Good morning, everyone, and a warm welcome to Bonava's Half Year Report 2020 presentation. Speaking is Louise Tjäder, Head of IR, and with me I have Joachim Hallengren, CEO, and Ann-Sofi Danielsson, CFO. Joachim will begin the presentation and take you through some highlights from the report, followed by Ann-Sofi, who will take you through the financials in more depth. After some concluding remarks from Joachim, we will open up for a Q&A session. With this, I hand over the word to you, Joachim.
Thank you very much, welcome to Bonava's Quarter 2 Report 2020. Let's start with the second quarter, which as all of you know, has been a very challenging environment to work in. Nevertheless, we succeeded to increase the number of starts in our main markets, both Germany and Sweden. As you know, Bonava has a business model where we focus both on consumer and on investors, and we can shift the focus from time to time, and we did that in the beginning of the crisis, and I'm happy to see that that has given result in increased sales to investors. However, the EBIT is lower, mainly due to two reasons that we communicated earlier. First, the Nordic segment, where we have been struggling with a few well-known projects with really soft margins.
They are gradually being finalized, some of them in the second quarter and the last one in the third quarter. After that, we will slowly see more normalizing project margins in the Nordic segment going forward. I would like also to highlight that the recovery or the turnaround project in Finland is going according to plan. Germany, where we have had both projects from investors, which basically have a lower margin than the consumer projects handed over, but also consumer projects with lower margin than average in the German portfolio. Just coincidentally, they were recognized this quarter. I would like to stress, however, that this is not an indication of any softening margins in the German portfolio. It is just an anomaly that happened this quarter. From the third quarter, we will see normalizing project margins in Germany again.
Looking at the first year, the sales were weak due to the pandemic, but if you look on the overall sales for the quarter, they were more or less on par with last year, which I think is a strength. We also increased the sales ratio from 70% to 79%. Again, softer EBIT, and that's of course a fact that we are absolutely not satisfied with. In the comparison for the first half year, I think it's also fair to point out that in the comparable period, 2019, we did have a high volume of recognized units from St. Petersburg and Baltics. We affected the result then. Key figures. We increased the net sales. As I've already said, we have a soft EBIT. I think, however, it's more fair to compare EBIT excluding land sales. That would take away approximately SEK 60 million from the EBIT results.
I think a better comparison is SEK 120 million compared to SEK 58, but still that is an unsatisfactory result for sure. Looking at the first half year then, we have decreased the number of units in production from approximately 10,000 to high 8,000. The absolute focus beside margins in the business is sales and starts in the project. We are planning to start a lot of units, but this year we are extraordinarily backloaded, unfortunately. It will wait until Q4 until we see the large volume of starts coming up. Of course, depending on a stable market situation where we can sell our products. However, the value of sold, not yet recognized, is still on a very high level, SEK 20.7 billion, on par with last year. As I said, very strong sales ratio in the portfolio.
Looking a bit deeper into sales and starts divided into consumers and investors, the sold units were down in the quarter. The sales were significantly down in late March and beginning of April, and were gradually picking up with June, a pretty strong month. Not yet on pre-COVID-19 levels, but it's a very positive trend. We lost approximately 30% of our sales in the quarters. There were units that were better performing than others. For instance, Sweden and Germany lost around 25%, Finland only within brackets 15%, 16%, while the Baltics suffered very hard from the lockdown and lost 50% of their sales, of course, affecting the average loss of sales. I said that the other markets or the markets were picking up in June.
The Baltics were suffering from the lockdown, I think that I see signs now in July that that market is also slowly but surely recovering. However, looking at the first half year for consumers, as you can see, we only lost 70 units compared to last year. That's 4%, and I think that's a very strong result. Started units up in the quarter, slightly below first half year. I think it's important to take into consideration that in the benchmark 2019, we started 700 units plus in Saint Petersburg and Baltics, we only started a fraction of that this year. More starts in our main markets and a positive trend. Investors, as I said before, investor deals is an important part of our business logic, we both sold and started more units, both in the quarter and in the first half year.
This graph is showing our expected or forecasted completions in combination with the sales rate, this graph is consumers. The major changes to this growth from the first quarters is that we feel more confident regarding the numbers now than we did then. There is still uncertainty, of course, because I don't think that we've seen the last of the COVID-19 effects, but we feel more confident. There has also been some delays in completions, as we have communicated earlier. Somewhat around 150 units have moved from the third quarter this year to the fourth quarter. At the same time, we forecast that we will complete approximately 100 units more in the fourth quarter, disregarding the delayed units from Q3. Looking at 2021, there is somewhere around 650 more units to be completed than it was in the fourth quarter. We're building stock.
Moving over to investors. The major development here is that we have almost 500 units more in the second half year of 2021 to be recognized. A COVID-19 update. I think it's a bit too early to say that we're out of the crisis. However, I would like to say that I'm much more confident and positive now than I was three months ago. The markets have shown greater resilience to this pandemic than we feared. We have had all construction sites up and running. There has been a few disturbances, as I said, but nothing severe. Of course, with our profit recognition model, even a few days' or a few weeks' delay will impact the profit recognition. However, it will just be a delay and not money lost. Also, some delays in handovers, but nothing material.
Sales, as we talked about, has slowed down, but gradually is picking up, and the last market to pick up is the Baltic market. We at Bonava continue to work very closely to the development. Focus is, of course, to protect our employees and customers and other stakeholders. As you well know, there has been a huge change in the way companies operate, Bonava among them. As one of the digital leaders in our industry, we have developed a lot of new tools and way of working also in relation to our customers that has been implemented during this period. Old school mitigation of business risk, cost base focus, and cash flow focus. As I said, even though I feel more confident and positive regarding the future, we need to be on our toes.
We need to be flexible and agile to be very close to the market, because I'm not sure that we have fully seen the impact on the general economy. Probably we have to wait until the autumn to see how that plays out. I would like to hand the word over to our CFO, Ann-Sofi Danielsson, for some financial details.
Thank you very much. I will dig deeper into the income statement and also the segments, balance sheet, and finally our debt situation and cash flow. Starting with the income statement then. I think it's fair to say that we actually have some impacts from COVID-19 here. I will come back to that soon, how that has impacted our income statement during the second quarter here. First of all, what you see here, our income statement, you see that we have higher net sales than last year. The main reason for that, if you take it shortly, is that we have recognized more units to investors, especially in Germany. That's the main reason why we have higher net sales 2020 than 2019.
The other thing I want to point out here is that we have lower selling and admin expenses. Here is the first thing to comment upon how COVID-19 has affected us. As Joachim said, we have taken a number of mitigating actions to adapt to COVID-19, that has impacted our selling and admin expenses during the second quarter here, where you see that we have lower expenses than last year. To make it short, what we have done is that we have, of course, stopped all traveling, all conferences, training, et cetera. That has impacted these costs for us. I would just like to point out here, because the obvious question here is, of course, how will this impact the rest of the year? One thing that we can say, we are not quite sure.
We are sure that the costs, the admin expenses, will be lower than last year. Quarter two here has been extraordinary when it comes to how we have mitigated the COVID-19 situation. We will, of course, increase activities during the second half of 2020. That will give us somewhat higher cost than we've had the first half of 2020, but not as high as last year. That is one thing I could say here. All in all, an EBIT of SEK 56 million compared to SEK 182 million. As Joachim stated out also, last year we had an impact coming from sales of land. If you take that away, we can compare SEK 58 million this year with SEK 120 million. Lower EBIT than last year, I will come back to more details regarding that.
Net financial items here, minus SEK 30 million, lower than last year, or more negative. It is a bit confusing here because if you look at our net debt situation, I will come back to that when I talk about cash flow and our balance sheet. We have a lower net debt than last year at the end of June. However, we have used a lot of financing resources also in 2020. The average net debt situation for us has been more or less the same as last year. In addition to that, we have some costs here in the second quarter due to the fact that we have raised more financing resources. I will come back to that as well, that has come with some cost for that. Also, as you all are aware, we have somewhat higher interest rates 2020 than 2019.
Somewhat higher negative effect here coming from higher interest costs during the second quarter. One other thing before ending this slide to point out here is the tax rate. I usually comment upon that, and I do that also today. 28%, that is higher than last year. The main reason for that is that we have now more EBIT coming from our German business, the German tax rate is higher than, for instance, in Sweden. That's the reason why we have a somewhat higher tax rate here in the second quarter of 2020. If we dig a little bit deeper into the EBIT, here you have the different segments. To make it short, SEK 56 million compared to SEK 182 million. The main deviations compared to last year is, first of all, Germany.
As Joachim Hallengren commented upon, those units that we have recognized in Germany in the second quarter here had lower margins than last year. That is the same as I actually said in the first quarter, that we've had some low-margin projects in Germany that have been recognized for profit. That is not the normal margin level in Germany. We have a more sound, and the portfolio in Germany is still very sound, and the projects that we have going forward have higher margins than the ones that we have recognized for profit here in the second quarter. That's the main reason here. The other segment that I want to point out already here is the Nordic Segment. Those units that we have recognized for profit in Finland have had a lower margin than last year.
That is also what we have communicated, both when we released the first quarter, but also in the press release that we presented just a couple of weeks ago, where we stated that what you can expect from Finland is that we still have low-margin projects in that segment, giving us a very low EBIT coming from Finland. That will improve during the second half of 2020, but not to be expected already in the third quarter. We still have some low-margin projects to be recognized in the third quarter as well. Again, 56 compared to 182, if you include the profit coming from sales of land. Some more details regarding Germany. Here you have more details. You see here that the gross profit is lower. The main reason is, again, that we have recognized units to investors with a low margin.
We also actually have had some smaller effects coming from COVID-19 due to the fact that we've had some issues with the authorities when handing over projects, giving us some extra costs in one of the projects that we have recognized for profit here in the second quarter. There are effects, not so big, but there are some effects coming from that. We have, as you see, more units recognized for profit in the second quarter here, 527 compared to 314. Again, then lower margin projects to investors giving us this lower gross profit. Also lower selling and admin expenses, as you see here. Again, the reason is that we have had very low activities. We have mitigated the COVID-19 situation by stopping all traveling, conferences, training, et cetera. You can expect lower selling and admin expenses going forward also here.
Maybe not as low as in the second quarter, but lower than last year. That's the German situation. I think it's also a very strong sign for us when we look at the German market, it's a very good condition actually. That is also what you see here when it comes to the number of units that we have started during the second quarter. We see a very strong interest for our activities, for our projects in Germany. Even though we have somewhat lower sales for the second quarter, however, the sales have picked up during the last weeks of June. We see a good future on the German market. We continue to increase the number of starts also in the second quarter. Going over then to Sweden, solid good performance. Units recognized for profit on a good level and also with good margin.
If you consider that we had profit coming from sales of land, that was in Sweden last year of SEK 55 million. If you take that away, you have a very good and solid performance in the Swedish operations if you look at the EBIT level. Again, lower selling and admin expenses and also in Sweden, adaption to the COVID-19 situation also here. Sweden and Germany, we have stated that several times now. We want to increase the number of starts on these markets where we see a good demand for our projects. That is also what we've done in Sweden. You see here we have started all in all 318 units during the second quarter here. That gives us all in all more units started in 2020 than last year.
We also see a very good solid interest for our housing units in Sweden. Also very positive for us is that we now have fewer unsold units on our balance sheet. We have been able to sell units also completed from our balance sheet from our stock in Sweden. That's also a sign of the strong market in Sweden that we see. One more thing to comment upon here, also showing that the market in Sweden is strong is that after the quarter, we have sold a quite big project in Västerås, 162 units to investors. That will be included in the third quarter for Sweden. That's a good market, giving us the possibility to start more units in Sweden. Nordic, again, here you see it more in detail.
As we have stated out, weak margin projects have impacted the EBIT level also in the second quarter. Again, we will have a quite weak situation also in the third quarter in Finland. You can expect that to be the situation. We want to stress that we see a stronger performance and better forecast for the fourth quarter for this segment. All in all, we have recognized 245 units here to investors and to consumers. None actually in Copenhagen, but in Finland and in Norway. Norway is performing well for us, but we still struggle with these low-performing projects in Finland, as we have commented upon earlier. Here, opposite situation if you look at the selling and admin expenses, higher than last year. The reason for that is actually that if you remember, we invested into the Oslo region at the end of 2019.
That has given us somewhat higher expenses here for selling and admin activities. At the same time as we have decreased the expenses here in Finland and in Copenhagen, we have increased costs in Norway, in Oslo due to the acquired operations there. Here we actually see effect also on sales. We talk a lot about that we have a strong market in Sweden and in Germany. However, in the Nordics, especially then in Finland, we see effects of COVID-19 with a more cautious market giving us lower sales number and that also has made us more cautious when it comes to the number of starts that we have in this segment. One thing to point out here, however, is that we have started the first consumer project in Oslo, the operations that I talked about that we acquired last year.
Successfully started that project. We see a fairly good interest for that project in Oslo. Segment Saint Petersburg, Baltics, and lower EBIT than last year due to the fact that we have lower margins in the projects that we have recognized. We actually had a very strong margin in Saint Petersburg last year for those units that we recognized then. What we can say here is also that this is also the market in the Baltics where we see the effects of COVID-19, a much more cautious market. That has affected sales, especially in the Baltics. Fewer sold units that you see here, 135 compared to 244, and that is mainly in the Baltics, that reduction. No started units in the quarter.
The main reason for that is, of course, that we are cautious in the Baltics, but also that we have very big projects ongoing in Saint Petersburg that we started last year. We have a lot to do on those projects and also to sell them. That means that we are, according to our own plan, more cautious when it comes to new starts here in this segment. If we continue to look at the balance sheet, total assets EUR 24 billion. If you compare to previous quarters and previous years, the split between the different assets is more or less the same as in previous quarters and in previous years. An equity to assets ratio just above 30% at the end of quarter two. A strong balance sheet and good, sound health of our total assets.
Lower net debt. As I said when I talked about the income statement, lower if you look at the end of the quarter than quarter one and the end of the year, this year and also compared to last year at the same time. That was an impact coming from a very strong cash flow the second half of June. If you look at the average net debt during the second quarter, it was more or less at the same level as in 2019. A good situation. We tie up EUR 13.7 billion in our capital employed. The EBIT and the profitability on that capital that we have used is 6.2%, well below our own financial objective of being between 10%-15%.
Our main objective now is to improve profitability to be back on these levels that we were in 2018 and previous years, that we reach our own financial objective. That is the most important for us going forward. We've had a very good and strong cash flow during the second quarter, EUR 1.1 billion coming in from our operations. The main positive income inflow is, of course, the divestments that we made during the second quarter, EUR 3.2 billion. At the same time as we have handled our working capital in a positive way. I think it's also important to say that we continue to invest into our business for the future. We have invested EUR 3.2 billion during the second quarter, and even though we do that, we still have a strong positive cash flow during the second quarter here.
That is, of course, very important for us. I would say to keep the costs in good line and also to keep a very strong cash flow, that is the most important things for us to do in this COVID-19 situation. We also have secured financing, as I said, during this second quarter. All in all, if you exclude the project financing, we have all in all finance capacity of EUR 8.4 billion, whereof we haven't used EUR 4 billion at the end of the second quarter here. That is also very strong and positive for us going forward. One other thing I want to point out here when it comes to financing is that we now have green financing. That means that we finance green projects such as the Svanen labeled projects in Sweden, for instance, EUR 0.6 billion.
This is, of course, very important for us in many aspects, both that we
That we work with our sustainability objectives, but also good for our customers to know that we have projects that we have used green financing for. This is a very important area for us going forward. With that, I hand over to you, Joachim, to summarize this second quarter.
Well, summarizing again, we feel more confident. I feel more optimistic than I did 3 months ago at the last reporting. We have increased starts in our main markets, which was also one very important objective when we started this year. The sales are picking up. We've seen a very slow end of March and April, but month by month, the sales have been improving, and that shows 2 things. The markets have been more resilient towards this pandemic, but also that there is a big underlying demand for new residential. We are not satisfied with the EBIT result this quarter, as we have communicated earlier. We see recovering project margins in Germany already in the third quarter. We should also see gradually recovering margins in the Nordic segment, especially in Finland, from the fourth quarter and going forward as the turnaround plan is so far successful.
Solid financial position. Ann-Sofi said that we have a lot of credit lines that are currently unused for opportunities. We also have a very strong sales ratio in our portfolio. Again, I don't think it's fair to say that we are totally out of this crisis, even if it's more positive than we feared. We need to stay very close to the market this autumn and see how this pandemic has affected the general economy. With that, I would like to hand the word over to Louise Tjäder to moderate the Q&A session.
Thank you. Thank you, Joachim, and thank you, Ann-Sofi. We will now open up for questions. We will start with two questions from the web. From Peter Corsell. How do you choose projects for investors and for own book? Is there a risk that Bonava takes the low end as not disappoint business relationships, Joachim?
It is actually quite substantial business logic between consumer projects and investor projects. The margin is lower in investor projects, the risk is also substantially lower. That means that the land price one can pay for a rental project is much lower than a consumer project. When we say that we ramp up the investor side, it starts at the beginning of the value chain with finding land appropriate for rental projects or investor projects. There is no sort of internal competition. We value both our consumer customers and our investor customers equally. No internal competition. Quite different business logic.
Okay, the next question also to Joachim. What differs Bonava from competitors, what is Bonava's strategy for a competitive advantage in the building sector?
There are a few things that separates us. One is what we just talked about. We focus on both consumers and investors. We have said that approximately one-third of our business should be investors over a business cycle. When the consumer market is weaker, we can increase that part. Secondly, our footprint. We operate in nine countries in 23 different markets or regions, which is also a significant difference. Then our focus on more affordable housing. The competitive advantage, besides these three sort of strategic initiatives, is also that we have decided to insource all the design and work more industrial and only with residential development. On top of that, we're also slowly but surely insourcing production capabilities to make sure that we can keep the whole business, our value chain, within Bonava's control.
Okay. We will now open up for questions on the phone. Operator, please.
Ladies and gentlemen, once again, if you have a question for the speaker, please press zero one on your telephone keypad and you'll enter a queue, and after you are announced, please ask your question. We have questions coming in. This question is from Simen Mortensen from DNB Markets. Please go ahead.
Hi there, congratulations with what I would say was good sales. Roughly SEK 3 billion in new housing sales in the quarter given the lockdown. I have a few questions here. First of all, the margins in the Nordic operations. You communicated now that Q3 will again have the last of the negative figures assumingly on the project developments in Finland. Once these projects are washed out and give you a completed contract accounting, you think it's going to be phased up. What do you mean by that? Because there's new project every single quarter. What would you consider to be normalized margins for that business? Especially since if you look at the market, Finnish development has one margin, but you have grown in Norway, and typically we see a lot higher margins in Norway and that kind of operations.
When will we see higher margins from that acquisition you did in Oslo here?
Okay. Thank you, Simen. Ann-Sofi?
Do you want me to say that?
Thank you. Yeah, that's a very good question. All in all, the segment, the Nordics, consisting of Copenhagen, Bergen and Oslo, and Finland. What you should expect in the long run, that segment should have the same EBIT margin at least as the rest of the group, if you compare to Germany, for instance, or Saint Petersburg, Baltics. They should have the same EBIT margin as they have. As we have said in this quarter report and also previously, is that we have some low-performing projects coming from Finland, and that will impact the third quarter. Of course, you should see a more positive development already in the fourth quarter. It will take some time to be up on the same level as the rest of the Bonava and what you should expect from that business.
You often mentioned that in terms of starts, it is going to be a bit back and heavy this quarter. Do you mean that? What can you help us with that? I understand some of us have the job. We have to estimate housing starts in both Q3 and Q4. If you can give us some indication of what you meant by that in terms of the housing starts.
Most of the housing starts actually this year is really back-loaded, so that means the fourth quarter. Again, due to the pandemic, for instance, in Germany, a total lockdown also meant that the municipalities were locked down. To a zoning process, there is things like public hearings and that kind of activity. So fourth quarter, but with the risk of delay. I am still positive. We have a lot in the pipeline. It seems like when you are talking about Germany, that our tactics is starting to pay off, that we work in a broader scale to get more building permits. It is not evenly distributed. So most of the starts in the fourth quarter.
Do you expect starts to be in line with what we have seen in 2019 and '18?
I think it is better to talk about different markets. We can talk about Sweden and Germany. I guided, before the COVID crisis, that we were looking forward to 1,500 starts in Germany this year. Due to the pandemic, I do not think that is realistic anymore. I would be really satisfied if we can come in somewhere between 1,200 and 1,300. As I said earlier, with the majority of those starts in Q4. Sweden, we had a good start of the year. That was a more even distribution. I would argue that we have projects planned for start for consumers, but that is more in the range of maybe 160, more. Looking at the investor side in Sweden, as we already communicated, we sold a package in Västerås, 162 units, and that is not recognized as started yet due to building permit.
Then we also communicated that we also have a letter of intent for another project, and that is in the range of 100 units. I think that is what we can expect from the Swedish starts.
Thank you. You want to touch upon the Nordics?
Nordics, I think will be slightly lower than last year. That would be an effect of what we said with a more cautious approach in Finland, that we rather work with the right size, even if there is an absorption in the market. We rather thread carefully after the experience that we have there. I'm happy to say that we started our first own project in Oslo. As I said, we had one started already before. The Oslo region should, during the year, have at least one more building start, and Bergen should continue more or less on the same level as last year. Copenhagen would be in a pretty small scale.
Thank you. Ann-Sofi, just in the completion margins we do see in the Nordics, is part of the low margins we do see here because of the M&A done in Norway, where you have the accounting system, which units on the construction have a very low margins when you account them and consolidate them. Is that part of the margins we're now seeing?
No, that is not what you see here. I'm not quite sure that I followed you, but we haven't recognized any progress at all. You have no margin coming from the Oslo business, if I understood you correctly. You have the same way. No units finalized in Oslo and no units handed over, if I understood you correctly.
Yeah, that is one factor, yeah.
Yeah. Okay.
Yeah.
Thank you.
That's fine. That's clear enough.
Yeah.
Thank you.
Thank you.
Okay. That was my questions. Thank you, and good summer.
We now have a question from Tobias Kaj from ABG. Please go ahead
Yes. Thank you, and good morning. I would also like to start with some questions regarding Germany. You mentioned that the margin in Q2 should not be viewed as a new normalized level. For the second half, should we expect similar margins as you had in the second half last year? Is it more that we should expect an improvement from the second quarter in this year?
It's more relevant to compare with 2019, actually, and saying that even if we talk about that you should expect improvement from Q2. If you compare with last year and previous year, that is more relevant to compare with if you go looking forward in the German business. However, I just want to say that from time to time, we've had very high margins in Germany, close to 14%-15% for one quarter or for one half year, and that is actually very high. What we've said is that, and I want to stress that again, that to be above and having an EBIT margin on average of above 12% is very strong for a business like our German business where we continue to grow, we continue to increase the activities. To be above 12% is still very good. I want to say that.
You should expect margins to be more at those levels when comparing with the first half year of 2020.
In Germany in Q2, you mentioned that you have more recognized units to investors. You also mentioned that you have had some cost increases due to COVID-19, but that they are not too big. The gross margin per recognized unit fell from SEK 720,000-SEK 240,000. It's a huge decline, and I guess it has to be something more. Can you give some more details why we see such a big drop in the gross profit from per recognized unit?
One thing was, for example, where we had a fairly big project in Heidelberg where we recognized units for that student apartments. That was one of the projects that were delayed due to COVID-19. It should have been recognized and handed over already in Q2. It was from the beginning, a low margin project that we've had ongoing for quite some time. The thing was that it was also affected by we were to bear some cost for that project due to the fact that the authorities didn't have the ability to come out and do the final inspections of that project. It's not huge in EUR, but it affected the already low margin of that quite big project in Q2 for us. That is what we meant when we said that.
Again, we've had also some other projects for investors with lower margins than the normal level in our portfolio in Germany. I agree with you, low margin when you look at the number of units that we have recognized, if you look at that margin per project, per unit, low. As we see it, there are explanation for that and not the normal margin that we have in our German portfolio.
To build on what Ann-Sofi just said, the Heidelberg program was, as she said, student apartments. Of course, they are a very small size. When you use the unit KPI, that also affects both the earnings and the net sales for those.
You mentioned regarding cash flow that you had a very strong inflow of cash in late June. Is that an indication that this will reverse in Q3, or do you think this is a sustainable improvement?
A good question as well. No, actually, I would say that there were some impacts coming from the fact that we had earlier inflow from some of the sales that we've had in the quarter. We had earlier payments from that, and also some outstanding payments that we will have to do in quarter three. It's an unusually strong cash flow in the second quarter due to this. You shouldn't expect that to be as strong as it was in quarter two, actually. Also, of course, that we've taken actions to be more cautious with our cash flow. We do whatever we can to mitigate so that we have inflow and outflow in the same quarter. That is always important for us, but maybe even more important now when we are in the COVID-19 situation and when we have to protect our financing.
I would say it was an unusually strong cash flow in quarter two.
Okay. Thank you for taking my questions.
We have a question next from Fredrik Olsson of Carnegie. Fredrik.
Good morning. One month ago, you issued an update following the development post-COVID. In that statement, among other things, you mentioned that you expect sold units to be at a lower level 2020 versus 2019. In the first half of 2020, you're above previous year. That would indicate a decline. Do you maintain that view, or is it an obsolete statement?
No, we actually maintain that because as we also backloaded, as we talked before, in Q4 with starts, that will also affect our possibility to sell. We still forecast a lower level of sold units, and the sentiment hasn't changed that much since we released the press release. I think if we go back to quarter one, we are more confident regarding the numbers now than we were before.
With regards to sold units, the selling pace, I would imagine, has improved during the quarter. Can you give us any guidance on development in June in isolation versus June of last year?
I don't have those specific numbers, unfortunately. However, Ann-Sofi, you might know how much of the total sales that were in June. I think it was somewhere around 40% of the sold.
Yes. I would say that in some markets, for instance, in Germany, we were at a higher level the second part of June compared to last year, due to the fact that we have started more units, we have more units for sale there. On the other hand, I would say that in the segment Saint Petersburg, Baltics, the opposite. It depends on what market you are looking at. I would also say and argue that in Sweden, we've also had a pickup of sales in the second half of June. All in all, I believe that the second half of June was better this year than the second half of June last year. Again, Finland, Saint Petersburg, Baltics, the opposite. It depends on what market you look at.
Thank you. Then two more questions. One on the gross margin in Sweden. The gross margin in the second quarter was below 10%, and you still had a decent amount of sales in the quarter. Why should we expect that to pick up during the next few quarters? Because I guess you're not satisfied with having a sub 10% gross margin in Sweden.
Do you want me to answer that? Well, again, I would like to reiterate what we say, and that is that if you look at the gross margin in Sweden, I think it's somewhat better than that, somewhat higher, especially if you take away the sale of land last year and compare the two. The margin in Sweden is somewhat better than that. The Swedish operations should have the same gross margin as we have stated, and also the same EBIT margin above 12% going on a rolling basis. That is what we expect from the Swedish business and also what you should expect.
Not this year, Ann-Sofi.
No.
Okay.
No.
My final question relating to Germany. We have already touched upon this previously, but just help us a little bit in our modeling. The gross margin difference we should expect from the consumer product versus the investor packages.
The consumer project gross margin in Germany is somewhere between from 18% to maybe 21%, while the investment packages, it depends. What we will see now is a larger influence of social housing going forward. That would most likely be somewhere between 12% to 15%.
Thank you. Those were my questions.
Thank you.
We have one final question from Jan Arnell from Kepler Cheuvreux. Please proceed.
Okay, thanks. Good morning. I have actually three questions. The first one regards your average selling price in Sweden, which seems to be rather high at about five million SEK. Could you give any guidance of the coming quarter, what you see on the average selling price?
Well, that was a very difficult question. Those prices, that is more Stockholm-related prices. Of course, as I said, we will start new projects in Sweden going forward, and that will carry a lot of sales. They will mostly be in other regions than Stockholm. I think it's fair to say that you should expect lower average sales prices than that going forward due to the product mix.
Yes, I can confirm that's correct. It will be more in line with the last year's average.
Okay. The second question regards margins in Sweden, you have commented upon both Germany margins, the Nordic margins, What's the case in Sweden? You talked about 12% EBIT margin. When can we expect that? Is that for next year, or is it already for the fourth quarter, or what do you mean by 12%?
I think the first objective for Sweden is to climb above 10%. I think that's a ticket to play level. Let's hope that we can reach 12 next year. I can't put my head on the block for that, for sure, we will strive to get there as soon as possible. 10% is the first step still.
Okay. Actually I have four questions. My third question relates to your margins on an overall basis in the group, when it comes to investor sales. Is that somewhere between 8%-10% on average for your investor business or?
No, I think that's fairly right. Maybe you could expand it up to 11, 12. It's in the range from eight to 12. It depends quite a lot on which region. Germany is a stronger market than others, so you can expect a bit more. On the other hand, as I said, there will be more influence from social housing, which will have a traction downwards. For the Nordic countries, I think that if you can get 10, I think that's really good. I think you boxed it in quite well there with a range between 8%-12%, depending on project to project.
Okay. My final question in regard to the German market, you were saying that it was totally locked down in the second quarter, and that also was the case, of course, for the planning process. Is that a hindering factor for your ambitions in Germany for next year? I suppose it has some negative effect, which you already mentioned for this year. For next year, will that be a hindering factor for you to expand your German business?
Well, a six weeks delay is a six weeks delay, and that might push projects from 2021 to 2022, and so forth. I think it's a bit early to say, because different municipalities in Germany has been differently skilled of handling this. I think that at the Q3 report, we can give a more detailed flavor. Talking about future projects, I just guided on today my forecast on starts this year, that I would be really pleased if we can land in somewhere between 1,200 and 1,500 , which is a bit lower than we guided before the COVID-19 crisis. We think that the actions that we have taken are yielding results, but it's a bit too early to be more specific. Of course, there is a risk that it will also impact 2021.
If we had projects planned for start very late in that year, they might be pushed over to 2022. It's a bit too early to say.
Okay. Thanks for taking my questions.
Thank you.
There are no further questions at this time, and I will return the floor to you, Louise Tjäder.
Okay. Thank you all for listening in. We will publish next interim report Q3, 23rd of October, and by this, we wish you all a very nice summer.