Good morning and welcome to this presentation of the fourth quarter and the full year 2025 for the NCC Group. I'm Tomas Carlsson, CEO, and with me here I have Susanne Lithander, CFO. As always, I will do an overview of the quarter and the full year for you, and then Susanne will give you the details, and in the end I will wrap up and we open up for questions. I'd like to start with yesterday's news. Two weeks ago we communicated a non-cash impact impairment charge of approximately SEK 1.4 billion. This relates mainly to new assessments of the property values within Business Area Property Development and tax charges in tax assets that we've had on the balance sheet. Susanne can answer more questions about that.
What I'd like to highlight is this: it has no cash flow impact, and you will during this presentation see that we have a very good cash flow both in the quarter and for the full year. So no cash flow impact and no impact on our dividend capacity. And from here on we will mainly focus on the underlying performance excluding these impairment charges. I will do it exclusively without it, and Susanne will do it mainly without them. So here's how you want to think about the fourth quarter. We have a really strong underlying performance in the group. We have a strong operating profit, almost SEK 700 million, in the fourth quarter.
If you compare that to last year you will have to remember this year we had very small contribution from Property Development, while we last year had a large contribution from Property Development, so the difference is roughly SEK 500 million. So the contracting units and Industry performs extremely well. We have an all-time high in Business Area Industry. We actually have that for Business Area Building Nordics as well, but the 88% improvement of earnings in Q4 versus Q4 2024 is actually quite fantastic. We have a high level of orders received, SEK 14.5 billion, and then you have to remember that we've actually reversed order backlog of roughly SEK 1 billion for the project Korsvägen. So the business itself has had orders received of SEK 15.5 billion, which is a really high level.
And then the board proposes to the AGM that we will have the same type of dividend that we had last year, a SEK 9 ordinary dividend and then an extra dividend, SEK 2, distributed in two tranches. One in the spring, a little bit larger, SEK 6.5, and then a smaller one, SEK 4.5 in the fall. So that's the highlights. To back that up: strong operating profit in the quarter, SEK 692, and if you compare that to Q4 other years you can see that it's clearly strong. And then in addition recognizing that there's no or very little contribution from Property Development in this. We have good orders received. Book-to-bill is 1 and 1.45, and then underlying it's 1.55. But then as we have pointed out in the Q3 report we have a very high level of early involvement projects that will convert into future orders.
Those are not in the books, but they have a very high conversion rate from those projects. So that's very encouraging for the future. Order backlog: we have visually a decrease, and it is a decrease, but it's for several reasons. One is that we are trying to focus on better quality of the projects we have. We are in a shift from traditional contracts to more early collaboration projects. We are taking out projects with no profits, large Infrastructure projects without any type of profit, and then we have a currency effect in the order backlog. So it's somewhat smaller but higher quality and a larger proportion of early phase collaboration projects in the backlog. Some examples: in the fourth quarter we have a large office and laboratory building in Denmark for a customer that wants to remain anonymous, but it's a large laboratory.
We have another phase of the hospital in Oulu in Finland, SEK 1.7 billion. It's the third phase that we're building on that hospital. And then we're doing a large renovation project in central Stockholm with orders recognized in the quarter of SEK 1.5 billion. Net sales in the quarter in line with recent years, and we've tried to highlight the impact of Property Development in this quarter and previous quarters because of the different ways of profit and sales recognition we have, where we have percentage of completion for contracting and most parts of Industry, while we have completed contract on Property Development. So you can have, on an individual quarter you can have a very pronounced impact. So if you compensate for that you can see that this is a high level of net sales in the quarter.
Underlying: EPS at SEK 14, and as our target is SEK 16, but we've also communicated that to reach SEK 16 we need a contribution from the Property Development business. We don't have that, but we have also communicated that we expect a larger proportion of the earnings coming from Industry and contracting business, and that's what you see in the EPS for 2025. Our financial targets: SEK 16 to SEK 14, as I said. We have a net debt target of smaller than 2.5 times EBITDA. It's actually 0.27 now. This is not compensating for what it is compensating for underlying for the impairment charges. And then we have a proposal of SEK 9 plus SEK 2 of profit, which is SEK 65 profit after tax on the ordinary dividend. Health and safety: pretty flat. We would like to see an improvement of that.
We have some units improving, some not improving, so we will continue to work with that. When it comes to the climate and energy targets we will report the fourth quarter in a quarter in connection with the first quarter reporting. I think it's important for everybody to understand that we have updated our targets. It's not because we have changed our ambitions. It's only because of that we have changed the base year to be compliant with the reporting standard. We have a new base year. That's the difference. It's 2024 instead of 2015. Finally on the business: generally good market demand. We see that we have a good market demand for basically everything with the exception of residential and commercial property, and it's the same pattern as we've seen over a long period now. We have an increasing demand for security-related buildings.
It's both defense but also industries in connection with defense. We see a strong demand for hospitals, prisons, police facilities, administration of buildings, Industry, basically everything with the exception of residential and commercial building. Strong demand for asphalt in all markets. You will see that the volumes are going up, and we see that in connection with both the maintenance that needs to be increased for the road networks in Scandinavia, but also as an effect of the increased needs that comes with NATO membership. Commercial properties remain cautious, both from a transaction point of view but also from a letting point of view. Now, at this point I normally stop and hand over to Susanne, but I will talk about one more topic. I will talk about the review of Industry. The board decided yesterday that we will stop the process of trying to sell Industry.
The logic why we wanted to do this review and why we think we have these synergies of having Industry and contracting together is still there. Industry mainly delivering standardized products from fixed plants to fixed geography, while contracting is about providing a service in different stages and different places leading up to different types of end products still holds. We've seen a strong external interest, but since the business has continued to improve and the market has continued to improve we don't see that we have any bid that reflects the value creation that we see in the company. We think it's better for the shareholders of NCC if we continue to own Industry.
However, we will make that to an independent unit, so they will have their own finances, they will have their own administration, they will have their own IT to be an independent company owned by NCC. That makes it possible for us to retain several opportunities for the future, and to be pretty clear what that means: it means that we may keep it forever, we may sell it as an entity, we may bring in a partner, we may do an IPO, but we haven't decided anything, but we have the opportunities going forward. And with that I will hand over to Susanne Lithander.
Thank you, Tomas. OK, the summary of our contracting units: as Tomas mentioned, Building Nordics had record high profits driven by Denmark and Finland. Infrastructure is stable with many good orders in phase one that we hope will be converted into orders soon.
Building Sweden is improving, and they clearly have a much higher or much higher quality in their backlog moving forward now. Last but not least, Green Industry has started to work on their projects on sites now. This slide shows the net sales per quarter and the rolling 12 EBIT margin. All three units have lower sales in the quarter. In Infrastructure it's due to the fact that we had really high production rate in both Centralen and Korsvägen last year in the fourth quarter of 2024. Building Nordics: record high margin, or no, they had lower sales in the quarter. That comes from Finland and Norway that are down compared to 2024 fourth quarter. In Building Sweden they have also lower sales, but that's due to mainly the selective picking of projects that they have done for the past couple of years.
The margin now, as in infrastructure, is really stable, and we are finalizing or exiting the projects now that we have had as a burden for quite some time. For example, Korsvägen and Centralen: that has been pressure on their margin, but it has been stable for quite some time. Building Nordics is on a really good improvement trajectory driven primarily by Denmark, but also Finland is really showing good contribution and good improvements on profitability. Building Sweden also has a good trend, an improving trend when we adjust for the provisions that we made in Q4 2024. And now NCC Industry, and as Tomas said, all-time high performance, exceptionally good. In asphalt they had really strong volumes given also a long season, but also really high operational efficiency. In stone the improvements were mainly driven by high productivity.
Increased funding for road maintenance investments continues to drive demands in all markets here. In asphalt the volume, as Tomas mentioned, is also higher in the quarter but also for the full year, partly driven by the long season. Stone material is up a little bit in the quarter but clearly lower for the full year. And the margin was record high at 7%, surpassing the internal target of 6%, SEK 359 million in the quarter and SEK 879 million for the full year. Also the capital employed is down a bit, and that gives us an all-time high also return on their capital employed of 22%, never heard of before. Property Development keeps fighting on a really tough market for commercial properties, and the letting in the quarter was really slow.
And as you know we took the impairment charges to some of our properties in the portfolio here in the closing of the books. The letting was slow in the quarter, slightly up from the third quarter however. We signed 5 contracts totaling 2,300 square meters. The overall letting ratio is 82%, and the completion ratio is 68% now. The underlying EBIT, if we adjust for the impairment, was SEK 50 million for both the quarter and for the full year. That's mainly driven by the operating net in our completed properties. Capital employed is down, or it's lower due to the impairment as well. The last segment: Other and Elimination. The first row here contains mainly headquarter cost and support function costs but also some subsidiaries and Green Industry Transformation.
They are slightly down in the quarter and a bit more down for the full year. This is mainly due to timing of our IT investments, the cost for those. We have elimination of internal gain, which is where we eliminate the profits in PD while we are constructing the buildings. And as we have not made any profit recognitions this year it's negative as we continue to build on the three projects that we have ongoing. Last item there: pensions and other accounting adjustments. Contains one item affecting comparability of SEK 256 million. That's for previously balanced costs. And it also included a negative effect of a transaction between the company and our pension foundation. And it also contained a positive effect from an old receivable that we have received in the quarter.
So our earnings before items affecting comparability was SEK 692, and we had SEK 1.2 billion of the one-off cost affecting EBIT. Our financial net was minus SEK 37 in the quarter and SEK 137 for the full year. And the lower is due to the lower average net debt for the year. Our tax in the quarter is, as Tomas said, impacted by an impairment of deferred tax asset in Norway of almost SEK 260 million, which makes the tax rate for the quarter very crazy for the full year. And if we adjust it for the items or for the items if we adjust it for the one-offs the tax rate is 25%. That's what I was going to try to say. And earnings before the items affecting comparability was SEK 13.9 and SEK 1.5 after the IACs. Our cash flow was really strong in the quarter.
It's really difficult. It has a difficult comparison period with the three profit recognitions we had in the fourth quarter of last year. So this year it's driven primarily by good earnings and really good contribution from improved working capital in the quarter. Our corporate net debt is low at SEK 373 million. Last year we had a net cash position after the divestments of our properties in the quarter. As Tomas said, we have a target to have a net debt below 2.5 times our EBITDA, and after the quarter we are at 0.27. With that back to you, Tomas.
Thank you, Susanne. Time for me to wrap up. I will add a few pieces of information here. As we have communicated earlier we have two new members of the senior management team coming in. First, Tomas Brannemo will start in March.
He will be head of NCC Infrastructure as Kenneth Nilsson is retiring or starting the journey to retire. Tomas Brannemo has a background in many international companies working both with products but also with project-based companies like most recently with Johnson Controls until he left when they did the reorg, and then he has been an industrial advisor to McKinsey in Switzerland starting in March. And then Catarina Wilson will join us during the second quarter as the new CFO. As Susanne has started her journey to retire, Catarina will take over as CFO after the second quarter report. So you have two more reports with Susanne coming up. I think that's important. And then we have annual general meeting.
I like to remind everybody, May 5th we will be in Space in Stockholm that has reopened again, and more information will be provided as we get closer to the dates. Then look out for our annual report that we will publish on or before April 14th. To wrap up the quarter and the full year: good performance, and we have a very positive outlook in the market, good underlying profitability, and a strong cash flow. I think that's probably the most important part. Industry and Building Nordics has an all-time high profit, contracting higher year-on-year. We have a high level of orders received.
The board proposes a dividend of SEK 9 + 2 distributed in two tranches, and then we have decided to make industry a standalone company while NCC maintains to be the or continues to be the owner of industry for the immediate future. And with that, operator, I open up for questions.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Keivan Shirvanpour from SEB. Please go ahead.
Good morning. I have a couple of questions, and the first question is on industry. So you had a very strong margin for the full year and in Q4, and could you maybe say something about how close is this to maximum capacity and what type of impact did the quite mild weather in Q4 have compared to last year?
Yes, we had a good margin in industry, but we also had a good return on capital employed, and we had good cash flow. I think both of those two are also worth mentioning. We still think that there's quite a lot of potential in the business area, so we think there's more to we should expect more from industry. Having said that, it's true that we have had a really mild and dry November, so that probably had a positive impact in the quarter. So we cannot expect to see that every year, but it's not significant for the overall improvement.
Okay. And also when this unit will be structured as an independent unit, what types of changes within the organization do you expect then? Is there something concrete that maybe could drive profitability or such?
I mean, overall they will continue the same type of changes that they've done over the last couple of years: working with productivity, working with sales, working with making the organization, that will continue, so it really doesn't matter. What we will see is that they will have their own administration that we think that can be done on a lower cost. They will have a more focused IT system, so we think that can lower the cost. They will have everything. We don't have to make compromises to fit both the business logic for contracting and for industry. So we think that there's a potential for savings going forward, but we haven't quantified that yet.
Okay. And then yes, my final question is on capital allocation given that you have such high headroom to your net debt EBITDA policies. What types of opportunities do you have? Previously talked about acquisitions.
Yeah. We are actively pursuing acquisitions, but we are, as we've said now, for the better part of a year. But we've also said that we want to be really careful and make sure that it's not only a good fit from a financial perspective but also from an operational and cultural perspective. And there are not an abundance of targets for that, but we're actually pursuing that. Having said that, industry is a little bit of a different case, and I see opportunities to do smaller bolt-on acquisitions for the industry business going forward.
Okay. And do you see buybacks as an alternative also in capital allocation?
Yes. That's always an opportunity, but as our share price is significantly higher than it was when we did it the last time, it's not immediately as attractive.
Okay. Thanks. Those are my questions.
Thank you.
The next question comes from Erik Granström from DNB Carnegie. Please go ahead.
Thank you and good morning. I was just wondering about infrastructure. When you mentioned the order intake, you also talked about early involvement in some of your projects. Could you say something about the size of the early involvement versus, for example, a year ago, and when you think that that will be converted into order intake going forward just so we get a sense of sort of the potential for volume growth within infrastructure?
It's higher than it was last year at the same period. As an example, we're a little bit reluctant of communicating the values because there's an issue of conversion, there's an issue of the exact size of the project, there's an issue of timing. But for example, and this has been communicated by our customer, we have the early involvement project of the electrical grid for Västra Götaland, and that's a multi-billion SEK type of project that we will be working over the next 10 years or so. And we will see the first orders received from that already this year.
Okay. And then perhaps coming back a little bit to industry, I think the communication is quite clear that you want to keep this company for now. Just so that I get clear on some of the details, though, the reporting structure for NCC will not change with this standalone situation for industry. That's the first part of the question. The second part, you don't expect to have any sort of extraordinary cost related to sort of spinning out this as a separate entity?
We haven't looked into how it will if it will impact our reporting. Short term, no. And also the cost, we have not looked into whether we will have we may have some restructuring cost, but I don't think it's going to be any larger amounts.
We'll get back to that, and we'll try to be as transparent as possible when and if that happens.
Yep.
Okay. Thank you. Then also on industry, the recovery and the strengthening of the profitability within industry has been, as you stated yourself, quite remarkable throughout 2025. Do you see that there is a risk that this improvement is somehow related to the fact that you have done a strategic review of the business, or is this completely separate from that in your view?
Well, I think the main reason is that the management of industry has actually worked very hard on making the organization more professional, more structured. They worked clearly with productivity. They worked with pricing, all of the things that you should be working with. Having said that, it's not unlikely that there's some impact from the fact that we have focused more on the business area. What you shine a light on will probably perform a little bit better, but we'll continue to shine that light on that. But mainly it's because of we have a more professional procurement process, we have a more professional pricing process, we have a more professional process when it comes to inventory, we have a more professional process when it comes to running operations. So it's mainly improvements in the business. Operational excellence.
Okay. Thank you. And then finally on building, it also showed, I would say, some serious strength here in Q4, and also it's been improving throughout the year. But it seems like you're expecting this to continue going forward. Could you just perhaps stipulate a little bit what you see in both Nordics and Sweden that makes you feel confident in continued increasing profitability within both building Nordics and building Sweden?
Building Nordics first. We've taken quite a lot of action in Finland, and the Finnish organisation is actually contributing quite a lot on a very tough market. Denmark has a continued good market, and we think that will continue. We're taking quite a lot of action in Norway, so that's the reason why we think it can continue to improve. And then for Sweden, for the last one and a half year or so, we've been very carefully working with the quality of the order backlog, deliberately decreasing the sales a little bit to get back on a better position with project quality and project earnings quality, and we think that that will continue. We're not factoring in an increase or an improvement of the market in this.
Okay. Thank you. Those were my questions.
Thank you, Erik.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Stefan Andersson from Danske Bank. Please go ahead.
Thank you. So a couple of questions touching maybe on some of the earlier ones. But just to clarify, when you separate industry and you set up that as a separate company with its own systems and own management, I would have expected that to cost a little bit more than actually being a saving. I mean, did I understand that correctly, that you're saying you could save money on that?
Yeah, that's our expectation. Long term, we think that we can save money because we can have more focused administration. We don't have to have now. We have an administration that is set up to take care of both project accounting and everything that is included in that and more pure-play deliveries of asphalt and stone. So we think that we can simplify that. The same comes with IT and HR and everything, finance, basically everything. So we think that long term we can make it a more efficient organization.
But short term, there might be something?
There might be. I mean, we're changing, and that might come with some costs. We haven't really. We're starting the process to separate the company now, and we'll set up a plan and try to do it as cost-efficient as possible considering the balance of speed and not wasting money in the process.
Okay. Good. And then I think there was a question about extraordinary costs relating to the restructuring. That's fine. My question might be then, this has been a process that has been ongoing for a while. Is there any now when you concluded this, is there any transaction costs that are lagging and that will come through that you haven't already put into the P&L? No. For advisors and such? No. Okay. No. Good. And then you touched about the, I mean, it's impressive, the recovery in the segments, not only by you but also by Peab, I guess, and the asphalt business has gone from poor to really good. Just again, repeating the question, I guess, but do you see the current level when it comes to pricing and demand in the asphalt share as sustainable?
Yes. We see overall a more professional industry. We see that some are leaving the market. We see that us and others are building our business stronger. So we actually see that this is sustainable, and it's sustainable both in a financial perspective but also the delivery of more sustainable products to our customers.
Okay. Good. And then on dividends, you don't raise if I understood correctly, you don't no, actually, sorry, forget that. Was it plus two there? I was too quick. Sorry, forget that question. The last one, I'm a little bit curious on Trafikverket, and I'm not going to dig into the Västlänken specifically, but I'm just thinking that discussion you have with them, is that affecting your relation with the whole organization? I mean, they are a big buyer in Sweden, or is that very isolated to that part of Sweden?
It is isolated to that part, but in general, for the project business, we're very reluctant of bidding on Trafikverket projects since we have a bad track record. If that's us or them, I don't know, but we're reluctant to that. We see that there's a very attractive, large infrastructure market with other customers that we are focusing on instead.
Okay. Good. Perfect. That was all from me.
Thank you very much.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Tomas Carlsson for many closing remarks.
And before that, we have a questionnaire on the web. So, Thomas there, is there a timeframe when industry will become an independent company?
We have an idea, but we haven't really decided yet. We will have to look into that more. If that's all the questions, thank you very much for listening in. We look forward to meeting you. We look forward to seeing you on our coming quarterly reports. We look forward to seeing you on the AGM. Thank you very much.