Good morning, and welcome to this presentation of the third quarter earnings for NCC. My name is Tomas Carlsson, I'm the CEO, and with me here today, I have Susanne Lithander, our CFO. The way I think about this quarter goes something like this. It's a mixed picture in more challenging conditions. On one hand, we have strong orders received, we have a strong order backlog, we have strong cash flow. We have stable earnings in Infrastructure and Building Nordics, even though cost increases are challenging. And then we have Property Development, selling one piece of property exactly according to plan. On the other hand, we have write-downs in a few projects in Building Sweden, and we have a heavy impact on cost increases in Industry, and those are of course disappointments.
It's a mixed picture, and that is somewhat the theme of everything that we see today. To give you a little bit more flavor on that, strong orders received both in the quarter and rolling twelve. Quarter three is always a bit seasonally a little bit lower on the orders received, but compared to other third quarters, this is a good quarter. Rolling twelve, we are on a really good level. To be a little bit more specific, if you look at different segments of buildings, you can see that residential for the last two quarters has been going down. Now, I always say that two quarters is maybe not long enough to actually know if it's a trend, but it's clearly in line with what you should expect.
There's still a demand for residential buildings. Offices, surprisingly flat. We have a few peaks with larger orders received in a quarter that's normally depending on one or two larger buildings, but overall, surprisingly flat so far in the quarter. We can see clearly over a couple of quarters that public buildings increasing. That is everything from prisons to schools via hospitals. We can see investments into water treatment and sewage treatment, and also other type of public buildings. On the back of that, we have a strong order backlog, a book-to-bill rolling twelve above one, and an order backlog on a really high level. On the back of that, we have now a really stable net sales.
You should focus on the blue line that's excluding PD, because that's where you can see the trend, and you can see that it's slightly going up. However, we have lower earnings and margin in the quarter, and that is driven by the Asphalt business and Building Sweden, and then we have, according to plan, less profit recognition in property development. Building Sweden and Asphalt business driving a lower margin. If you want to have some more details on that, this is the quarter-to-quarter comparison. You can see that Infrastructure, Building Nordics, fundamentally on the same level. PD lower, but because of sales of fewer buildings, one building compared to three, same quarter last year.
You have Building Sweden with the write-downs in a couple of projects in residential, and then somewhat more headwind and primarily in residential. Industry compared to last year due to increased costs. It's increased oil, it's increased gas. That influences our production costs in our plants, but it also influences transportation costs overall. SEK 510 million in the quarter. For the year-to-date figures, the picture is pretty much the same, the same drivers. We end up at SEK 814 million for year-to-date, the first three quarters. The market, a mixed picture. Significant uncertainty with potential impact on the business areas. We all read about it. We all talk about it all the time.
We talk about inflation, we talk about interest rates going up. We talk about the financing market, and that should theoretically have a negative impact for businesses. We can't really see that overall in the group yet. Also, at the same time, we have strong areas of demand, for example, infrastructure, public buildings, as I demonstrated. The industry is investing into the green transition. We have a number of factors that should have a potential positive impact on the market. What are we doing? Diligent project selection. We've done that for a long time. We continue with that.
It's what we've seen the last quarter is no reason for not continuing what we've done before. Continued operational discipline, maybe even more emphasis on some places, and we're also adapting resources throughout the group. With that, I hand over to you, Susanne.
Thank you. As Thomas said, we have a strong order backlog in our contracting units. The dark blue bar here, it's in the vicinity of SEK 19 billion for all three units, and that is significantly higher than the 12 months net sales number. Continuing with the contracting units, the margins are, as you can see here, on rolling twelve, infrastructure shows stability. Building Nordics are pressured on the margin due to the material cost increases, and we see Building Sweden drop significantly due to the writedowns. Business unit infrastructure had good orders received, SEK 4.5 billion in the quarter, which is higher than the previous two years. The biggest project was the Käppala water treatment facility. Water treatment is a strong area for us where we have a strong market position and are strengthening it further.
The book-to-bill was 1.1 in the quarter, and net sales grew 9% to SEK 4.1 billion. The Danish and Norwegian markets are growing, but still Sweden remains the biggest market with 73%. Earnings and margins were stable in the quarter. Earnings grew to SEK 139 million, and the margin was 3.4%. We need to remember that the margin is still pressured by some old Swedish projects. Sweden, Building Sweden, had an order received on the same level as previous two years, an okay level, SEK 2.4 billion. Clearly, we can see now that Tomas pointed out as well that public buildings are growing as a share of orders received. It's on the same level in the quarter and over the nine-month period as residential is now 27%.
Of residentials, we have 56% rentals. Earnings, net sales were SEK 3 billion in the quarter, and 30% of that was residential. Earnings down significantly, as Tomas has talked about, -SEK 56 million in the quarter due to the significant writedowns in a few residential projects in the Stockholm area. The project margins are also pressured by cost increases, primarily within the residential projects. Building Nordics had an okay order received number, SEK 2.3 billion. It's higher than the same quarter as last year's, but seasonally low. The quarter increase is driven by the Finnish unit. If you look at the nine-month number, it's Denmark that is driving the increase on orders received. Also here, we can see that public buildings are growing as a share of orders received.
The book-to-bill is one for the nine-month period in Building Nordics. Net sales grew 12% if we exclude impact from currency and that's on the back of the really strong order intake we had last year. All countries contributed to the growth. Earnings in the quarter is slightly below last year due to pressure on margin for cost increases, but it's 3.2% margin, and it's still on an okay-ish level. Moving over to industry and the volumes, we can see that the stone material volumes drop minor. It's really minor. While the asphalt drop is significant, that is due to planned customer mix changes but mostly due to increased customer pricing. This slide exclude the numbers for Asphalt Finland from last year for comparison reasons, of course.
Net sales in both stone and asphalt grew to SEK 3.6 billion, and that is driven by the increased customer pricing, of course. To the right, we can see that Sweden accounts for 56% of net sales, and the split between stone and asphalt is 72% asphalt and 28% stone material. Earnings in the quarter dropped to SEK 50 million and, as already said, driven by cost increases that we have not been able to compensate for in customer pricing. The business area has also had increased overhead coming from improvement activities, but also from the payments to the pension foundation. Capital employed is SEK 5.1 billion and return is 2.9%. This slide shows the volatility in earnings in property development. This quarter, we only had one project recognized for profits, Fredriksberg D in Finland.
We started one project, an office project called Flow in Hyllie in Malmö. We have 12 projects in our portfolio. Over 80% of the 240,000 sq meters in our portfolio is in Sweden. We did have some letting in the quarter, even if the letting was slow. We signed eight contracts corresponding to 9,000 sq meters, and the green and the yellow line on the top there shows the relation between completion ratio and letting ratio. This quarter, the letting ratio of 62% is below the completion ratio, 63%. Net sales SEK 836 million. Only one project in revenue compared to three projects last year. Earnings, 183 million comes from Fredriksberg D, but also from earnings from previously recognized projects. Capital employed SEK 7.6 billion and return 5.6%.
On the bottom there, you can see the timing expected for profit recognitions for the four sold projects. That brings us to earnings of SEK 420 million from the business areas, and now we come to other and eliminations. Usually has a negative contribution to earnings, but not this quarter, and I will try to explain why. The first item there, we have NCC headquarters and subsidiaries that is not part of the BA. That has a positive contribution of SEK 27 million, and this is explained by repayments from sickness and pension insurances, plus reversals of positive provisions in the parent company. Next item is internal gains, where we eliminate the PD project profits while under the construction phase, and we reverse it when we take profit recognitions on property development.
The difference between the years is explained by the fact that we only reverse profits for one project this year versus three last year. In other group adjustments, we have various accounting adjustments, and the large impact this quarter comes from the IAS 19 booking of a reversal of the pension cost that industry had to take to put money into the pension foundation that we reverse on this level. Ninety million positive effect from other and elimination in the quarter. Financial net is increasing due to increased corporate debt and interest rates. Tax rate is 15% in the quarter based on the portion of property development projects expected in profits. That brings us to SEK 425 million net profit and earnings per share 11.3 on rolling twelve. Cash flow before financing was almost SEK 700 million.
From operating activities is of course lower due to the lower results. From property projects, we continue to invest in projects. Last year, we had revenue coming in here from three projects. This year, that explains the change to this year. Other working capital have a positive impact of SEK 145, and that's driven by improvements and reduced accounts receivable. If we look at the nine-month period for other capital employed, the impact there comes from big prepayments that we had in PD in 2021. Investing activities is low, and that's due to the divestment of NoDig in the quarter that contributes SEK 100 million to this positively. In the nine-month period, we also have SEK 140 million additionally that comes from the land sale in Denmark in Q1 and Hercules Armering in Q2.
SEK 700 million cash flow before financing. Finally, our corporate net debt is SEK 1.9 billion, and the development there is explained by the negative cash flow over the nine-month period, of course. Our net debt to EBITDA target is to be below 2.5, and after Q3 we are at 0.9. With that, back to you.
Thank you, Susanne. Before I wrap up, a couple of other things. We continue our repurchasing program for the NCC share. We can have maximum 10.8 million shares, and last Friday we had repurchased 9.6 million own shares. I expect that we will finalize this in the next couple of weeks. It has been significantly less costly than we anticipated. Financial targets, our target for 2023 is SEK 16, we are now rolling twelve at SEK 14, and for 2021, and for the rolling twelve we are at SEK 11. Net debt, significantly lower than the target. Dividend was decided at the AGM SEK 6 with two tranches of payment, and the second payment will be on the 8th of November next week.
Non-financial targets, starting with health and safety, we are on the same level as we were before. We have a mixed picture even for health and safety. We have clear improvements in certain areas. We have a couple of departments that will have to work even harder on health and safety, 3.7 compared to the target of 3.0. Climate and energy, we have for a long time been measuring Scope one, two CO2. The target for 2030 is -60%. We are now at -48%. A person with a good memory might remember that we've been on -43% previously. We've restated this quarter and also back to the starting year 2015 as an effect of the sales of Asphalt Finland.
Since they had higher CO2 emissions than the rest of the group, this has a positive impact on the CO2 savings. Scope three, clearly more complicated to measure, and it's to a large extent dependent on. I think we will start with the questions from the room.
Hi, Albin Sandberg , Kepler Cheuvreux. I have two questions, the first on the asphalt business, and some of your colleagues in the industry have pointed to the fact that those are contracts with limited ability to pass on costs to the client. For how long are you sort of stuck in these contracts? Are they?
That's true, but they are also normally quite short. There are contracts with a duration for several years, but most of the volume has a good duration of this year, and then we retender now again. The tendering period starts now or in the beginning of December, and it ends fundamentally in the end of March. You have the seasonal volumes.
Do you foresee yourself trying to obviously charge higher prices or getting some kind of indexation clauses in these contracts? Would you be ready to walk away from this business, basically?
Well, I see that as actually the same thing. We need to have higher prices, otherwise we have to walk away from them.
On the competition side in that business?
It's a mix, it's also a mixed picture because it's different from country to country. In Sweden, you have a number of larger competitors. In Norway, you have a couple of large road competitors, but also a number of smaller ones. In Denmark, you have several competitors.
For sure, as you pointed out several times, I know you're not providing a guidance and so on, so I'm just trying to.
Let's try again.
Rephrase the question. You still reiterate your target for 2023 of 16 SEK per share. You know, what all your divisions, is there some specific thing you're looking for for 2023 versus 2022? Maybe tie it back to your overall outlook for this year.
Well, the target remains. You know, to be completely transparent, it's tougher than when we set it. We will have to have a more consistent performance across the group from the starting point that we set this year. We will have a different mix between the different areas. You know, admittedly, it is harder, but the target remains.
Yeah. Sorry, I just have one more question, if I may. That's on the buybacks, and you said it was not as costly as you imagined from the first part. Your gearing is coming up a little bit, but still quite below.
What's your overall takeaway from this, share buyback program? Is it something that you would consider again?
Considering everything you can do, this is one thing we can do. Now, this is probably the cheapest M&A we could have done during this period.
Thank you.
Thank you, Erik Granström, Carnegie. I have a few questions as well, and perhaps starting with Building, and the margin development. Even if we put back sort of the 120 in charges that you took in Sweden, it seems like the underlying operations aren't performing, perhaps as well as you would like. What should we expect going forward? Do you think that this will be the trend going into next year as well, in line with sort of the fall that we've seen in Building Nordics? Or what's the underlying order backlog look like?
That's true. That's what I tried to allude to with the somewhat heavier headwind from primarily residential. Residential is normally around a third of the order backlog for Building Sweden. We still have some projects to deliver on the orders won a year ago or so. Think of it as a tougher headwind for residential going forward.
How have you handled those kind of contracts in this environment when you bid for new ones? I would assume that residential contracts to some extent are fixed, and that's part of the reason why you're seeing sort of the cost squeeze. What are you doing in your order backlog now that we've seen you've won orders for?
In the current order backlog, we try to use the tools we have, index regulations when we have that opportunity, more of operational discipline when we, you know, more support to the units. Going forward, we are even more careful with what kind of projects we pick and what are the contractual requirements from the residential contracts. You can see that in the order backlog with probably order receipts will probably decrease more than the market has for orders received in residential.
Okay, thank you. I have two more questions. One is on industry. What's your outlook for sort of next year? Albin was into that specific area a little bit in terms of what do you expect in terms of operations? Do you think that you need to make larger adjustments to this business area, or will you continue as is?
Well, at the moment, we keep all options open, but my expectation is that we will be on an improvement trajectory, but we will not reach full potential next year and not even maybe the year after that.
Thank you. My final question is your letting activity. What have you seen after the summer now that we've now moved into Q4? You did lease some space, but it's still fairly low volumes. Sort of a follow-up on that question as well is would you consider divesting projects that are ongoing, which are not fully let if you felt that you could handle the leasing risk at that point?
Lease or letting is definitely slower this quarter, and you can clearly see that, but it's not disappearing. We have let during the quarter, and it's on the low level, but it's still, you know, within the range that we normally are at. We develop our properties to have, you know, a good profit from them. We have a, you know, pretty fixed set on rules on letting before we take risk on them. As we stated, we will rather wait than sell below our expected price.
Okay. Thank you.
Operator, we open up for questions.
Anyone who has a question may press star and one at this time. The first telephone question comes from the line of Markus Henriksson from ABG Sundal Collier. Please go ahead.
Thank you very much. Good morning, everyone. First off, a question on the EPS target of SEK 6.16. Do you think you need to have a historically strong results in property development in order to reach that target?
I think we need to have a result according to expectations.
Fair enough. I have a question surrounding the positive effect of the NoDig divestment in infrastructure. How large was that in the results?
It's very minor. It's really minor.
It's more of a quick cash flow effect.
The cash flow effect is SEK 100 million, but on profits, it has very little impact.
Okay. Thank you for that. It's been several questions surrounding industry, and you mentioned that you do not expect to reach a normalized result, maybe not even in two years' time. Could you highlight a bit? You have earlier said you focus a lot on internal efficiency and that you're done with divestment. Do you feel that response would have been better in Q2, Q3, if your plan would have put in place? Do you feel that the increased costs have really been almost impossible to handle?
Well, that's a bit counterfactual since what we've seen over the last couple of quarters is cost increases and primarily for industry on a level that we haven't seen in a very long time. What we've learned is that maybe we have to be a little more flexible and a little bit quicker in adjusting to when we see this type of price increases that we haven't seen for more than a decade.
Thank you. One more follow-up on industry. You mentioned that the tendering starts now or in December. Have you already gotten some feedback from clients and how they are expected to behave into next year given the vast cost increases?
Not that has reached me.
Thank you. Those were my questions.
There are no further telephone questions on the line right now.
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