Good morning, and welcome to this presentation of the second quarter earnings for the E and C Group. I'm Thomas Carlson, CEO. And with me here today, I also have Susann Litander, our CFO. And if we move on to the highlights of the quarter, this is the way I think about it. This is a consistent good performance of the group, higher earnings and in particular higher margins for all business areas.
If we look at the business areas, we have higher orders received in Building Sweden, which is good. Industry continued strong performance and demand for asphalt in particular. Infrastructure, solid development overall. Building Nordics, a good performance driven by Denmark. And then finally, property development and given the current market conditions for office letting, I think we have fair letting in the quarter for the group.
If we move on to earnings, we see a good development in contracting business and in the industry. That means that we have higher earnings in the quarter. We also have higher margins in all of the business areas, which I think is really encouraging development that we see. Before we move on to orders received, I'd like to take a moment to talk about a little bit about strategic development that we've been working with for some time. We have increased our share of early involvement projects where we see that the projects are getting larger and more complex.
And we see that sophisticated customers can benefit from the value that we provide by involving us at early stages. That means we do not order register quite a lot in the beginning and in many cases, have orders received coming in continuously over the projects. But it's part of what I mean when I say that we have a good demand overall. We have a significantly higher value of early involvement projects than we've had before even though it's not reflected in the order backlog. Here are some examples.
You might have seen that we communicated that we will collaborate with SSAB on the large part of the steel mill in Lunya, Sweden. As you can see, the building is quite long. It's actually measured in kilometers, not in meters. But we also have other projects. We will work together with SanskraftNet for transformation stations, GIS for metropolitan areas in Stockholm, all of them that they were out for tender earlier this year.
And then we are continuing with the third phase of the hospital in Ullo and early involvement that has been ongoing for many years. These are just some examples. That brings us to orders received On a good level, book to bill on the first half year is one. As I've said many times, it's important not to focus too much on the orders received in the quarter or even in two consecutive quarters because the nature of our projects are so large, so they can have a heavy impact, but overall good development for orders received, which brings us to unhealthy order backlog in line with strategic priorities. We have negative impact year on year from the strengthened SEK.
It really doesn't matter since both our costs and revenue are in local currency, but when we translate it to SEK, it looks like this. Overall, we have very much better quality in the order backlog than we had a couple of years ago. So moving on to some examples. On orders received this quarter, this is not by any means the largest, but interesting projects. We won 14 asphalt agreements in Norway of a combined value of million.
And as you might have seen, we have continued to win asphalt projects in Norway in the beginning of this quarter. We are redeveloping an office building, Metallum, in Espoo, Finland for about SEK0.5 billion. And then we have just agreed on a new police station in Auschwitznvig in Sweden for slightly below SEK $05,000,000,000. A couple of examples of orders received this quarter. Moving on, sales, we've had the continued disciplined approach in selecting projects, particularly in even more pronounced so in Sweden and Finland, which is reflected a little bit in the sales, but I'm happy with the way it's developing.
And we've also removed the part of property development, which gives the time series unnecessarily lumpy image. Moving on from sales to our key financial targets. As you know, earnings per share, the target short and medium term is to reach or over SEK 16. We are right now on the rolling 12 basis on SEK15.6. And as I've said on many times, we are dependent on a contribution from the property market and sales of property real estate to actually get to reach SEK16, but we are expecting a higher contribution from contracting and industry business areas and that's what we're seeing.
Net debt should be lower than 2.5 times EBITDA, we are way below that, 0.53, I am sure Sassan will talk a little bit more about that. And the dividend policy, roughly 60% of profit after tax and the AGM decided on minus 2% of extraordinary dividend, of which SEK4.5 plus 2% has been distributed and the remaining SEK4.5 billion will be distributed this fall. Health and safety, developing in a positive direction. We are now at 2.9, well on our way to our really ambitious goal of two point zero, but a positive development for the group. And then finally, the market outlook in general, we continue to experience general good market demand.
It's a divided market, but we see a particularly strong demand for infrastructure in broad sense, not only roads and railways, but water distribution, water treatment, electricity generation, electricity distribution, but also industrial and public buildings. We see hospitals, police stations, defense, prisons, that type of buildings. Strong demand for asphalt and stone. And then as we've said for quite some time now, commercial properties remain slow. And with that, I hand over to Susanne Matanden.
Thank you, Thomas. And here are the highlights in our contracting units again. Infrastructure shows solid performance and have a good demand situation. Building Nordics, good performance is driven by Denmark. Building Sweden had a really strong order intake in this quarter.
And Green Industry Transformation signed their third contract and this time with SSAB. We have a solid and healthy order backlog in all our contracting units, in line with the twelve months of rolling sales. And we have, as Thomas already explained, many projects in early phases that we have not yet converted into order booking. And the book to bill on twelve month rolling was one. In the contracting units, we had slightly lower net sales, but the margins improved across all three units in the quarter.
And on rolling twelve months, both sales and margins are very stable. We move on to Business Area Industry, and they continued their strong overall development and earnings are on a good level with improved margins. The asphalt demand is also fueled by increased funding for the road maintenance. The volumes, slightly higher in the asphalt business. While our Stone Materials business had lower volumes, but that had little impact on our performance due to a much better product mix.
And again, earnings and margin increased. And on rolling 12, the margin is now up to 4.7%. The capital employed is lower, mainly due to lower accounts receivable in the quarter, but improved working with working capital in the business area. And the return has gone up to almost 14%. Property development.
And as Thoma said, considering the challenging office market, the letting in the quarter is okay. During the quarter, no projects were profit recognized and we started no new projects. So we have nine projects in our portfolio, of which six are unsold and completed and three are sold and ongoing. Earnings was close to zero in the quarter and lower than quarter two last year due to the fact that we had less rental income from the divested good properties we sold last year. We also had additional sales on previously sold properties last year, which explains why we are so much lower this year.
Capital employed has decreased also due to the divestments of the three properties in the end of last year and the return is now up to 7.1%. The letting in the quarter was okay, considering the commercial market with five contracts and 3,700 square meters let. And this made the letting ratio go up to 81% for the total portfolio and the completion ratio for our total portfolio was 64%. That brings us to the segment Other and Eliminations. And here the EBIT in the quarter is €50,000,000 less negative than last year.
And this is explained by the first row here lower cost for group common function and that is mainly due to the timing of the cost for our investments in digitalization and IT platform that we have talked about previously. The decrease or the improvement is also explained by an increased accounting adjustments for pensions. And internal gains are negative as we are building on our property projects and we had no profit recognitions in the quarter. So the segments added up to an EBIT of $6.49 Our financial net was €46,000,000 which is more than previous year in spite of the lower corporate net debt. And this is due to the fact that we can't capitalize as much of the cost the financial cost on our property projects as they are completed.
And our tax rate increased to 23% also due to that we have no profit recognition. Gives us a net profit of $467,000,000 with an EPS of 4.8 kronor. Our cash flow is seasonally negative in the second quarter as industry start up their business here in this quarter. The cash flow before financing is better from all areas within operating activities: better earnings, less property investments and less negative effect from working capital. We do have higher investments and that comes from machinery and equipment in our industry business.
Our corporate net debt is $2,000,000,000 lower than last year due to the divested properties in the end of last year. And our net debt to EBITDA target, as Thomas said, is to be below 2.5 times and we have lots of headroom at a ratio of 0.53 after Q2. And with that, I hand back to you, Thomas.
Thank you, Sandd. And with that, the only thing that remains is for me to sum up this quarter. Overall, a solid quarter, good and increasing earnings, increasing margins, good orders received and a healthy backlog. Particularly, I'd like to point out that we have increased number of early involvement projects, large and complex projects, good demand in contracting and industry. And the strategic review of the business area industry is coming along according to plan and we expect that that process will be finalized before the end of the year. And with that, operator, I open up for questions.
We will now begin the question and answer session. Session. The first question comes from the line of Chirvan Pour Kevan from SEB. Please go ahead.
Yes, thank you and good morning. I have firstly a question on industry. So this was once again a quarter with strong profitability. And my question is how far do you believe that you are from reaching this internal target of 6% EBIT?
Good morning. We think it's definitely within reach. What actually depends determines quite a lot of that is the weather in November since this has impacted heavily on the utilization over the year. It's fundamentally the weather in November that will decide.
Okay. And maybe could you quantify the impact from this increased state funding? Is this a margin driver or it's on the volume?
Well, is both because the marginal volumes increases our earnings margins.
Okay.
So sorry, increased volumes increases margins and earnings.
Okay, good. And also a question on this early involvement projects. Do you have any type of indicative potential order values for this early involvement projects?
No, we don't for several reasons. One is that it's something between us and our customers. Second is that we are actually co creating the projects to a large extent together with our customers. It depends a bit on the choice that our customers do. And in the end, they will be orders received, but we do not at this point want to quantify that.
But as you can see, it's quite kind of large projects that I gave examples on them, and we have more than that more of those.
Yes, that's good. And also I have one So
it's significant.
Okay. And I asked one final question, and that is on the property development. So you're now close to SEK 7,000,000,000 in the completed projects. How do you see on the conditions for disposing any of these assets this year? Do you have any discussions that are currently ongoing?
We are sounding the market continuously, but the transaction market is slow and particularly if you want to get the fair value for the real estate. I can't really say that I can't give you a probability on that because at this point last year, I didn't think that I thought the same thing. But all of a sudden, you find something someone that is interested. So So I couldn't really tell, but it is slow.
Okay. And just one final here and that is that you mentioned that you have this quite significant headroom to your net debt to EBITDA policy. And in Q1, you mentioned that you were, to some extent, serving the markets for potential acquisitions. Do you have anything here to share about this?
Yes, we still are, and we'll continue to do that for the foreseeable future. But I think I was pretty clear on that a lot of things has to fall in place before you do an acquisition. We wanted to start signaling to potential sellers that we are interested. But before we find there has to be a buyer and a seller, but there also has to be a business fit, there has to be a cultural fit, there has to be quite a lot of things in place. So it will probably take some time, but we are actively pursuing that opportunities for M and A.
Okay, good. Those were my questions. Thank you.
We now have a question from the line of Erik Grandstrom from DNB Carnegie. Please go ahead, sir.
Thank you and good morning. Most of the questions have been asked and answered, but I'll have a follow-up on the early involvement projects. Thomas, when you talk about the fact that it's a larger part of NCC today and probably a larger part of the backlog going forward, should we also expect that you will report your profits more back end loaded within the contracting operations going forward because of this? Or do you see this smoothing out in terms of the way that you recognize your EBIT?
That's a tricky question. The way I think about it is this. We are now in a transition period where we have more early involvement projects for all our business areas. Over time, that should smoothen out because in the end, it's converted into orders received. So that's the way I think about it.
How long time that will take, I really don't know. The projects are large and complex, and you have to have an understanding for the fact that our customers have quite long decision making periods over these early phases.
Okay. But the simple fact that they are quite large projects should mean that you tend to recognize those at a later stage, meaning that the risks associated with taking on these kind of projects are usually larger as well?
Not I would say that they are usually smaller. The risks should be as we will order recognize them when we have a clear understanding of what the projects are and we've had an opportunity to work for an extended period together with our customers understanding really what the projects are. So as a general rule, the risks should be smaller.
Okay, very good. Thank you. Those were my questions.
There are no more questions at this time from the phone. Back over to you.
And no written questions. So with that, Susanne and I will thank you for listening in to this presentation and have a continued fantastic Tuesday. Thank you very much. Talk to you later.