is slower or lower volumes in Germany, which we are now mitigating, and we are expecting to start more, as I said, during this year. Of course, investor starts is very much correlated to the investors' sales. Unit in production due to the slow starts in Sweden and in Germany are down.
The value of the sold not recognized are still on a good level of SEK 21.1 billion, exactly the same level as last year. The sales ratio in the portfolio is a very strong 72%, up 4% since last year. If any concern it is that that number is actually a bit high. I'm afraid that we might be missing out some of the potential that are in our markets. That's again why we have a lot of focus on starting more units, especially in our main markets, Sweden and Germany. Looking at the markets, Germany, solid, strong. I get a lot of questions regarding macro, automotive. Of course, there are some indicators of a bleaker macro situation for Germany. A large part of the German economy is now boosted by consumer consumption, and we see no effect on the demand for residentials.
Even though some bleak outlooks for the macro, the residential market in Germany is still very strong, and there is a very good demand for our housing in Germany. The market in Sweden is definitely stabilized. We can see also in measurement that consumer confidence is back. While there has been comments from other players in the market that the so-called old model, and then they are referring to selling an apartment only on a blueprint or a drawing before the building or project is even started, that that should be dead. We can confirm that is not what we see. We have started and are about to start new projects where we actually are doing exactly that we are signing agreements, contracts with customers before start based on visualization and drawings as we used to do before.
I think that is also a sign, hopefully, about consumer confidence in Bonava. It also says something about Bonava's ability to start without having extremely high demands when it comes to pre-sales to get financing. Looking at the Nordic segment, Norway is very strong. As you know, we acquired a company called Urbanium in Oslo in the third quarter. That's now fully integrated in Bonava. That region will not contribute to the result during 2020, though the run rate will affect profitability. The portfolio in the Urbanium acquisition or the Oslo region, as we will refer to it going forward, will start to yield from 2021. Markets are more hesitant in Denmark and Finland. There is no change in neither market. Let me point out that the Helsinki market is relatively healthy and sound, while markets in other parts of Finland are more challenging.
St. Petersburg and Baltics are strong markets. Investors, solid demand. Our challenges are not in the rare end of that business, which is to sell and find investors. The challenge is to get right-priced plots and get through the pretty complicated and slow planning, zoning, and building permit process. Sales value and number of units. We share this many times. There is actually not very much news in this. We are confirming Germany to be the biggest market. Sweden is losing slightly. In the bottom bracket, you can see the St. Petersburg Baltic market that is now actually claiming its rightful position as one of our segments. Ann-Sofi will be back to that also because that is one segment that has strong earnings and good profits during 2019. We expect Sweden to reclaim part of this volume as we see more starts coming in during 2020.
A few small words about cost control in Finland and plan restructuring. We plan, as I said before, to leave the Oulu or Uleåborg region. They have had a weak profitability and result development, they also have multiple projects tied to their region that has failed to properly govern and forecast their profits and cost. While planning to do that, as I said, we have plots or properties where we have planned and designed to start more projects. We write that down now and are preparing to sell off those plots. We also looked at the general land bank and saw a few plots that is not core strategy in other parts of Finland. We do exactly the same measures with that. We have already enhanced cost control and governance. We feel much more confident now regarding driving the new projects than these old projects.
I think it is fair also to point out that the majority of the projects that are now or during Q4 are showing a weak profitability were starting in 2017. We already announced the restructuring charge of EUR 15 million in the beginning of this month. A few project starts. Happy to say that we are starting in Germany. Wesseling, this is a typical bread-and-butter German project. Sorry, this is row houses and semi-detached houses, 142, a pretty significant area that has just been started. Mannheim, which is in one of our regions down in the south, 28 apartments in the multifamily building. Moving out to Sweden, we started the project Solkatten, which is a rental project in Lund, 169 apartments. We also started the Helsinki Kaiku first phase, 31 apartments to consumers in the quarter.
With that, I would like to hand the word over to our CFO, Ann-Sofi Danielsson.
Thank you, Joachim. Yes, I will dig a little bit deeper into our financial numbers for the fourth quarter and also for the full year. Starting with the full year. Our financial objectives and the outcome for 2019. We have the first objective, return on capital employed. Our objective is to be between 10%-15%, and due mainly to the extraordinary items we've had during 2019, the settlement of a dispute in Germany in the third quarter of SEK 100 million, and also now in the fourth quarter, all these restructuring costs in Finland of SEK 159 million has given us a return on capital employed of 6.4%. Equity to assets ratio, objective to be above 30%, and we ended the year at 32.1%. Our dividend policy saying that at least 40% of net profit after tax is to be distributed to our shareholders.
EPS, earnings per share, was SEK 5.71, the proposal from our board is to distribute SEK 3 per share to our shareholders. That is 53% of our earnings per share, above 40%. However, if we exclude these extraordinary items, the dispute in Germany and the restructuring cost in Finland, we end up with an earnings per share of SEK 7.5, and that SEK 3 is 40% of that number. That's why we end up with this proposal from the board. Income statement, the headline here, a challenging year, that is absolutely obvious when you compare 2019 with 2018. Not when it comes to net sales, though. We are well above last year for the whole year. The fourth quarter here, more or less in line with the last year. There are some differences, though.
We have handed over more or less the same number of units to consumers, somewhat less to investors, but with a higher price. All this has given us net sales of more or less the same as last year. One other thing that I want to point out here is that our selling and admin expenses, they are spot on for 2019 as in 2018, even though we have more people employed and also higher activities. These are well in control. We have these extraordinary items or items affecting comparability, which is the correct wording when it comes to accounting. SEK 159 million for the fourth quarter, SEK 259 million for the full year, Germany and Finland. Next thing I wanted to say something about is our net financial items, well below last year for the full year.
The main reason for that is that we now have less debt in RUB, giving us a lower financial cost. In the quarter though, the total net debt more or less higher than last year, we'll come back to that in our cash flow also for the fourth quarter. That's why we are in line with last year when it comes to our financial net. I just want to point out one thing because I normally comment upon this, what I've said before is that you should expect a tax of 25% for our business, more or less, we are a little bit higher than that for the full year, 26%.
The main reason for being a little bit higher than 25% is actually that the German business is contributing more to the total profit, and the tax rate in Germany is higher than it is in Sweden, for instance. That's the main reason why we have a higher tax rate for 2019 now than 25%. Much higher than last year, though. For those of you who were here then and remember, that's not easy to remember, but we had an extraordinary payback tax in Germany in 2018, and that affected the tax rate quite a lot last year. SEK 368 million for net profit for the fourth quarter, SEK 615 million for the full year, taking everything into account. Here is the development for the top line and also the EBIT margin. Here we have included all these extraordinary items, Germany and Finland again.
The EBIT margin here being down to 6.1%. There are also to be remembered that we have handed over more units in 2019 than previous years in Sweden, for instance, with price reductions giving us a lower profit margin in Sweden and also some in Denmark, actually. That is also why we have such a low EBIT margin in 2019. Just to give you an overview of the EBIT in the different segments, and as Joachim has stated out, and also what you can see here very obviously is that Germany is contributing to our EBIT on a very solid level, a good development. I will come back to that. We have had a huge growth in Germany all these years. The other positive thing here to point out is the contribution from St. Petersburg Baltics, almost SEK 200 million for the full year.
Sweden, lower EBIT, mainly due to the fact that we have recognized more units with price reductions, and the Nordic segment, then low profitability, especially in Finland, giving us a negative EBIT for the full year and also a low performance in the fourth quarter. I just want to say something about other eliminations here. Costs for the headquarters, somewhat higher than last year in the fourth quarter. The main reason for that is actually that here we have the costs for the acquisition of the operations in Oslo. That's the main reason why we are somewhat higher in the fourth quarter than we were last year.
Continuing here, saying something about Germany, and again, point out that we have grown the business in Germany quite substantially during these four years, and we can still see a very good margin in the German business here, 13% EBIT margin for 2019. As Joachim pointed out, we haven't started so many units in Germany as we did last year, and that has, of course, affected the number of units sold as well. Our plans are to start more in 2020, this year, these numbers will catch up going forward. Sweden. Here you also see that the EBIT margin here, Sweden, lower than last year, and the main reason for that is that those units that we have recognized for profit in 2019 had a lower margin due to the fact that they are price adjusted.
Here, the number of units sold up quite a lot, especially the second half of 2019 of the year. The number of units sold are up quite well, and as Joachim said, this will give us an opportunity to start more units also in Sweden going forward. A good development on that market for 2019. Nordic, weak performance. We have said a lot about this now, and behind these overall numbers, what you have here is, of course, the Finnish operations, but also a quite low performance in Denmark, where the Norwegian business is performing quite good. When you dig deeper into this, what you have coming from these three countries. A weak performance all in all with a negative EBIT margin, in this area. This is where we are mostly disappointed.
Again, St. Petersburg, Baltics, a very good performance, increasing business, and also very good development when it comes to EBIT margin, as you can see here. Also, a good performance when it comes to how many units we have started and also the sold units. Somewhat lower than last year, but still on a very good, decent level when it comes to units sold in this segment. 9,700 units at the end of the year. A very healthy portfolio, I would say, with a good sales rate. Here the value of those units that we have sold, the sales value, a little bit more than SEK 21 billion. That's a very good and healthy portfolio going forward. All these 9,700 units, our plans or our forecasts now, our estimations when are these to be finalized and possible to hand over to customers.
We follow the same trend as we've done now for all years, that most of these units for 2020, they are expected to consumers to be finalized and then possible to hand over in the fourth quarter. That has been a trend for many years and also in 2020. Somewhat more evenly distributed when it comes to those units that we have for investors. Still somewhat more units in the fourth quarter, also in 2020. That will give you an indication of how these handovers will be distributed in 2020. This is our balance sheet or our assets, almost SEK 24 billion when we ended the year. That is higher than a year ago. Lower than in quarter three, though, since we've handed over many units.
All in all, the main reason why we have more assets in billions than last year is the acquisition of the business in Oslo, since we now have more properties held for future developments. We also have somewhat more units completed in our balance sheet also. The main reason why we have more assets than one year ago is the acquisition of the Oslo business. I think go on to our cash flow, and the headline here is that we have had a very strong cash flow in 2019, and that is really true, especially when you look in the quarter here, SEK 1.4 billion coming from our operation and That is higher than last year. The main reason for that is that we have been more efficient working with our working capital.
There is also more cash flow coming from the handovers of our housing projects, but we have also started more and invested more. SEK 1.4 billion, very strong. When you compare to last year, we have a cash flow being SEK 1 billion higher than last year. That is before our investing activities then. That is really a strong cash flow from our operations. Well, just to remind us all that our cash flow has a very strong seasonal pattern due to the fact that we have more units to be handed over in the fourth quarter. Normally, we have more units to hand over in the fourth quarter, and that is also giving us the strongest positive cash flow in the fourth quarter. That has been the case for many years and also for 2019, SEK 969 million coming in in the fourth quarter.
All this has given us a net debt of SEK 6.9 billion reduced in the fourth quarter compared to Q3. However, higher than one year ago. To make it easy, the main reason why we are higher than last year is actually, first of all, the accounting effect of IFRS 16 giving us a net debt of SEK 0.3 billion. The other reason is that we have this acquisition in Oslo also giving us a higher net debt all in all. That is why we think that we can say that we have a strong, solid financial position in our business. Finally then, just to look at our capital employed. We have increased our business five year in a row. Compared to five years ago when Bonava started, we have SEK 5 billion more in capital employed.
We have invested a lot into our business, especially down in Germany, but now also in Oslo. Almost SEK 15 billion as capital employed at the end of 2019. Return on that, though, being 6.4% for 2019. By that, Joachim, to give some words about the total year of 2019. What's your thoughts?
Thank you, Ann-Sofi. I think that we have consolidated. We have done market adaptions that puts us in a good position for this year, 2020. We still have Germany, our biggest unit, with a solid performance. We see signs that our tactics or activities to get more permits out of the system is working. We plan to start substantially more units in 2020 than we did in 2019. We also see the strong sales in Sweden as a confirmation that the market is stabilized and that the consumer confidence is back. That is also backed up with a lot of external indicators where we see or can confirm that the model that we work with selling before we start projects is still valid.
It's also a strength, as Ann-Sofi showed or talked about, our financial position that makes it possible for us to have multiple sources for financing of our projects and not being dependent on having a very high sales degree before we start. Nordic performance in general, but specifically Finland, I am disappointed with our performance, especially when it comes to cost control. It is really unsatisfying to have projects that in late stage come up with cost overdraft. Now we have done a thorough analysis, both in depth and broad. We have already instigated a lot of change and activities and processes, and we also see, or can confirm that the projects that are started recently are according to our expectations when it comes to profitability.
Norway is one of our strongest markets, when it comes to profitability, and it's always good and comforting to see that integration, which is a pretty delicate part, works well, and we can really confirm that Bonum is fully integrated already in December into systems and processes and brand. We're looking forward to that investment to yield in 2021. We have a very solid financial situation or position, which gives us a lot of opportunities to be active and to maneuver going forward. Again, we are expecting the starts in Germany and Sweden to pick up during this year. So that was the conclusion from the Q4, and also from a challenging 2019. With that, I would like to hand the word over to Louise to facilitate and moderate the Q&A session.
Yes. Thank you, Joachim, and thank you, Ann-Sofi. We close the formal presentation and open up for questions. Operator, please, do we have a question?
Yes. The first question comes from the line of Stefan Andersson from SEB. Please go ahead.
Thank you. A few questions on Sweden. Where I guess I'm more concerned than the other regions at the moment. If you look at the underlying margin, if we take out the Ursvik profit or the land bank profit, you don't give the margin. I guess we're talking about somewhere 6% plus/minus 1%, I guess. Is this because of price reductions that you mention? Or is it also relating to the scale you have currently? How should we view that margin in the light of where you see a stronger market coming up?
You're actually answering the question yourself with your analysis. It is dual. A, we are subscale, and that has an impact. We're also seeing projects that are finalized now with price reductions. We said already in the last quarters that we would expect to see softer margins coming out of Sweden for a while now. We have ongoing projects that were started in another market that we should still deliver units, but we also have projects that have building permits and zoning from the, how should I put it? The old days that we need to work with now. There is no substantial price pressure down on costs yet. We have to be smart and efficient to try to get those projects started anyway.
Of course, it will be very challenging to get out the high margins that we had in the really good days out of those. Yes, you are right in your assumptions. There is scale, there is price reduction. Going forward, I don't think that we should talk about price reductions, because we're not actually not reducing any prices, but we are adapting to the new market, which is down somewhere 10%.
Okay. Looking at the volume, I think 2017, you were just about 2,000. Talk about to consumers now, 2,000 units in production. We're down to 800. You're talking about this substantial pickup. What do you mean by substantial? Is it realistic to get back to the 2,000? I understand you won't be there until 2020. Could you maybe indicate where you're aiming and what you mean by substantial pickup?
I think that the numbers in production is a deceptive KPI because the longer it takes to produce something, the more you have in production. I would rather talk about starts than, well, I think that in the old days, we might have been up to 1,200 to 1,400 in consumers. I think that would be overoptimistic. I think that we will see that in the coming two years. That would be a level that for sure we are aiming at on a more stabilized market. Then part on top of that would also be investor sales. If we can start by doubling the starts to consumers from this year, it's a good start, and then we can build from there.
Okay. Then on Denmark, you're touching on a little bit of a difficult market there. Just to get a sense, is there any risk for similar actions that we've seen in Finland, of course, maybe in a smaller scale? Are you just talking about the soft market and not really concerned about it?
I'm more talking about the soft market. I'm more talking about soft margins due to price adjustments in a market which is pretty challenging. We have had challenges with cost in some of our projects in Denmark, but that was a few quarters back. Of course, we need to finalize those projects also. I would argue that the main headache is Finland, where we were in late Q3 and also in Q4 to get control of that. Denmark's costs are much better under control, but the margins are weak still because a few bad projects that need to be finalized, then as you were into price adjustments.
Okay, thank you. That's all from me.
The next question comes from the line of Simen Mortensen from DNB Markets. Please go ahead.
Yeah. Hi. Sorry, I might have missed a few of the first questions here that might be asked before. In terms of Germany, you are telling about you expect the market to bounce up and come back and getting more starts and stuff. Historically, if you look at your figures, Q4s have typically been a much stronger figure or quarter than any of the other months. When do you expect the German market to come back? Do you think we will have to wait until Q4 2020, or do you think you will be able to show us better figures earlier on?
I would like to set the terminology right. The market is strong, continues. We are talking about our starts, which is related to building permits. I hope that we already in Q1 will see signs of a pickup. Historically, the seasonality is always a very back-loaded year. Hopefully when we talk again in Q1 reward, we will see that the starts are on a higher level than Q1 this year, the Q1 2000-
You still assume the seasonality will persist in 2020, where Q4 is strong.
Yeah. We can't expect a flat distribution on starts.
Okay. In terms of the Nordics, you told us about the weak projects, and how they still will impact 2020 figures. Just in terms of the scale, how many are these units which are in weak projects with zero revenue, versus what you had in your portfolio 2019, 2018, et cetera? You're saying there are less, and they're starting to be fewer. In terms of 2020 helping us on the way here, how much is it now versus what it's historically been the last few years?
I'm not really sure I understood the question.
No, you said you have a few zero margin projects in the Nordics, like in Denmark and some weak projects in Finland.
Yeah
et cetera, you're expecting to press down margins. How much of the portfolio for 2020 are those versus what you have had historically? Are it few or are there more of those low margin projects?
It's a few. I would say it's probably around a handful. Denmark is, it's one or two, maybe. Let's say it's a handful in Finland. Of course, this is the challenge we have. In a quarter where two of these or one of these out of three projects are handed over, the impact is big. While if there is 10 projects handed over, you wouldn't see very much impact at all.
Okay. Also in terms of the Nordics, you had the guidance which you had for completions, which were in the 700, if I do recall correctly. You guided you will complete in Q4 in Nordic 770, you just delivered 544 to consumers, which means there's a deviation of 220 units, more than what we see in the hiccup in unsold completed apartments. Can you please elaborate on this?
It's a combination. You were onto one of the dimensions, which is that part of that, we have not been so successful in the sales speed. Part of that has ended up being completely unsold. The other part is a project in Finland that was delayed from Q4 to Q1.
That project has been delivered already in Q1 now, if I assume correctly.
No. It's been postponed to Q1 2020 from Q4. We guided it to be handed over in Q4 2019. However, it was delayed and will be handed over Q1 this year instead. Then we have on top of the completed unsold, we also have some sold but not handed over. That is explaining the difference between the guiding we have in forecasts or Q3 and this.
My last question, in terms of the plot sales, which you said you delivered the last one with huge gains. A lot of these have been in Sweden, but saying it will be substantially lower. I might have been asked before, but what rate and what level should we expect for Sweden to have in plot gains? Are the figures we've seen in Germany, Nordics, and St. Petersburg representable for what we can expect from Sweden going forward?
Yes, I think so. We will still work with plot sites in the sense that we will buy larger areas, and part of that will not fit. I think that low level is what you can expect going forward.
Okay. My last question, in terms of the dividends, you argued a lot about it being reflecting to the results for 2019. A lot of companies also like to use the dividends as what they expect for the coming years and communicate with the market that we still have big, high hopes. Here, the dividend was cut quite significantly. To what extent has the board taken into account their expectations for 2020 into the dividend, which you now suggested?
I have absolutely no idea. It's not my decision at all. It's their reasoning. I didn't express that I actually knew how they were thinking. I just made a kind of logical analysis based on the dividend policy. What the board has decided upon, I don't know their reasoning. It's their decision. Again, it's a suggestion to the shareholders meeting.
Thank you. Those are my questions for now.
The next question comes from the line of Niclas Höglund from Nordea. Please go ahead.
Yes, good morning. Niclas Höglund here. A couple of questions from my side as well. We start out with Germany. You're talking about a substantial pickup in starts owing to better permits. You were down to only 858 starts in 2019 versus more than 2,000 in 2018. Could you elaborate a little bit on the pipeline? Is it fair to expect you to recover to that level over the next coming years? What's the pipeline?
The benchmark 2018 is way too steep. 2,000 units, I think that should be put into context where we have the last year sold around 1,500. The first aim for us is when it comes to start to get up to that level, to the sales level. Hopefully, Germany developing, starting 2,000 units will be totally in line with our own expectations, but not this year. Let's get to 1,500-ish to start with, because then we are level with the expected sales.
Okay. Just to follow up on that. Do you really have a pipeline to support the 1,500 level already in 2020?
Yes.
Is it more longer term? Okay.
We have plenty of pipeline. It is a building permit related question only.
Right. Then a question on margins in Germany. You seem quite happy with the 13% level, but if we exclude the gains from land divestments, the underlying margin is down from 13.9% in 2018 down to 12.5%. What's this delta? Why are margins falling in Germany?
Because we are growing the business, and also partly because it has to do with the mix. Sometimes we get a really good premium for our packages, the B2B, sometimes we get a more expected or market price. I think we can expect that the margins might fluctuate, I don't know, 50 points, sometimes 70 points. 13.9% is a very strong benchmark. Going back to the business, around 13%, I think that's a good margin, still including gains from land sales.
When I look at your profit accounted units, your expectations for 2020 and is aiming for more than 20% increase in units. Is it fair to say that you then will get a positive operational leverage on the higher cost level, which you had when you started more project in 2018? Is it fair to assume that all else equal, margins with 20% higher volume should increase?
Sorry, Niclas. Those numbers you're referring to, is that in a segment or is that group numbers?
Well, you do present that profit recognized units will increase to, what was it? Let me double check the number here. To 1,600 units compared with 1,325 units in 2019 on profit accounted wise.
We're still in Germany, right?
Germany consumers only.
No, I don't think we will see a leverage due to the increase of scale. We're still growing the business. There is still a lot of costs and activity going into the future. No, I wouldn't expect that.
Costs will increase with more than 20% then as well.
Well, I don't think the margin will grow due to the increased volume anyway.
Right. Okay, maybe a clarification on the Nordic side. You're talking about a negative impact on when you're finalizing these weaker projects. You're aiming at more than 800 units to be delivered in 2020, and you're talking about a handful weaker. Should we expect a couple of hundred of those units to be soft margins or diluted? Are we talking about losses on gross margin wise?
I'll talk about losses, because if we turn into negative numbers in a project, that needs to be handled immediately as a loss when that forecast is changed. It would be 0 margin. I guess that a handful plus a few, plus some kind of average project size of, I don't know what, 60-70 units, I think you could make a pretty good assessment.
Okay. Fair enough. Then cost savings. You are now closing down Oulu. What would be the gain or delta in 2020-2021 from exiting Oulu and cost-wise?
No cost gains. It's an adaption of volume.
Right. The people will still be employed in the Oulu operations then?
No, I'm not saying that. If we carry this plan out, we will reduce volume, including reducing new projects and reducing cost tied to that volume. It wouldn't really a save, because your assumption then would be that we will have all these people employed, and then they wouldn't bring anything to the table. It's more of adjustment of volume.
Could you maybe help us with what's been the average contribution from Oulu over the last two years?
No.
Has it been positive?
No, we have had very weak development.
By letting these people go, you don't expect to save cost? I don't understand that.
Okay.
Those were my questions. Thank you.
The next question comes from the line of Jan Ihrfelt from Kepler Cheuvreux. Please go ahead.
Thanks. The first question, really going back to the Nordic segment. You're talking about some of the projects being loss-making, and you're talking about debt invoicing. Are you guiding for zero margins in the total Nordic business?
No, I don't give any guidance at all. I try to put things in context. I'm not guiding on any margin.
Yeah. If you just could repeat that, some of the projects, I don't know how large portion it is of the Nordics, are making losses. You're talking about the zero margins.
In those projects, yes.
They were loss-making.
No. If we have an ongoing project that is making a loss, then that loss falls into the P&L immediately that quarter, even though it is not finalized. Going forward, until completion of that project, it will tie a zero margin profitability.
Okay.
It is our accounting method.
Yeah. That is only part of the Nordic business?
Yes.
Okay. Second question refers to cost overruns. Are they spread all over your business or are they isolated to different markets?
No. The cost overruns in projects, they were specifically in Finland in the fourth quarter.
Yeah. You mentioned here that you have plans for tighter cost control going forward. I'm just wondering if that was caused by cost overruns in other parts of the business.
No, it was not. I think it could be beneficial for the whole group to have a tighter cost control to mitigate the risk of this happening somewhere else. No, we will gain better cost control and governance all over, but it was targeted to the loss-making projects in Finland.
Okay. My third question relates to your average selling price in Sweden. It was, if I recall it, SEK 4.8 million. I think that is due to mix. My question really regards the average selling price for 2020 in Sweden. Is it down substantially or going to stay on these levels for 2020?
I really don't know that. I don't have those details because so much depending on mix, row houses, multi-family, where projects are located. Sorry, I don't have that insight now.
Okay. Yes, those were my questions. Thanks.
Just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. Our next question comes from the line of Tobias Kaj from ABG. Please go ahead.
Yes. Thank you. Sorry, I forgot to unmute. I only have one question, actually. Regarding units to investors, you have almost 1,300 units that you expect to complete 2020, but you have almost 2,300 units to complete after 2020. Should we expect all them to be completed 2021 or some, and if, how many completed not until 2022?
I'm pretty sure that some of those that are beyond 2020 will be finalized in 2022.
Do you know roughly how many?
It can also depend, again, on getting a permit or something else. Where I sit now, I don't have that detailed information.
Okay. Thank you. That was my only question.
Thank you.
As there are no further questions, I'll hand it back to the speakers.
Thank you very much. We will now end this call. Our next interim report, Q1, will be published 23rd of April. Thank you very much for calling in. Bye.