Hello everyone. Welcome to Bonava's Capital Market Day 2022. Finally, we can meet all of us together live in the room, but also digitally. A warm welcome here. First of all, before we start, we need to go through some safety rules. How we exit this room if something would happen. We have two emergency exits upstairs. If you just turn around then you will see them. There is another one here in the corner. If you go out that way, you will come out on the street. If you go that way, you will come out in the backyard. There's a door in the backyard between Norway's and Finland's embassies, where you will also get out on the streets.
The assembly point is to the left of the hotel, Pestana Hotel, towards the bridge. There is no planned emergency evacuation today. If there is a loud sound, we will all get out of here and get also some guidance from the embassy. There is also police station on the side of the street, so we can feel pretty safe being in this room together. Now I want to welcome the Minister Counselor, Jenny Lünning Malmqvist up on stage. Thank you, and thank you for having us.
Oh, you're welcome. I will say that with the microphone right so.
Yes, please.
Everybody can hear.
Yes.
Well, thank you so much for introducing me, and thank you all so much for coming. We're very, very happy to have all of you here in Felleshus and also around Europe. It's special warm welcome, of course, to CEO Peter Wallin and the head of the German part of Bonava, and all of Bonava team. As you said, we are here in this. I always say Swedish Embassy, and then I have to take a little deep breath and say in the Nordic Felleshus here in Berlin. This is a very unique building and site. It's the only place in the world where all five Nordic countries are located together.
It was inaugurated a bit more than 20 years ago, so around 2000. This very close cooperation and the symbolism of this close cooperation is really not lost in a city such as Berlin, where unity is a leitmotif for all of us. We're very happy to have it here, and also, of course, to have this venue for our esteemed guests. I should say those of you who are here, you might have seen big banners and invitations to exhibits and art artist exhibits. We also have cinema showings in this very room. Right now there is a exhibit on Sámi art and culture.
A small Werbung for those who are here in Berlin. Welcome back. As you said, in the embassy compound then, or each embassy has its own building, and they are built and designed with traditional and local materials. For those who are interested, it's also and you can go out and see, they're also located roughly in the geographical distance to each. Not distance, but it's sort of set up as a abstract map of the Nordic countries as well, including ponds representing the Baltic Sea and the North Sea.
Anyway, when you asked me to talk to you this morning, you ask what is on top of the political agenda in Germany at the moment, including economics and energy. That is exactly what's on top of the German political agenda at the moment. I do need to go back one year because the German government came into office less than a year ago. It feels like another time. At that time, the first governmental declaration, Regierungserklärung, of Olaf Scholz focused almost entirely on the corona pandemic and crisis. I should also say that the government was elected on a quite progressive agenda. It was climate change, social change, et cetera.
You know the government is comprised of three parties in a coalition, the Social Democrats, the Liberals, and the Greens. Of course, 24 February happened and the government has gone into almost a permanent crisis management mode, but trying not to lose sight, of course, of the common challenges that we all face. This I think is true for most governments in Europe. Just a very quick reference to the ongoing COP 27, the climate conference, and another small commercial, we will be doing a live stream and a seminar on from that event also here in Felleshus next week. That's sort of the dual vision is what the German government and are trying to uphold.
When it comes to economic development, which of course we as the Swedish Embassy, and of course, all other embassies here in Berlin are really keeping a close watch on, being how important Germany is for Europe and also to Sweden. I will come back to that later. Of course, there is more bad news than good, unfortunately. It's similar to the rest of the EU, of course. The government are expecting a recession, and we of course record the highest inflation rate in decades, currently around 10%. There are, and that's the good news, there are signs of resilience. We unexpectedly, the last month's figures showed a German GDP growth by 0.3%.
Not fantastic, of course, but at least it's in the black zone in the third quarter. There was also a production growth in September by 0.6% compared to August. There are signs of resilience. Of course, the labor market also remains quite robust and resilient. Of course, the business sector here braces itself for the winter and also for the coming winter. You know, of course, that a lot of these important sectors in Germany are high energy-consuming sectors, car industry and chemical sectors, et cetera. It is a very challenging situation.
On top of that or related to that, of course, the energy situation, which is the key for how to manage the economic developments in the months to come. Germany has taken a lot of difficult decisions, and they have been reported in the Swedish press quite extensively, and I'm sure also in all over Europe. There have been very difficult decisions, of course, to restart coal plants, to extend the use of nuclear power until April next year, but also the construction and speeding up of LNG terminals and also very large support schemes for businesses and households to keep up and the business activity and also shelter the households from the worst impacts.
We follow here in Germany every day the gas storage facilities. They are now full. People are saving a lot of energy, people and businesses as well, of course. This is also good news. Of course, we are in for some challenging months, which factor is very difficult to influence, for example, the weather. I also want to say, I think this is impressive, before the Russian invasion of Ukraine, Germany relied 25% of its total energy consumption from Russia and now, of course, more or less zero. That's. I mean, it is a really huge thing that has started to be turned around in a very compressed amount of time.
I've totally lost track of time, but a few words on the Swedish-German business relations. Okay, as long as you're smiling.
I'll continue to smile a little bit more.
Germany is Sweden's largest business partner, accounting for 10% of our goods exports and 18% of our goods imports. That is complemented with 1,800 Swedish companies in Germany, 125,000 employees, 1,400 German companies in Sweden, 80,000 employees. That, of course, covers all business sectors. I would just like to highlight two things, that is, of course, that we've tried to focus within the framework of an innovation partnership between Sweden and Germany since a few years back. On a few sectors, I will just mention quickly, mobility, artificial intelligence, e-health, cooperation between small and middle-size enterprises, and so on. We hope to enlarge it with a few more sectors. That's really exciting and interesting.
Three examples perhaps of also increased activity within the areas of green transition. Just to note that Volkswagen is a large investor in and consumer to the Swedish battery producer Northvolt. Of course, we have this very interesting projects to produce fossil-free steel. Daimler and Schaeffler are the investors and partners to H2 Green Steel. Also a great interest, of course. German Uniper is a partner in Swedish Liquid Wind to produce e-fuels up in Örnsköldsvik. Those are just three examples. As I said, all sectors and a lot of this dynamism in the partnership.
To go back a little bit to the political side, there is a large interest in Sweden from, they see us and, as innovative, trustworthy, reliable, and very forward-looking. That's something that we try to take into all our planning. Of course, as Sweden now will also take over the EU presidency on the first of January next year, that will also. This type of thinking is something that we will try to take forward also in the EU context. I will now end with two things. Wishing you a very fruitful event, important event, and good discussions. I've seen the program. Lastly, congratulate Bonava to the nomination of the Swedish Business Award, Swedish Unternehmenspreis. I think some of you we'll be seeing you next week.
Let's see here, the seventeenth of November, some of you. That'll be exciting times ahead. Let's see. Congratulations on the nomination. Again, thank you so much for having me, and enjoy the discussions today. Thank you.
Thank you. I kept smiling all the time, so thank you. That was really, really interesting for us to listen to. Also that we know that there are interesting exhibitions. I assume that you all will be maybe heading back. If there's time, of course, interesting. Yes. Sorry? Yes. You did see the program, and now I will show the program to you as well. Let's go through that. Today, we will cover the following. After this, soon Peter Wallin will be on stage together with some others, and we will talk about the changing market dynamics. I assume you are very interested in that. The second part will be around our business and our progress and performance when it comes to that. Finally, also the strategic focus for us going forward.
Am I doing something wrong? No? Good. We will have a short break, with pointing out it will be short, so please mind that. Then after the short break, we will get to know even more about Germany, but more from the housing perspective with Andreas Schulten being here. Thank you for coming and being here now in the room. With Sabine as well, our Business Unit President. Sabine Helterhoff will help us after the break, and including Q&As, where you during this morning, of course, can prepare difficult questions for us. That's the program, and let's have a look at the total. Just before moving on, of course, there will be a lunch after the Q&A session.
As you know, there will be project visits after lunch as well. We will come back to the logistics when it comes to the lunch and the project visits as well. Here are the speakers of today. We will have Peter Wallin, our President and CEO on stage. Lars Granlöf, our CFO. Sabine Helterhoff, Business Unit President of Bonava Germany. Myself, I am Anna Wenner, I am SVP Brand and Culture. I will also speak, and I'm also responsible for sustainability. Anna Falck Fyhrlund, our Head of Investor Relations. She's over there. And Andreas Schulten, who's the chief representative from bulwiengesa. Now, welcome on stage, Peter Wallin. Ta-da.
Ta-da. Thank you for the applause. Sorry for that. You should never beg for the applause, right? Then you are not good in entertainment. Good morning from me as well, and welcome to this Bonava event. I've been looking forward to meeting you live. Last year, we presented the strategy meeting, and we had a digital capital markets day. It felt very strange because we were in industrial area setting outside Stockholm, completely empty, and just cameras and everything. This feels much better and more natural. Even if it's beautiful picture of some of the people here, let's move on in the presentation. When we presented the strategy, we presented some key findings on how we should be working with the reshaping Bonava in the future.
We want to take this opportunity to give you an update on where we are. Then, of course, we have all heard about the changed landscape when it comes to the realities right now, and we're gonna talk about how we're gonna tackle them. Of course, since Germany is half of Bonava, it's even more important to hear about Germany. Germany, as we heard from Jenny, it's always interesting, but even more now, we read about Germany every day in the press. With that, I would like to start with my last slide on the previous capital markets day. That's a good start to link back to what did we say then.
On the top part here, in the light boxes, you're gonna find what we said almost a year ago. If you start out to the left, favorable market fundamentals and improved profitability. That was November 2021. That was also the time when the Riksbank of Sweden and the European Central Bank said that they were gonna increase interest rate in 2025 the first time. It's a different time now, and market turmoil, uncertainty, and one of the most important part for us as developer, the consumer confidence. Because buying a home takes courage. You need to see positive on the future. You want to take that move. Of course, when the market looks like they are now, you're hesitating. Perhaps you can see that I have some gray hair.
I've been in a few downturns, and I know that the residential market becomes eerily silent when it is turbulence and turmoil. I also know that people need new housing. Societies are changing, and we are building new neighborhoods to support that change of the societies. Long term, the need is there, the demand is there. The next part that we said that we will leverage of becoming a sustainable developer, and this is very much linked to creating the market share and be sizable in the market to create that. By acquiring land bank, increasing our position in the local markets, we are sort of taking a few steps towards this. Sustainability, as Anna will talk about later, is even more important today given the energy prices and given how you keep track of the gas price.
Now, the ambitions for profitable growth, of course, then becomes changed. The ambition to increase profitability is not changed. Bonava came from a very low level of profitability as a group, and lifting the profitability is the absolute key. If I can talk about two things, I would talk about profitability and health and safety. That is the two things I would talk about. What we have done also is that we have changed the structure. What does that mean? Well, it means scaling down the top and the central interference into the decentralized business model that essentially is making the foundation of a successful residential developer. If we don't have local businesses which can act in accordance with the markets, we are hindering the performance of our business. That change in structure is something which we are now enforcing into Bonava.
We have taken a few steps. We have more to do. We have a great team in place now, and I'm very grateful to have the right team in place to help us form and shape the company to support the improvement of profitability. It's a long-term business. It takes time to change a business where you can have the permitting and approval for five-seven years. You need to be there for the long run. You need to have perseverance. Of course, to change something that needs to be changed takes some time as well. Growing the land bank. We came in with a under par land bank, which means that we had too little building rights ready to be launched into the marketplace.
That also means as soon as you get the permitting, you need to launch the project. You get sort of a very volatile volume. In a developer, in a successful developer business, you need to have a consistent level of volume out in the market the whole time. That is to leverage on the market in the right time, and it's also to be able to launch the projects at the right time, and not just to. That is what we have on the shelf. Growing the land bank is essential for us to lift the profitability long term. Last but not least, and it was important a year ago, and it's even more important today, is to make sure that we have a solid financial position.
The financial position in itself means that we can act within the current market, but it also means that we can take the opportunities when they arise, because this market will create opportunities for sure. Sort of putting a few more words to what I have been speaking about now, when we look on the long-term trends that we have, we have favorable demographics. We know that people want to change the way they are living. We are seeing this move from the city centers out to the outskirts of the cities, the so-called donut cities. This trend was extremely strengthened during the COVID situation, of course, but it has been a trend for a long period of time. The underlying demand for homes is there. The migration into the bigger city areas is continuing.
We are seeing how new industries are being formed. Here in Berlin, for example, we have the Gigafactory of Tesla, which happens to be that they built it close to our office. Everything is happening around that. All the support that needs in a huge factory like that. You can just imagine creating a completely new situation compared to 20 years ago. The rental business is also growing, if you look on all our markets. People wants to be able to be flexible and also be able to rent shorter term and have their fixed permanent home somewhere else. That's a business model that is there. We have a sector which is lagging productivity. You know that from the construction and development stage for a long period of time.
We need to work hand in hand with having a land bank and a platform system that works together. I think some of the investments you're going to see this afternoon is good examples of that. You will hear Sabine talk about that a little more. The ESG agenda, it's gaining momentum. It's interesting, when the price gets high for not saving energy, you start to see the behavior changing directly. We could speak to how we are changing our products and offering, and have been changing the offering in a very short period of time now, given the context of the market, where we're moving to solar panels, electrical heat pumps instead of gas, for example. Then it's interesting because Scope 3, which Anna's going to talk about, is around behavior.
When the cost is high for not having the good behavior, then you start to see a change behavior. Believing is one thing, doing is a different thing. I have not become friends with this thing now. The short-term trends, and this is sort of baking together what we have seen also during the COVID situation. We saw during COVID that the inflation was picking up because of shortages in material. Demand came up rising very quickly, and then material started to be sourced. Then, of course, you also were shutting down production facilities. The cost of transportation rose, and so forth. Also, there was limitations of some materials. This, of course, impacted the construction costs for producing the homes. Energy prices, again, comes on top of that.
Now when we are seeing the input material, steel, copper, tree, and so forth, wood falling, we are seeing the transport cost and energy sort of going the other way. All in all, we are seeing that the shape is flattening out, but it's a mixed bag. The consumer confidence, as I said, it's a big ticket on the demand side. We need to help to build a number of solutions for our customers to feel safe of taking a decision to buy and move into a new home. The changing home preferences that we saw during COVID when you needed an extra room to work in whilst you were home with your small kids. Now that extra room is perhaps a bit more expensive to heat.
We are seeing that change behavior. You wanted greening, you want the surroundings that were supporting the more outdoor lifestyle. Even if COVID is sort of fallen in importance from that point, we have established a new way of working after COVID. I can just look at myself. I'm working from home from time to time, which I wouldn't have done a number of years ago. Things have changed. The acceptance of working digitally has sort of come there. All in all, if you bake in all of the challenges here, a lot of players is going through the challenges here. Those challenges would also create opportunities, and they will create opportunities for companies that are there for the long run. Bonava is such a company.
If we just take a very quick market snapshot on the Bonava map, let's start in Germany very shortly. I feel now talking about Germany in Germany feels very strange and difficult perhaps. We're going to hear more about the market. From where we sit in our eight regions here in Germany, we can see that sales is slowing down, of course. People are afraid of increasing energy costs, increasing interest rates. We are seeing signs of interest and demand in our projects. We are seeing that the cities are still. I would not say that they are in a good place, but that still there are some demand in our projects. Here in Germany, we have the opportunity to work with huge investments.
You're gonna see some of the, those great examples where we have been working for many, many years. Of course, we have created an interest and a value in those neighborhoods. Even if the market is turbulent, we still have demand in those sites. If we move out to the west coast, Norway, the Norwegian economy is quite robust. Of course, they are making a lot of money now when the oil and gas prices are high. Still, the market is a little bit more, I would say, wait and see mode. There is sales in the Norwegian market. If I take Sweden, that is the market mostly affected by the current turmoil. That's a combination, of course, that the Swedish market have experienced a long period of time of very quick growth of prices.
High leverage, relatively speaking, and the dependence on variable mortgage rate. That creates a direct impact into the affordability of housing. This has caused the sales to halt, stop. Sweden is the mostly affected market. If I turn to the East and our Finnish neighbors, they are also experiencing much lower sales, but still we are seeing some interest into the market. The prices have not risen as quickly as the Swedish example. I don't know about the culture about Finnish people, but it's more sort of the grit. Going down to the Baltics, this is very interesting. I visited the Baltics just after the invasion of Ukraine. The fear level, you could feel it, you can sense it in the room.
Now, when Ukraine is standing up and defending themselves, you can see how they have sort of increased the height and lifted their gaze. It's also because of course, the stock is so old. The demand for modern energy-efficient housing, and they are coming from a pretty low level, is still there. Actually, the Baltics is one of the strongest market, which sounds a little bit like a difficult proposition. All in all, sales impacted definitely. The outlook is very hard to see. It's hard for buyers and sellers to meet. Sweden is mostly affected right now. This came quickly during the third quarter. First quarter, we couldn't see anything. Starting to see signs in the second quarter, and the third quarter we saw the direct impact.
Taking sort of a look at the cost and price component as I spoke about, you can see two graphs behind me, and they are from public information, Eurostat, starting point 2.2, 2020. The blue part, the blue chart line is representing the price, and the green part is the construction cost. We have been speaking a lot about the cost increases in production. If you look on the later part of the graph, this is public information, so it's not something that we have invented. We would expect the prices, of course, to be flattening out and be on the downturn. You have a lag in new production because in the current existing stock, you have the capacity out in the market the whole time, and you can see the price indications.
Whereas in new production, you have a lag because we are withdrawing volume from the market when the prices are going down. Then we are changing the offering. Sabine will speak about this a little bit more. It means that you have a stickiness of the new production prices. Come in a couple of quarters, we will start to see this sort of turning back down. We will also start to see the cost component coming down because we are seeing the material prices coming down and also the construction cost. The fees that we are paying for the general contractors will also be much softer.
This means that the gap you see between the blue and the green curve is also what we have done when we have sold the properties that we currently have in the SEK 18 billion portfolio projects being sold that we will realize in profit over the next year and a half. That is why we have in the comments in the quarterly reports, we have said that, yes, cost is increasing, but as long as we know the cost when we are starting the project, we feel quite safe. I think that third quarter showed that we are in better control over the cost right now, even though cost has increased. We are capitalizing on that. Also, that the price has increased. Let's remember, the green and the blue curve starts at the same point just because the indices starts at 100.
If revenue is one, the cost is approximately 50%-60% of the total price. You have, if the blue curve increase is higher or even lower, you can still have a positive momentum between margin-wise. Going back to the playground. Let's talk about our business and performance then. When I said that we are here for the long run in Bonava, it also means that we are different compared to some of the other players in the marketplace. We have a diversification in terms of markets. We have a diversification in terms of buyers with consumers and investors, and we have different products. This means that we are not exposed. We have not put all the eggs in one basket.
If we take a look on the Bonava map again, and this is the 12-month rolling numbers, and I will not go through all the numbers, but this is to say that all our markets is very much individual in terms of how they are set up, how the business model look like. This is also why we divided the business units in the redirection of the strategy into three different buckets. We put Norway and Finland in to get the basics right. Really start from the bottom and build it up. You are not allowed to grow at a fast pace until you get your basics correct. I would say, if I take a look, that Finland has progressed, which we also saw in the third quarter, or given they came from a very low level.
They have improved. Whereas I find Norway are sort of struggling a little bit. The next part, it's the Swedish business, and we had improving performance. Again, coming back to the fact they can grow, but not to a large degree. They need to get sort of their performance together and improving the performance. We have just changed leadership in Sweden. I think takes time to change a long-term business. I'm very positive towards how the new leadership in Sweden, Alexandra, is conducting her review and looking into the business. I know that she has one thing in her eyes, and that's increasing profitability. I like that. The last group was licensed to grow, and that's Germany and the Baltics.
I think both Germany and the Baltics have proven that they have improved performance over time, and they have grown. They have proved why they are in that bucket, and they should belong in that bucket. A couple of decisions that we have taken is to exit and wind down a couple of businesses. The Danish business, we took the decision in the second quarter as of last year. We sold the land bank in the third quarter. The fourth quarter, it was reported. Looking at the CFO to get the confirmation whether I'm right or wrong. Actually, that close down has gone much better than we were fearing.
Because when you give the word to a local organization that your business is no longer going to exist, we're pulling in a lot of energy into it, and we also named a very good local leader who has led the exit so far. I would say it's gone very well. We have one project still to hand over, which is under production, and that is in just a couple of weeks in Copenhagen. That's it. Then the remaining part, of course, is taking care of all the customers that the Danish business have built for over the years. But that is something which we're gonna take care of, and we have a good leader of that now. St. Petersburg.
I'm not gonna lie to you that this has created a lot of attention for top management since the end of February last year, this year. You have been forced to take decisions on the go in a very difficult time where the conditions are changing four or five times during the same day. Talking about finding a needle in the haystack. We have been able to do so with a very good central teams, but also an extraordinarily good local team being put under serious stress. On October seventh, we announced that we have signed the sales contract for our Russian business. It has the conditions precedents of authority approvals in Russia from the Federal Antimonopoly Service and the Ministry of Finance of the Russian Federation. We are in full go within those processes, conducting those processes, seeking approvals and so forth.
We have said that this could take up to six months. Of course, the longer it takes, the harder it is to assess the situation. We are happy with the progress we are having right now. It is a very sort of dicey situation to get the approvals, and also when you can get the approvals, the approvals could be linked to certain conditions from the authorities. We only know what we know, and we act accordingly. We are happy with the partner and the buyer that we have found. We are happy with the process that we eventually had and conducted internally. Then it's going to be up to having a responsible way of conducting the approval processes.
It's not for the faint-hearted, I can tell you that. When we presented the strategy within this way. In the heart was building happy neighborhoods for the many. We then had three different themes, as you see the circles around the purpose. It was strengthening the land bank, drive cost and efficiencies through repetition, and up commercial excellence. All of this built around people, not systems. We have great people in Bonava, so we have a great foundation to build this on. We also defined strategic objectives, six strategic objectives, two financials and four non-financials. What we communicated now when we announced the third quarter was that we will review the financials. If you take a look on the financials, you can understand why.
Bonava came from a very low level of profitability. Interest rates and interest cost in a high, heavy asset demanding operations like ours is important. We wanted to create that through using earnings before tax. Now, if the interest rates moves very quickly upwards, of course, looking ahead, it makes it very strange to use EBT. We also had volume, so we wanted to increase the volume, and you can see that on the bottom part here. Already in 2024 means that we need to start those projects this year or beginning of next year. It's not responsible to grow the business in the current context. We are responsible. We are reviewing these numbers, and come Q4, we will announce the new targets and the way we have been reasoning.
We will of course be very responsible in terms of showing that we want to improve performance, improve profitability, and also that we want to take care of the balance sheet. Both of those are very important in our kind of business. Now, you have heard the CEO stand here and talk about the run. Let's get into the meat. Why not introduce Lars, our CFO, that will take us through the numbers?
Thank you, Peter. Yeah, let's then get to the numbers, give you a bit of the background and where we are standing right now that we are building on going forward, of course. First, just to point out that St. Petersburg and Denmark are out of these figures. If you try to compare it to the financial reports, you might not be able to track it. Also that we are reporting our figures based on completed contract, which means that there is volatility in the revenues and thereby also the profitability depending on the projects that we are handing over and that we are reporting as sales and revenues.
Here you can see the gross margin and the operating margin also excluding sale of land, which was a very important part of our profitability in the first years of Bonava, where we were selling quite a lot of land with good profitability. That is also factored out here. After the first few years, where we were benefiting from a number of land plots at favorable purchase prices from the past, and that was building the profitability, we're coming down to a 12% level. You see in the last twelve months here, it's approximately the same as we had in 2021. If you remember from Peter's slide with the map, we were pointing out that we took some SEK 155 million in Sweden in Q3.
Factoring that out, we would have approximately one percentage point higher level here in 2022 in the last twelve months. We are moving in the right direction, both in terms of gross margin and the operating margin, the EBIT margin. If you look at the sales and admin costs, they are on a 5%-6% level, 6% level. We definitely aim to maintain it at a 6% or below 6% level, not more than that. The financial net, of course, we have been at a low level, quite below the 1% to sales. With the higher interest rates, and of course also we have higher net debt, this has increased. Going forward, depending on the interest rate movements, it will increase even further.
That's the problem for us to predict what that will be then, going forward. What are we doing then? Based on the situation where we are trending right now. We see that, as Peter said, we were putting the BUs in different brackets to get the basics right, and they've been working with that, they continue to work with that. We put the right team in place, and the organization is following suit, of course. We have put in stricter investment processes, really seeing to that we are profitable in those projects that we are starting, that we are making the right investments in terms of land for us to be able to create profitable projects going forward. What we are talking about in all our presentations, what are we doing then?
We are always, of course, seeing to that we have the right people in place taking care of the projects, that we have control of costs, and that we have the situation in terms of sales and market, verified before we start projects. That is the way that we are securing that we are not entering into loss-making or low-margin projects. What does that mean in terms of starts and sold units? We have been, as you see here, the last few years on 4,500-5,000 both in starts and sold units. The aim was to increase that, as Peter said, going into 2022. What happened then in Ukraine by the end of February, and the impact on the market has made us then to rethink a bit, of course.
We have lowered the targets that you're also seeing or the guidance that you've seen in the Q3 report from 4,200 starts to 3,000 starts, which means that we are about 750 starts to go now in the fourth quarter to reach the 3,000 starts in 2022. Speaking about then the security, what we have in our stock today, realizing profit on a completed contract basis means that we have an ongoing production of about SEK 25 billion. With a 71% sales rate in that, we have about SEK 18 billion that we are sure of that we are going to hand over and realize over time in accordance with the graphs that you see here which we are publishing in the quarterly report.
You can see when we are estimating that the units will be handed over, and the sales and the profitability will be realized that in that same period. Going back to the strategy, Peter was mentioning that we were focusing on increasing the land bank going forward in order for us to build the business for growth. We said about SEK 3 billion rather soon. As you see, we have actually built our land bank with about SEK 3 billion in book value from the land bank that is on balance. We also have a part that is off balance, and if you look at the left-hand side, you see that the off-balance part have been reduced, but the on-balance part have increased. We have converted it, and that is part of the increase in book value.
Of course, we have also added new land to the portfolio over the year. If you're trying to then calculate the average price per building right, you see that has increased. Of course, with increased prices during the period compared to with the stock that we had. Also that we have invested quite significantly in Germany and also in Sweden, which are the two markets where we are seeing the, I would say, the highest prices for plots. That is also part of the increase in the average value.
Another part of the strategy was that, in mid-December, the capital markets day, that we had the digital capital markets day, we said that we are going to start build to manage, i.e., building and keeping them for some time before we are putting together portfolios and selling them with the tenants in, of course, in the flats in these houses. At that point in time, we said SEK 2 billion-SEK 3 billion. We have capped that to SEK 1.5 billion during this year. We are focusing primarily on the Baltics, where I would say that we are the leader. We are the one that is basically introducing this into the Baltic area.
We have also started one project in Sweden that we will learn from, and we see how we move forward in Sweden. Not in any other BUs for the time being. Another very important part, it's always important to keep track of costs to keep that at the lowest level possible. Given the circumstances, of course, in the market with lower volumes, lower number of starts, et cetera, we need really to keep track of cost. We identified about SEK 220 million in cost reductions during this year. We have some impact during this year, but we will have the full impact of that during 2023. We are also, of course, constantly looking through this, and we will be able to identify more opportunities as we go forward, move forward here.
If you look at these SEK 220 million, it's about 60% in sales and admin, about 40% in the indirect. The indirect is then part of the gross margin, so they are not seen separately there. As I mentioned early on, sales and admin, we are targeting maximum 6% in relation to net sales going forward. Moving from that into the financing part, we have a balanced financing of growth in place. So we have funded the investments in land. We have the long-term financing credit facilities mixed with good, flexible, short-term funding. Project financing in Sweden and Finland in addition to that.
We also need to realize that very important part of the funding picture right now, and even more so going forward, introducing Anna to that theme of course, is the green financing. We have set the framework in 2020. We have adopted that to the EU Taxonomy during this year. If we look at the net debt as we had by end of September, approximately 50% of that was based on the green financing framework that we have. In addition to that also, just to mention, you might have read the verdict in Sweden about JM and how to handle the financing of the housing associations and the housing companies in Sweden and Finland. We have been consolidating them all throughout.
That is approximately SEK 1.7 billion out of our SEK 6.8 billion is the consolidation of these debts, of course. Then speaking about the net debt, you've seen that we have had a drastic increase in net debt compared to one year ago. One year ago, the SEK 3.5 billion, that was in a stage where we were refocusing, looking through the strategy. That was a bit of a pause in the aggressive, the offensive way of acquiring a land.
We identified the strategy, and part of that was, of course, the growth agenda to adding more land, more investments, which we have done, which is on a net basis, really the difference between the net debt that we had one year ago and what it is now by end of Q3. Of course, it coincides with the cash flow. I haven't got the cash flow slide here, but it will show you the same picture of course. Even though the net debt has increased, you see that the equity to assets ratio that you have in the circles up here. We are maintaining this very strong financial position. We are still on a 31+% in asset to equity ratio.
That's the weakest quarter. Q3 is always the weakest quarter. In the other quarters, we are in, say, the 33%-35% bracket. You see the covenants that we have in the financing, 25% is the lowest. We are far above the 25%, and we have an interest cover ratio above two as well, which we are far from reaching. We are very good there. My final slide. The net debt is of course based on credit facilities, and these are credit facilities that we are maintaining then on the Bonava AB level. You can see that in the short-term perspective, we have some overall facilities, utilized, non-utilized.
Our main financing, the revolving credit facilities of SEK 3 billion, is maturing by the end of next year. We are currently in the refinancing phase of that, and we aim to have that done completely before year end. In 2024, we have our bond issue maturing, so we start to look into how to handle that, of course, also in the coming months and quarters. In addition to that, we have bilateral loans, both maturing in 2024, but also 2025 and up to 2027. That's the current funding picture. I hand the word over to Anna.
Thank you. I wanted to cover a little bit our non-financial or strategic objectives that we have. Overall to summarize that, we are on a good way, but still lots of work to do in each of the fields. We can see that it's diverse between the business units. Even if everyone is putting in a lot of hard work in all these areas, there are still differences between the units. Looking at the area of health and safety, we have Jenny Engstrand, who's the Head of Health and Safety. She's done a really, really good job together with the business unit to improve our performance there.
With a lot of focus, all the procedures, many procedures, most of the procedures are in place, but of course there's still work on to get the leadership in place and to do the things that we have sort of promised to do and do that together with our subcontractors and so on. We now focus on decreasing the serious injuries, that's the top priority, together with increasing the awareness and work on the culture in the organization. This year we had, instead of a one day of awareness, an awareness week where we all worked together, and that's something we will continue doing as well. It's really important, but also really long-term work to make it happen. The same thing for our customer satisfaction, where we see good progress.
The number here, NPS, if you don't know it's about sort of detracting the promoters from the detractors, and that's the target we measure in all of the markets. We then see some fantastic projects, and we also see some projects where we need to further improve when it comes to that. That's also throughout the customer journey, even if we measure, the measure point is, just after people are moving into their new homes. Combat climate change, we'll come back to that with a couple of other slides as well looking at that.
We have a really good but also ambitious target there, as you have seen, to reduce direct and indirect emissions of greenhouse gases by 50% by 2030. When it comes to employee engagement, we are happy to have really engaged employees. That has been through both sort of when the economy was going up, but also now when we have challenges and work to do in our business units, the engagement is still really strong, and we can see that all over Bonava. Also for these four areas, we have also made organizational changes to connect to the new strategy.
We have made changes to work very close with the business units, more than sort of top-down, and that has also made us realize that we have good progress in the areas. We have our mission, looking at the sustainability area. Of course, an embedded environmental respect is crucial, and that's what we state all over. We have done our analysis work according to the Science Based Targets initiative. There we definitely see that these three areas is where we can make the most impact. It's about the sustainable use of land, and that's also to select areas where we're close to already infrastructure in place, for example, as well as looking at the biodiversity, when it comes to the land.
Of course, the middle circle is where we have the biggest impact. If we look at the Scope 3, we know that 78% of Scope 3 is upstream, where, of course, with the goods and services that we buy, that has a really big impact and that we also need to work even harder as well as everyone else in this industry. The third part is about doing the life cycle cost analysis and be efficient, create efficient buildings throughout the whole life cycle, which is about 20% of the Scope 3 impact. Here are more of the details where we see that we have had really good progress when it comes to Scope 1 and 2.
The big impact for us is around Scope 3, as you can see in the middle here. Looking at the progress during the last years, we also know that the effect of the inflation is there because we have how we measure is about the what's it called again? I lost the word. How we measure the impact we have, how we buy our services and goods.
Spend.
The spend base. Perfect. Thank you. I lost the word. That's where we need to also make progress, going forward to have more of the accurate measurement of what's in our buildings and what the effect is. That's something we also need to work on for the future, the coming years, to be able to reach the target in the end. We see progress, but at the same time, we have put ourselves in a very tough position and a tough target. At the same time, we also know to reach the 1.5 degrees decrease, we know that this is something we need to work on. There's a big engagement in the company as well.
To finalize, giving you a few examples, as Peter mentioned as well, the good thing now is that the interest is really, really big. We, looking at the last point on the left-hand side here, with the solar panel standard on new single-family projects, for example, has raised a lot of interest in the market. Now it's really a good time to continue that work and to supply our customers what they also want and need. Looking at Finland, for example, we know that the building material in our projects, looking at the concrete, that's a really heavy impact as well. They have done very good progress in that area in Finland. There's a lot to do.
We have a little bit of a new organization in place. Looking at the right-hand side, that's where we'll put our focus going forward, to go from the spend-based calculation to more of the accurate calculation and focusing a lot on the life cycle approach. Finding also tangible KPIs and work together with the BUs so we know that we have progress in real life, not only sort of on paper. That was a quick summary of that. Handing over back to Peter, right?
Yeah.
You look surprised.
I look surprised. Thank you very much, Anna. It's also interesting to see because we have some good examples in the projects, of course. Actually, as I said, you can actually see we are measuring energy consumptions two years after people have moved in. You can see that they are far under where they wanted sort of as a threshold, and that is quite interesting. I hope to come back to that and show more of that at a later event in Bonava. Stay tuned. Again, flipping back to and coming back to the strategic presentation here and how to handle the current turmoil.
When it comes to the land bank and footprint. Even if we are selective now, we still need to be in the marketplace. We still need to track the market. Because what happens is the market turmoil is that, you can't see any sales. You can't get any readings for the market, so you need to be there. Very selective on starts, continue to press the right prerequisites, and I feel very happy that we have been sort of progressing that part so well. You're gonna find a word which says investment funnel. What does that mean?
Our investment funnel, if you think about it, if you have an investment business, and then you have Sabine here, who has all the great investments in the first day of the year, and you say yes, yes to those, and then you're consuming the capacity. Then we have the Finnish friends, which are a bit slower to grab on, and they come in November, and we say, "Sorry, the money's out." They perhaps, the Finnish could be better than the German. The investment funnel is about having a visibility of both starts and investments over time, and also to show the attractiveness of them in terms of profitability, so you're able to prioritize the limited means.
Seems like an awfully something you should have invented a long time ago, but we are there now, and we are going to put this as part of our very rigid investment process going forward. We're gonna have actually the group management, the senior group management sitting on the investment board now. That also means that Sabine, you will need to shine in front of your colleagues and really be good on pitching your projects. If you're gonna see the Finnish, the Swedish, Norwegian doing the same thing. I also think that this brings us closer together as a group management, having a collective responsibility for the whole group, and not only thinking about your own business. That's a tip for Rico's nodding there, the regional manager of Berlin. We can have that in Germany as well.
Securing financial positions. As Lars explained, the third quarter is the quarter where we have a lot of projects ongoing and not so many handed over. The fourth quarter is extremely intensive. You can speak to our German colleagues, and they are planning all the handovers even just before Christmas and New Year's. We are happy that the Christmas weekends looks like it does this year, because we have more working days. It's extremely active. We have a windfall of profit being reported and then cash flow. That's the line of the business. This is a good opportunity to us to continue to secure that we have capacity to act on the opportunities that arise. That is that point. If we talk about the other circles here, driving efficiency through repetition.
The projects you're gonna visit this afternoon is good examples of when we are using the same platform system, but the homes look completely different in the make and look and feel, roofing, façade, et cetera. It's basically the same legal system underneath. That means you can drive efficiency. Also, having the same team working year out and year in on the same area, building the same neighborhood also means that you get certainty in cost, and you have a very good team in place. That is something which we are driving projects now in the current marketplace. We're gonna focus more on those larger areas, of course, because there we have built up and created a demand. A part of our cost base is the overhead cost, as with any other cost.
Whether it is in production or in overhead, it is a cost that we have to cover. You can rest assured that the volumes that we will see in the planning is the volumes that we will address when it comes to the cost. We can't afford more than 6%, as Lars said, and that's exactly how we will need to conduct the business in a responsible way. Maintaining, of course, the resources that create profitability in projects, but also be very clear on who does what and how we can create a stronger Bonava as such. The ESG agenda has just started, and it becomes even more important now, I think, given the challenge the whole world is standing in front of. Being selective, ramping down volumes does not mean that we are passive. It's the other way around.
We need to be out in the marketplace. We need to conduct the sales. We need to stand in front of the authorities. We need to get those building permits achieved. If we start the projects or not, that is not the question. Because what we see when the market starts again, if you're not having any projects ready to be launched. You are dead in the water. You are losing momentum. Be ready to launch products when the market turns. I've talked about the larger developments already. Last but not least, the people-centric culture. When we talk about that, it's because sometimes when you talk about platforms, you talk about management systems, and you talk about this, that, and the other, processes, processes. In our business, we develop homes for a person of flesh and blood.
We are people of flesh and blood that develop the homes, so we have to put the person in center. We must have the best managers, we must have the best people, and we need to create a culture which is driven on performance basis. Of course, as I said, when we are reviewing and looking into the cost levels, we need to retain the right people. It's very important for us. Without the right people, we can have the greatest building rights whatsoever. We don't know what to do with them. That is how we're gonna address the turmoil. We know the levers, we know how to do it, and we're gonna do it. With that, I think I'm looking at Anna and Anna. It's very easy, the same name. Yeah.
We have a five minutes break now, which means that we will be here again 20 past. Thank you.
Welcome back, everyone. Please be seated. Otherwise, I will not look happy anymore. Now we will continue to dig deeper into Germany and the German market. Please welcome Andreas Schulten on stage. Thank you for coming.
Yeah. Thank you, Anna, Peter, Sabine, for inviting me. I have to admit, I give presentations, you know, three, four, five a week or so, but I'm a little flattered today because of the topic, because of your extreme professional business. I mean, that was good to look at how is Germany in a European scale. That was fascinating for me. Well, we at bulwiengesa, just to give you some, we are a 100-person company, working as independent analysts in the German market. We are therefore, we are here for 40 years now. You will see our data platform, RIWIS, which is one of the key, I would say think tanks, which our clients use also for Bonava.
When it comes to development, and this is where we are, not just residential development, but also, office, retail, logistics developments. We are in luck that we mostly get the data from our German developers directly delivered into our database. Thank you, Bonava. You're very. You get our transparency star. Because, you know, Germany is not transparent, and that's the problem. You know, it is, by far not as transparent as Sweden or the Nordic countries. And that makes it, even now, a little difficult to say where we are going. When I was invited, and we had some talks before, where is the balance right now? Is it a turmoil which really makes us suffering in the next one, two, three years?
Are there, as you said, Peter, also, with the turmoil, chances to grab and, you know, be in a good competition situation? This is what I told Sabine. What was it? Yesterday, the day before yesterday. When we look at developments in Germany, the development market as a whole has more than doubled over 10 years, you know. We are in a volume which is probably so we were in a volume which is not the normal volume. We will probably see a decline. We had a LinkedIn questionnaire yesterday. What is the German real estate word which is now really the one word. I would say is back to normal. The Germans say we are going back to normal.
Back to normal from a very high level is also suffering. Let me try to I don't know how I will speak to you. I mean, just I have some slides, but you know, this really what chances are there, what risks are there, is a little difficult. We had the speech of Jenny this morning, and this is what is now being told on the slides. Despite that, in October where you see a minus 0.3% decline of German GDP. That went a little better in the third quarter. We do see a slight shining up in the last days, also in the stock market and so on. Those who are analysts, you know what I'm talking about.
We have our high interest rate. We will have an increase in interest rate. We have an inflation rate. I have to press it very strongly. Thank you, Peter. Yeah, these are the figures I was referring to. We and this is, you know, we have a department of three people just in economics, and we are always fighting with them because they give us these numbers you see in the first three chapters. They say, "As long as inflation rate will be at 8, 9, 10%, we will suffer." Whatever comes, you know. They say we need to cut down inflation rate, otherwise you market people can tell us whatever you want, you will not succeed with an inflation rate of 10%.
When we say, "Well, look, there are good projects, there are opportunities," and you will see there is no shortage in supply, neither in residential supply nor in office supply in Germany. I will come to that later. This is new. A foreign company, I said earlier, we are a little in a situation which was Germany in the nineties. That was a phase of five years. You will see that later. Germany was not growing anywhere. We had the word of Germany is the red lantern of the train, of the European train. All Europe has to drag Germany to success. Then came the switch that Germany was ahead. It might be.
Our economists say, "nineties might come back for the German market." How do we come to our ideas? We have a Bulwiengesa property market index. You can go to our website and take these documents from our website. This is important. I have a big slide for this because the Deutsche Bundesbank came to our numbers, that was 10, 12 years ago and said, "whenever we speak about the retail real estate market, we will take your data. We will take your numbers." That was quite honoring for us. This led to most of the business banks, most of the big investor companies take our data.
When it comes to data, we, you know, this is a pyramid where we take all this data and put it into this index, which is one of the advantages is that it is a very long index. We do not have other indexes which start in Germany in 1975. This is quite interesting to look at where are we right now to have the long scale view. You see Germany in the seventies and eighties, we had an energy crisis. You see this cycle thing. How is real estate, being the property market, how is it performing in the time before the German reunification? We had the dark blue bars showing what was happening after German reunification. We had these, what I say, these 15 years of modes of not developing Germany in total.
The Anglo-Saxons say, "Well, you silly Germans, what did you think? You can't take a socialistic country in a snap of the fingers and say, 'Well, here we are again.' That takes time, you know?" Probably the Anglo-Saxons were right. Actually we see them right now in the German market. All the opportunists say, "Well, wow, this is a good point to enter a market." We look at the right situation. What did we see after the debt crisis, the financial crisis in the world, 2009, 2010? That was when Germany boosted, you know, when it really had an advantage from austerity. The Germans really profited from a very low interest rate and a strong economy at the same time.
That had a massive effect on the real estate market. You'd see it. We didn't have cycles anymore. There was just a boom going up. Another economist says we had the sweet spot. Everything was just right. That might turn. Cycles are the normal situation. When it comes to residential property compared to commercial property, it's even scarier or whatever. When you look at the yellow line, that is the residential index. It grew up to something like 240 in prices. When you look at the commercial index, it is much, much lower. Retail didn't perform as well. Industry didn't perform as well. Even offices, also in the last eight, nine, 10 years of German yes, I would say restructuring, did not perform as well as residential property.
That has been taken. In my view, has been taken into account when it comes where is the future. I don't want to be too gloomy, but what comes up must come down. I mean, when we say back to normal, this is what I wanted to show you. Back to normal means going down. You, especially the Swedish, know now what might it mean going down. That is what we fear in Germany. Relax, there are other stories too. The sentiment. These are data which go to 2021, so last year. We have a sentiment index which is going very well. We started it in...
After also with the financial crisis, we started the sentiment index and you see we could really say, "Yeah, there was a crisis." We have, I think it's about 1,200 people in our panel. We get answers monthly from 200 to 250, sometimes 300 people. It works really well. You see the upswing in Germany after the financial crisis, and you see the blue line is residential real estate in Germany really was the thing in the key in core. The other commercial indices, retail and office had a very hard time. We said, and that is quite interesting too.
In 2009, the end of 2009 and the first three, four months in 2010, for us as analysts, we said, "Well, look, it's going up." Everybody said, "Well, you know, this is just, we don't have a safe euro. We still are much in the euro crisis." Well, not in German real estate. "Go, go," we said. That was quite interesting. We saw all these insurance companies, all the pension funds who are still quite reluctant for a year. They started to do business at the end of 2010, 2011.
We said, "Well, but you're already in the upswing, so you should have started much earlier." You know, talking into the past is much easier than, you know, knowing the action right now. You can see that we had some cut-ins that was, you know, when the EU umbrella, the euro umbrella had to resolve. You see, can I point it? No, I can't point it. When you see in 2000, end of 2014, you see a cut. What was that? That was the first Ukraine war, you know. That was going down, and then, oh, it's everything quiet, things go quite well. They're going up again. You see the retail crisis in Germany starting very early.
It was not Corona, which was hard for the retail real estate in Germany. It started much earlier. Also, the hotel business. It is not as shiny as you see as the other asset classes. Logistics came up, of course, after the Corona or with the Corona crisis. Where are we right now? We are really falling deeper in sentiment. Of course, a little more intensive in retail, in office and in hotel. You see that residential, the residential sentiment is going back as it was in 2008, 2009.
This is something which I would like to take serious and say, "Well, yes, there is a danger that we might face a longer period of problems in our very, compared to earlier years, very high-priced residential real estate." Jenny already said energy is the topic for the last months in Germany. This is very current data. This is November 2022. You do see in electricity, in gas prices, a deep falling down. This is. We have a warm November, luckily. Maybe we face the energy problem. What happens then? When we face the problems we had in industry and in energy and so on, what happens if this will be solved? This is the question right now in these days.
This also led to the energy issue and the interest rate and the inflation rate led to the listed real estate companies in Germany to Vonovia, Instone, actually one of the competitors of Bonava. What is, yeah, the line with these companies? We had a decline of 52% with Vonovia compared to in a yearly comparison at minus 66-67% with Instone. That is what is happening in the capital market right now. So, what? Where are we? Is sentiment really showing or leading into the right direction? Where are we in the broad numbers and big picture?
We had a very good, you know, turnout, a good volume of new apartments after German reunification. You see in light blue bars the approved apartments, and in dark blue bars the completed apartments. We reached actually a level of more than 600,000 apartments approved in 1995. We went down after the boom of German reunification and the, you know, extremely high new build in Eastern Germany. We had the decline story in 2006, 2007, 2008, and when we needed new supply because prices went up since something like 2003, 2004, and we needed supply. Look at what happened with approved apartments, completed apartments.
We have this approval backlog in Germany, and this is quite interesting. There are other institutions like ours who say, "Well, wait, there will be more apartments being built over the next years. They are approved." We say, "Cut it out." This is just dealing with the construction rights. They will never being built. This is a question really right now in these days, which we spoke of land banking. Who is now acquiring what kind of land from who? I mean, this is what happens right now and again, to what price? We don't really know yet. I mean, we are just lurking. You know, buyers and sellers are just you know, going around in circles and say, "Well, where are we in the market right now?" We will know.
Some people say we will know by spring of next year. Let me give you some more slides in order to give a where could we go, where is Germany right now? This is. The question is what kind of players are there in the market is also quite interesting. To be honest, I feel quite happy here. You're a very professional, very transparent company. I spoke to Sabine, and she will probably also give a speech on it is competition right now. When we have a decline in volume, it's a question, the stronger you are, the stronger you will be for the next decades right now. I mean, this was just German national statistics.
You all know nobody wants to go into Sachsen-Anhalt or the north of Mecklenburg-Vorpommern or so on. These are the blue areas. We have another quite interesting, I would say competitor or partner in the market, BPD Bouwfonds, which is for me quite interesting because what you do with a Swedish, with a Nordic view on Germany, they do from a Dutch view on the German market. I would say, whenever we talk to them, it's interesting to see a difference in cultures. What we do for BPD is a heat map where are oversupplies and undersupplies in German residential real estate. We do it annually. This is a website, Wohnwetterkarte. You can, you know, see it on the internet. What do we say right now?
Whenever the darker red the map is, the more interesting the market is. The more undersupply we have in residential real estate. What do you see? Look at Berlin. Where are we right now? We are in Berlin. With the white dots, this is where we are. This is not the darkest shade of red when you look at it intensely. The darkest shade is the suburbs of Berlin. There we are again. Peter said it. It is. We had reurbanization in Germany until, what was it? I would say 2015 or so. After that, reurbanization stopped, and we had the push, the growth in the outer fringes in the suburban areas of the German metropolitan areas.
This is very much or a good, nicely seen in the Berlin area, not so much in Hamburg, as you can see. Let me tell you about Neukölln-Cloppenburg, so far west. Those who are not familiar with Germany might have said, "Well, what kind of city is there?" It's not a city. It's the only area in Germany where we have per family, more children than in the rest of Germany. The people there get, on average, three children, whereas in other German areas, we have 1.5 children per family. But also look at Hanover, at Münster, at Leipzig. I mean, these are the areas where Sabine looks and looks and looks. The same thing in southern Germany. You see one thing.
Still southern Germany is when you go into the countryside, when you see it in a broader scale, has much more undersupply in residential real estate than northern Germany. Let's go back to where I work right now. I moved to Essen in the rural area. 18 million people living in North Rhine-Westphalia, five million in the rural area. It's still when it comes to residential real estate, there is volume, but it's not heated up. No. Heated up is southern Germany. Whenever you know, everybody knows Munich, but it's also Regensburg, Landshut, all these, technically and economically well developing cities and areas. This map goes into very detailed. It's not just, you know, a city map, but goes into each single community.
What BPD does, and this is probably what the German fellows of Vonovia also do, you have to go to each single community and say, "Well, do you want residential real estate? Do you have land in order to being developed?" So on. Each single community has different rules. Let me show you one gloomier picture. This is a source, Sprengnetter. They also have their data derives from concrete financial contracts. You see that the residential market in Germany, the market for apartments in Germany as a whole, went up till first quarter of 2022. First quarter here in Germany, January, February, March, were still buoyant. That makes it a little.
When you know, when you're analysts, the annual rate in Germany will not be as bad because of the first quarter. This is what our economy people say to us. We need to look at what is happening in these weeks, in these months. There you can see already a starting decline going along actually with the sentiment. We do see way less purchases right now. We do see problems in, you know, for all the households financing their new real estate, and that has an effect. Also again, you see a stronger decline actually in Munich and in Hamburg right now, not in Berlin. Why not?
There comes, you know, all these details which have to be taken into account, and I'm very curious to hear your presentation later on, Sabine, because that is actually what has to be done right now, cutting the raisins out of the cake. You know, where are they? Where are the opportunities? What we provide in our platform is a site of Bonava, SimonsHof in Cologne. We look at, well, how do you configure your apartments and your houses, your single houses? You will see that I go a little further, so there is a change here in prices and in the components of the prices. I start with a first-floor small apartment, 36 square meter big.
This is actually what is offered by Bonava in a simple design. Simple design. You are, as a single station, with this configuration at a price level from EUR 5,686 per square meter. When you do it differently, you have a bigger apartment, you have 60 square meter, and you have a slightly uplifted design, you go into EUR 6,700 per square meter. We have an algorithm where you can put any address into our algorithm, and he does it that way, you know. This is where you really have to surf the market. You see here, these are data from ImmobilienScout24, one of the big sources of residential real estate data.
These are asking price. These are not the real prices in the contract, but you see where do people look at. What do they look for? This is the age of buildings. Are you looking into stock or new build? What kind of size are they looking for and what kind of price are they looking for? Of course, everybody looks for a lower price. You can see for each situation in Germany or each location, where is the market. Just look at the map. We take our data, where is the Cologne market as you know this base currency.
Then we say, "Well, where are the locations which go a little higher, and where are the locations which go a little lower than the average in Cologne?" You do see when you know, focus it or when you broaden it up the map, you will see that the patterns in German cities are so different. I mean, this is the same in Sweden. When you have a big country like Germany, I would say there's always a market, but you have to find it. Where would I say where the market goes? Well, I said earlier, it is like, it is a situation a little like in the nineties where Germany had a structural problem.
If, and this is what our economists say, if we will see an increase in unemployment rate, no? If we see a longer period of high inflation, we will face, we will still face a severe recession. In these days, it doesn't look like. We have a very stable labor market in Germany still, and we have quite, given the energy problem and given the interest rate problem, the inflation rate problem, we still see some economic power. What happens when we will face a more difficult situation? When we look at the residential market as a whole in Germany, we have one problem. We have a meltdown in our social housing. When we are really into ESG, we shouldn't forget the S.
That is where I would say Germany tends to be a very regulated residential real estate market. There it comes, we don't know what. How much money is there in the Bundesbank in order to solve problems. Are they going into ESG? Are they going into carbon dioxide prices? Are they going into certificates or are they going into social issues? I would say Germany, with its also demographic challenges, you know, an aging population, cannot afford a meltdown in social housing. Some of the developers right now, [audio distortion] , really focus on social housing.
They say, "Well, this is easily the lower margin, but this is a stable margin." Looking at social housing also in mixture with normal private housing in our new build schemes is something I would have an eye on. Then comes the over-aging of German population. This is just some numbers, and you're given the chance. Social housing, the housing houses for the elderly, for senior citizens is something we have just four people working in this kind of business. How can you provide residential units, apartments for a changing society? We have 93% of the senior citizens still living at home.
What kind of home is it? It has, on the fourth floor, no elevators, for instance. Still a problem, with, well, what do they need? What will we, what will I need? We both have gray hairs. What will we need, in 20, 30 years? These are the numbers, you know, with assisted living. We have in Germany right now 360,000 apartments for assisted living, so being for your own but having the opportunity to get some care, whenever you want. We do see, that the care places for senior citizens have to be from now 886,000 have to be lifted up over the next years. What do we do at Vonovia? We look at for the, you know, the normal care places.
We have these 370,000 as demand because of, you know, modernization backlog in existing nursing homes, and we have an additional demand. The additional demand is 370,000 and 100,000 because of the backlog. What are the projections? We have a severe unmet demand even in care places. We say this might be a market worth of EUR 70 billion in Germany just for these care places in nursing homes, for the elderly. Then comes assisted living on top. We say that even more, something like EUR 80 billion is the market for, well, what kind of apartments do senior citizens need? This is not apartments, this is also quarters in our cities.
Where do senior citizens live in future when they live in their assisted living apartment? We say if there is a really severe cutdown in the residential real estate market, we would advise to not just go into, you know, the bread and butter business, but also to take social housing and senior housing into account. Coming to an end. The Deutsche Bundesbank has since several years a quite well-organized and well accepted panel by now. They ask Germans: What do you believe what is going to happen? This is the expectations of German individuals about real estate crisis in the future. When you look at the beginning of the Corona period, decrease significantly in housing prices was way higher than in September this month.
Here comes another sentiment. Investors, real estate people, you remember the sentiment graph I showed earlier, tend to go very fast, you know, either in one direction or in the other direction. I would say that the, you know, the intelligence of people should not be underestimated. There are signals in the news, in the media, or in every local market in Germany where they say, "Well, if I want to have still quite a good quality residential real estate, I doubt that this will be cheaper because of high land prices, high construction costs, and so on, and our, you know, interest in high quality.
Maybe this last slide is a good last point to give a balance of it. It still is not sure, it is not secure that the German residential real estate market will see a steep drop in prices. I fear it, but you know, given these information I presented to you, I would say it might be. There was a good word three or four years ago, three or four days ago. We might face a recession, but it's not the end of the world. This was for me quite a good word, a simple word, because some of these graphs I showed you seemed to show the end of the world.
The thing is now to be clear in data, to be clear in transparency and see where are the problems and where is stability? I would say that, as I said earlier, competition means where are the proper good developers, those who really build? Where are those developers who just dealt with building rights? This is one of the major things we will see in Germany, that those developers will not be on the market anymore who were just, you know, doing a game, which was not ESG like. Yeah. I would say, being here presenting to the capital partners of Vonovia, Germany is not a good market. You spoke of turmoil and you spoke of chances.
Looking at the map of the heat map, I would say there are still chances in Southern Germany, in Berlin, in these spots where we do see a proper economic development despite our demographic problems. Thank you.
Thank you so much. Super interesting. Now we will follow up with Sabine very soon. A short break first and be back on ten past, please.
Yeah. Welcome, ladies and gentlemen on behalf of our whole German management team. I'm very happy to be able to get the opportunity to present a bit deeper the German business today of Bonava. I would also like to start reflecting what I showed last year. That was this slide. Showing our growth story in Germany. We decided to grow in 2012, and since then we have tripled our net sales and increased our EBIT by four times. Our five years growth rate in EBIT was 8%, and in sales numbers it was 12% over the last five years.
When you see this graph, you see a drop in EBIT margin. The years 2019 and 2020 were heavily influenced by some warranty cases, which influence also our EBIT margin. We have a very stable EBIT margin as well in Germany. With that, Peter already mentioned, Bonava Germany is the largest market within the Bonava Group, covering 48% of the net sales. We are also Germany's most active housing developer within the top seven cities and their surroundings. We also got the award being Germany's strongest development brand, housing development brand, this year already. Last year, standing in front of you, I talked also about very good market conditions. We had our new strategy in place. We had a new budget plan. Made a new budget plan.
We talked about increasing sales prices, very high demand, undersupply, very low interest rates and very low inflation rates, and also the labor market was quite good. As said several times today, the market drastically changes. We are faced with energy crisis, first signs of decreased sales prices and rising interest and inflation rates, as already mentioned several times. How does that affect on our Vonovia market? Our customer change their demand for renewable solutions. The customers are more hesitant, and also the financing capabilities are decreasing. Our customers get more problems really to get financed. All these effects and conditions we can't influence. That is driven by the global market, by the global situation, by the politics, but not by us.
There are a lot of actions, areas where we can take actions because we have an opportunity to influence. What we are doing is we will build on our strength, who brought us through different market situations over the last years and brought us to the situation where we are currently in. The areas where we can take actions are footprint and organization, people executing the whole value chain, our processes and platforms, the land bank and also our market offering. I will come back to that and focus on that during the next couple of minutes. I will start with our footprint and organization. At the right side, you see our footprint. Our footprint is on eight growing metropolitan areas in Germany. When we are talking about the German market, we don't talk about the German market.
We are talking about many, many submarkets. Andreas mentioned how many people are living in the area around Essen, and that was also our selection for our markets. What we have done there is we have sold more than 19,000 units over the last 15 years. We will keep this footprint. Why are we doing that? We are doing that because we see that the general conditions in all these markets on a long-term perspective are staying the same. 30 million potential customers are living in our 8 selected markets. We are also faced with a historic undersupply over the last 20 years.
You have heard maybe that our government stated that they are aiming to support to deliver 400,000 newly built per year in Germany. You have seen we have not reached that over the last 20 years. It was 293,000 last year, and our share in Bonava Germany was 1,800. We believe that we have a lot of room for further growth within exactly those selected markets. Last but not least, we also see that we have a really high demand and high need in new housing. Despite customers are getting more careful now and generally speaking, our German market is very, very large and the demand will stay there.
We also see that, and that was also pointed out by Peter, that the demand, especially in the surroundings of the larger cities, is still increasing. That is a market where we are already for 20 years now. Coming to the second point of the second area of our influence, the value chain. It, as Peter explained, and as said before, we are executing on our strategy, of course. But our main focus is to work with our internal capacities along the whole value chain, starting with the plot acquisition, development, design and production, marketing, sales, and all the supporting functions we also have in-house, of course. We believe that with that we are less dependent on market changes and especially in that current market situation.
A very special and very competitive edge for us is that we still have an in-house construction and design company, and that makes us even more flexible to react on market conditions. We have half of our 1,000 employees working within this house or in this construction and design company. What does it mean? That means all our sites are managed 100% by our own site managers and foremen. We are equipping our sites, all our sites with own equipment, containers, machinery and so on. We are also doing 50% of the required design work in-house with own capacities. Our own blue collars are building our shell works mainly in the region of Berlin.
With that, you can see it here, the share of co-costs for own workforce in the whole construction costs is between 5%-12%. It is not so large, but we have everything under control because our site managers and our foremen are also steering the external capacities, the external partners which are purchased by our centralized purchasing department. It is not a secret, and Peter also mentioned it. It is really important that we have to have the right people on board. In the German construction and housing business, we have a lack of professionals, and that is a huge problem, especially when facing these market challenges and when, of course, thinking of who are the right people for the maybe declining business we are faced with.
It is essential that we keep our people, our key people, our key performers, and that we also work with talent management, succession planning, and that we also encourage our people to be very flexible in the kind of work and kind of position they have within our organization. The third area of influence are our processes and our platforms. Peter talked a lot about repetition, and that is exactly what it is. Our platform or so-called platforms. Three platforms we are working with, a technical platform, building platform, a design platform, and a process platform. That ensures that we have repetition in all these three areas, always. In all our more than 187 projects in several stages of preparation or execution. It is not a nice to have, it is a must in Germany.
We have started to develop these platforms back in the 1990s, and we have improved that step by step. When we are talking about building platform, for example, then we mean we are using the same materials, we are using the same technical solutions in each single project. It's the same sand-lime stones for the outer walls. The same solutions for floor slabs, for heating systems, for windows, for facades, for balconies and stairhouses and so on. But our products look different, as you can see here, and as you will also see during our project tour this afternoon. Platform does not necessarily mean everything looks the same.
We are very flexible with that, but we are ensuring repetition, we are ensuring fast pace, learning curve, and also keeping our costs under control, and that has been successful, as you have seen, at our figures. We have also well invested in our land bank, as Peter already mentioned, and that enables us, in the current situation, to work with our current land bank to improve our way of working, to optimize the project preparation and, yeah, get building permits, get the projects ready to market. We have also invested into a digital transformation department because we feel that is really important to keep track on or to be prepared and to really do this, digital transformation and to digitalize and, automate all our processes.
When talking about that, for example, for our sites, we have equipped all our blue collars with tablets. They are now working with digital drawings instead of paper. We are also using, and you will also see that this afternoon, we are also working with QR codes at our units. That enables a very quick access to all digital information you need for this unit, starting with the drawings, with the subcontractors, the purchasing, the special wishes of the customer, and that is also the basis, of course, for the cycle of the unit after handover. That is a really important step that we now can show that digitalization really gets into the real life, and we will continue doing that. The fourth area of our influence is our land bank. We have 10,100 building rights in different status.
As you can see in the right, in the second, column here, on and off our balance sheet, we have additional around 3,200 units in production. As you can see, we have four different perspectives on our balance sheet, on our building rights. I would like to focus today a bit more about the building rights status. The whole process from starting a master plan procedure until getting the building permit in hand takes between three-eight years. The building permitting process from application until the permit is granted takes between 2-16 months. You can see there is a large difference between regions, between municipalities, cities, authorities.
What is common, in general speaking, the processes are too long, and they are still not predictable. The duration is still not predictable. That then we come to exactly what Peter was mentioning. We are forced to start projects when we receive building permits because we are waiting for some others. Unfortunately, the durations of those processes are not shortening because the authorities are still faced with the fact that they are understaffed and that they have a low standard of digitalization. That is one of the points our government or our housing initiatives stated 187 action points in order to reach this goal of 400,000 newly built per year. We are market participants and of course, we are in these discussions.
We are supporting that, and we are of course expecting that they will get into real life and that with all these 100 or most of the 187 points, it will be happen there. Duration of building permits is one of the top agenda points there. Just to give you a flavor, one year ago, we made our plan for this year, and we have today received around 50% of all building permits we expected to receive. There are some seven weeks left, and we are still waiting for some building permits, but that is the situation currently.
That is also very important that we come to another status, that we are prepared, that we have all building permits in hand when we are planning the next year, because that is really important, that we are independent of these processes which are unpredictable. Our land bank provides a solid base for the next three to five years, as said, because we have bought a lot. The fifth point of our area of influence is our product offering. I really like this, what Andreas was saying, back to normal. We are talking a lot about back to our basics. Adapting our projects or our offering to that, what is really needed. Why are we doing that?
Because we have to create or enable more favorable end prices for our customers, that they get financing. Of course, they can then have packages for additional offers to upgrade their homes. First of all, they have to get a product what enables them to get the financing. We are doing that now by offering a so-called savings edition. That is a flat ready to move in. We have but we have chosen different alternatives for the interior. For example, paper walls instead of gypsum plastering or vinyl instead of wooden flooring. And with that, we get more attractive offers for the customers.
Of course, we are also, and Anna talked about that, we are also offering other heating solutions, meaning combined or hybrid energy concepts. Air heat pumps combined with solar panels or with pellet heating, just in order to get away from this gas dependency. Additionally, we are also improving our platform constantly. What we are also meaning with that is that we are doing that we are working with the floor plans. Reducing or downsizing is the key word here. It is really important that we plan the right size of the flats that our customers really can afford, and we will be faced with much smaller and more efficient floor plans in future, we think.
Anna also talked about sustainability and just to summarize that, of course, we are thinking about a more sustainable housing platform. We are thinking totally new there, new ways of material, new ways of working, having the whole life cycle of our buildings in mind. We are also working with partners on new ways of collaboration. We are also thinking of modular building. We are also thinking of how to work with the demographic change. How can we get a better offer for elderly people? We have already offer, but we can improve that, and we can extend that. Summarizing, that is my last slide. You will see here also a picture of a platform building or platform project that is Blockdammweg.
You will visit it today, this afternoon. Summarizing, despite the current market situation, we see a huge interest on our website. The desire of our potential customers for home ownership is very high. We have a really large economy, Europe's largest economy. We have a huge market. We have long-term, very good market prerequisites, let's say it so. We have a clear plan how to deal with it. I already mentioned that. Footprint, platform, stick to the platform, develop that, adapt the product. Finally, our customers are paying, and we have to meet our customers' needs, and that is what we are constantly working on. We focus on our business today, and we also prepare, of course, for the market conditions to come and also for further growth.
We also, of course, want to take the opportunities that may arise based on our strengths our group provides us. We are operating in our market for almost 60 years now and have managed ups and downs in the market. I think we have a very strong experience and very flexible organization that has a proven and successful track record. We are willing to prove again and further. Thank you very much.
Thank you, Sabine, and thank you all presenters. Today, we had some interesting topics, so I'm guessing that you have a lot of questions that you want to ask. I will ask Lars, Peter, Sabine, and Anna to come on stage and take a seat. For you in the audience that wants to ask a question, please raise your hand, and Fredrik or Josephine will come with a mic so you can ask your question there. Please state your name before you do it. For you that are watching us online, if you want to ask a question, please post it, and I will read it out loud. We have our great panel here. Is there anyone in the audience that wants to start with a question? Very silent. I will start and see if you have any questions coming up.
We were talking about the building rights. Are we seeing in the different markets, is anything happen with the prices, or are they coming up any more building rights on the market and so on? What have we seen?
I think that we've heard Andreas Schulten speak about the fact that when you have the uncertain price situation, the stock of ongoing deals are sort of taken back from the marketplace. It's very hard to see the trend of the prices. Also over time, historically, land prices are very sticky because you always need land because you need somewhere to build on and new areas get there. It seems conclusive on your question right now in the marketplace.
We are ready to be there, and we are ready to make good deals when we can make it because I think the situation that Sabine has explained now, since we are controlling a big part of the value chain in development and also the design and production-
Mm-hmm.
We can really adapt and change the product and the offering that suits the market and the demand.
Yes. I have a question here.
Yes. I was wondering a bit more about that, how are you able to adapt the type of apartments that you produce? Can you make them cheaper to make it more relevant given that perhaps you want a smaller and cheaper apartments? My second question was, in your experience, Peter, when do you think what is needed in order for sellers and buyers to meet? As we see now in Sweden, they're still waiting. There's a waiting game, and there are signs of that in Germany as well as I hear it. From your experience, when do you think we can see that? Is it the interest rate stabilizing or yeah, if you can elaborate on that. Thanks.
Your name.
Oskar from SEB.
Thanks.
Thanks, Oskar from SEB. Sabine, should you start with how can we adapt the offering?
How can we adapt? Yeah. Project by project. What we are doing is we are really going through all our projects, and we are asking ourselves, is it really needed to have such kind of offer at this standard? Or is it possible to lower the standard a bit, changing the mindset and giving the customer the opportunity just to upgrade it? We are going through every single project. Andreas and Enrico, they are working a lot with all our development managers really going through the plans, the building description, the materials, the interior design, and so on. It is a daily work. You also have to, of course, keep the timeline of the project under control. We are...
It's two or several things. On one hand, we are adapting our current projects in sales and production. On the other hand, we are starting to create a totally different offer on those projects which are now in the preparation for the market.
I think, Andreas, what you wanted to add something.
May I just add. Adapting, I would advise not making it cheaper. Germany is still a rich country.
Yeah.
That is an important thing. You know, not just going downscaling, but, you know, getting the right market.
Yeah.
A very simple way of adapting.
Yeah
... is changing the composition of size of apartments in that way. That's one thing. Seeking the advice from the elderly and then when it comes to the market. I think what the federal banks are now doing is shaping the expectations of inflation. The consumer confidence is based on the same thing. What can I afford? How does my future look like? The waiting mode is, of course, what's happened with inflation and cost, but also unemployment and what happens with the companies. I think as we are getting more granular view, a more clear view on what is happening now, we will start to see things evolving. If people need to move and wants to move because of certain things, they can't wait forever.
I know that you have young kids yourself, Oskar, so the kids need somewhere to live. They need schools and everything. You need to take a decision at one point in time. What we're talking about the situations, which is a year and a half, two years. But the market is always there. That's why I stressed during my speech that we need to be active in the marketplace the whole time. Otherwise, we will not know what's happening. Scaling down, being selective is not the same thing as being inactive.
Yeah.
May I also add that we are now working really close in our commercial council with the marketing and sales manager from each of the countries, really, really trying to collaborate and using the creativity in each of the markets and exchanging ideas on how to be more aggressive and present and visible in the marketplace. That's also where we try to utilize our footprint in a good way.
Very good.
Good. Any more questions in the audience? No. We have one online, and it's Fredrik Stensved from ABG. He is asking, have banks made any changes of their requirements of a presale ratio before you're able to start a business to consumer project and get financing? Is there any differences between the markets? Lars, maybe you will start with that one.
Yeah. I think I cannot speak for if there are absolute levels, but from discussions, I understand that we have a tougher situation where banks are demanding higher presale to make sure. I probably would ask Sabine to reflect on what's your situation in Germany. Is that different than in other geographies?
I don't know so much about other geographies. What I can say for Germany is, of course, but that is more our own responsibility, really, to come to a decision, when is it the right point with a certain presales level to start a project? That is what Peter was mentioning. Being a bit more careful in the current market situation with starting of projects and also being more aware of the sales speed, which is shown in the project history, and then decide on the right point when we have the prerequisites, the team, and so on, then to start the projects. That is also a project-by-project decision that you cannot have a decision overall project. It is, it differs between the projects.
I also think that the question is very much asked from a co-op point of view in the Swedish context.
Yeah.
That means that the co-op, we are taking part of the funding in the co-op, and then the individual house buyer is buying the flats and taking share of the overall indebtedness. We actually got a couple of products approved without any presales.
Mm.
In the early part of the fall, we decided not to start them because of the basis of selling. Because if the banks are putting thresholds, if you put a too high threshold, you will never start the products. Because the first sales and the length of the sales process means that the product is dead in the market. You need to find a balance, and normally we have the market that you are talking about. The kind of market sense is very important to have.
Yes. Any more audience? Yeah. One more from Oskar.
Yeah, I was wondering about the in-house development and design that you have in Germany. It seems to be a success, and as I understand, you do parts of it in-house, and then you use external contractors to supplement or make it the whole value chain. Is there any thoughts about, you know, taking this concept and utilizing it in the other markets? If those platforms that you are talking about as you have with repetition, is that something you could reuse in also the other markets? I guess that's something you have considered, so it would be just interesting to hear your views on that.
Yes. It's a very good question, and good that you're active with questions, Oskar. A gold star for you. I would say that, yes, that has been considered, and yes, it's being done, but on a selective way. If, for example, you look into the Baltic markets, the way they are conducting the business is very much similar to the Germans. You have a lot of interaction happening across the Baltics and Germany. Nordics are a little bit different. We are doing things in the single-family housing, for example, that we're doing exactly that, the platform system and everything. That works very well. It's harder on the multifamily housing side.
The important part is you can't do anything different than the land bank and the product offering supporting the land bank. When you do the other way around, that you're gonna have a low cost or high cost product on the wrong piece of building, right? It doesn't make sense. You need to start it with building from the basis, from the operations, and not coming from the top.
Good. Actually, time flies, so for Peter to have a few minutes to wrap up this day, what we have been talking about.
Is this it?
This is it.
Ah.
Ah.
Blimey.
Yes.
I have just one slide. Perhaps that's the starting point of the next event we're gonna have. We have a lot of things on the plate right now, given the current context of the market. The purpose is delivering the basis for improved profitability. I've talked about profitability so many times, and the reason for it is we are in a business which have a lot of long time periods. We are committing a lot of capital and resource over those long periods of times, and we need sufficient returns to be able to invest and grow the business. If we don't have profitability, we are not a sustainable developer as such. That's why we're talking so much about profitability. It's the oxygen of the business.
What we're doing now, we are staying very close to the market. Anna has alluded to it being very close in the market basis into the local businesses, but also share and discuss this in the senior management team on a frequent basis. We are adapting. The map is good, but reality trumps the map when you have fast changes as we have right now.
You need to press the button.
I need to press the button again. This has been a learning exercise for me. Sorry for that. Eventually, I learned on the last slide more. Yeah. We need to continue to build the profitability that we have talked about. Of course, if we have a market context which is more challenging, it's very important for us to keep the focus on and controlling the cost. Growing in the regions where we have the most profitable growth in front of us and scale back on the things which is not adding profitability and value. Some of the businesses that are in the get the basics right, like Finland and Norway, they need to up their game. They are coming from a low level. They are subpar. Strength in the balance sheet, you have heard me talk about that several times.
This is the last time for now, but this is for sure very important for us. The purpose of course is to be able to act on the opportunities. Finalizing the closure of Denmark, that is not the toughest job. It's perhaps the tougher job to close the exit of St. Petersburg. Then come in a few weeks, time flies, as you said, Anna, we will come up with the review of the financial objectives. I'm saying again, the objectives and the targets and the ambitions is increasing profitability. Again, we will touch base on that. We will come back then in the beginning of Feb with the Q4 report, after a very super active fourth quarter. I look forward to that.
I must also thank you very much for the attention here today. Thank you very much.