Good morning everybody, welcome to this presentation of the first quarter for 2026 for the NCC group. I'm Tomas Carlsson, CEO of NCC. With me here I have Susanne Lithander, the CFO of the NCC group. Susanne will come back and give you all the details of this quarter. I will start with something I have never done before. I will start with the reader's manual of the Q1 report, because there are some things that may confuse in understanding what's going on. What is important to understand is this: you need to separate the different business areas that we have or business models that we have. I'd like to talk about Contracting, Industry, and Property Development in particular. Contracting business, we have an operating profit earnings that is good. It's SEK 177 million.
That despite the fact that revenues are down heavily, that's because we have managed to get rid of a number of large projects with zero margins. What happens is this: earnings is the same, net sales is down, margins goes up, and continued good market demand. Since Contracting represents roughly 90% of the revenue in the first quarter, Industry, as, you know, we always have low earnings in the Industry in the first quarter, we have slightly more in this quarter. That is for all practical purposes related to stone sales in January and February. In March, it came back to normal patterns. We don't see that that is will have an impact on the full year, but it has an impact on the earnings in the first quarter.
Industry always strongly negative earnings in the first quarter. Little bit more now, but we know the source of that. What I like to point out is this: we have really strong orders received. We have that for the group, but particularly for industry with 17% higher orders received compared to last year. Really well-positioned for the rest of the season and a really strong demand in the market. Property Development, stable on a very low level, just like we've seen it for a long time now. We have no profit recognitions from sale of projects. What we have now is the lease, the result we have now is from the lease of the properties that we have. That's the reader's manual.
Understand it as Contracting connected to revenue, Industry connected to winter. It's a pretty normal and stable start. That brings me to the key takeaways. High levels of orders received. SEK 14.8 billion , up 5% compared to last year. If you compare it over a very long period of time, it's the strongest orders received we've had in a very long time. Overall solid demand, particularly in our prioritized segments and in industry. Overall solid demand in all our countries. We have stable earnings in Contracting, on the same level, compared to last year. The group operational earnings, EBIT, reflects a cold winter, particularly driven by the stone sales in Industry in January and February. That brings me to my second additional slide.
Industry, we have a really positive outlook for the year. Earnings reflects the cold winter and the normal seasonal pattern. We have a really high demand for state investments in roads and a positive expectation of the general building demand driven by Infrastructure. That is evident from the orders received that we have SEK 4.6 billion in orders received. We have now a high level of operational discipline in the organization. Compared to 2022 when we saw the same type of volatility in the market as we see now, we are way better prepared. We have a better operational discipline in the organization.
Orders. When it comes to net sales and the margin, it looks like this. Infrastructure has lower sales, that is impacted by the fact that we last year, at the same time, had really high production in our mega projects in Göteborg, but at no margin. Our margin, on the other hand, for Infrastructure is very stable, seasonally stable, I should say. Building Nordics, sales volumes are down, driven by currency in Norway and to some extent also Finland. Denmark, on the other hand, are showing a solid growth. Earnings are on par with last year, but the margin is improving, and that's also driven by Denmark. Building Sweden's volume is down, due to the fact that they have had a very disciplined approach towards project selection.
They have picked the right projects, and we see the effect in a better portfolio reflected in the margin. Industry, this will be a repetition of what you've heard from Tomas, but nevertheless, t hey have all as always, they are negative in the first quarter as the asphalt business is basically at a standstill. This is however, this year, been amplified by the cold winter and impacted stone material much more than normal. They have a very high demand, and the good orders received in the quarter was really good. We see that the increased funding from public investments support the asphalt business moving forward, and also the expected construction activity increases, we think we will support the stone material business.
Here are the volumes in tons for industry, and as you see, the asphalt tons are insignificant as always in the quarter. Stone material, as you see, is clearly impacted by the cold weather. Earnings are down compared to last year, and as we have explained, it's due to the cold winter for the stone material. It also had an impact for asphalt in Denmark that impacts the lower earnings. The margin, however, is on a good level, 6.7% above target level. Return on capital employed, 21%, really good in despite the fact that they have increased capital employed driven by investments in operations. The portfolio for property development has not changed. We still have six completed projects and three ongoing projects in the portfolio.
As Tomas said, the commercial market remains really slow, and the letting for the quarter is unchanged. NCC, however, has decided to relocate the headquarters to our own premises in Bromma Blocks. That will make the letting ratio go up to 90% for Bromma Blocks. The letting ratio, we actually signed contracts of about slightly above 1,000 square meters in the quarter. However, that was offset by lease terminations by Bral. We actually had a net letting of negative 350 square meters in the quarter. Our letting ratio is 82% for the total portfolio, and that's before increasing the ratio in Bromma Blocks with our move. We have a completion ratio in our portfolio of 69%.
We didn't have any profit recognitions of projects in the quarter, so our earnings come from the property management that we have in our completed projects, and it is at the same level as last year. The capital employed is down to SEK 7.3 billion, even though we are building more on our three ongoing projects. That is due to the fact that we had to write down, or we did write down, three or some projects in the end of last year. The last segment, Other & E liminations, slightly lower EBIT than last year. That is driven by the elimination of internal gains where we eliminate the profits, the construction profits when we build in our property projects.
Since we have more production of the three ongoing projects, that is more negative this year. In pension and other adjustment and elimination, we have slightly higher adjustments and eliminations in this quarter. The segments add up to SEK -237 million in EBIT. Our financial net is higher than last year due to the fact that we have a higher average net debt. Our tax ratio is high. It's 26%, that is due to the limitation of deductions for interest. We have earnings per share of SEK 13.4 on rolling 12 when we exclude the items affecting comparability in the quarter, and an earning profit for the period of minus SEK -186 million.
Our cash flow is seasonally low, and it's extra low this year, due to the lower earnings, but also due to higher paid taxes. That is what is impact or explains the difference from previous year. Corporate net debt has increased to SEK 1.1 billion, still on a very low level. The reason we had such a low net debt last year was that we sold three properties in the end of 2024. We entered 2025 with really low net debt. Our net debt to EBITDA ratio is 0.81, which is really way below our limitation of 2.5 x. With that, Tomas, I hand back to you.
Thank you, Susanne. I have only two slides to wrap this up. We have an Annual General Meeting coming up on May 5th. That's next week. We will be in SPACE in Central Stockholm, please join us if you are shareholders in SPACE on May 5th. My main message for this quarter is this. The important thing is high levels of orders received, SEK 14.8 billion. Generally good demand situation in all our prioritized segments and in industry. Stable earnings, actually, increasing margins in contracting, the operating profit reflects the normal seasonality and then an additional touch of the cold winter in Southern Sweden and Denmark, impacting industry. We don't see an effect of that going forward. With that, operator, I open up for questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone when your question is up and waiting. If you wish to remove yourself from the question queue, you may press star and two. Questioners are requested to disable the loudspeaker while asking a question. Anyone who has a question may press star and one. The first question comes from ABG Sundal Collier. Please go ahead.
Do you hear me?
No.
I think that, yes. I think it's kind of a weird noise.
We have-
Yes. On Industry then. T he Industry margin came down in the quarter because of the cold weather. I had a question. Could you please quantify, how much is because of the weather and how much is because of underlying pricing or cost inflation, or is it purely on the weather? A follow-up is, how should you think about the Q2 recovery? Is the volumes lost or is there a catch-up effect?
First of all, the impact on the iIdustry is the normal seasonality, which, you know, varies a little bit depending on how much maintenance we have to do. Particularly after a strong season like last year, we have a little bit more maintenance to do. But that's a normal variation, and the rest is weather, 100%. The catch-up for Q2, we don't expect that these lost volumes will have any impact on the rest of the year.
Okay. Perfect. Thank you. Then on, kind of the residential market for Building, do you see any early signals or anything turning around? I think we've seen some early signs in the Swedish market, but is this something you see in 2026 or is it further out?
Not really. You can see increases, but, you know, an increase from almost 0 becomes a lot of percentage points. I have a very cautious outlook on residential going forward.
Okay, perfect. Just on the capital allocation, you have talked earlier about M&A. Any comments about the pipeline or anything going forward, or is it stable?
No, not really. We're continuously interested, but there are a lot of stars that needs to be aligned before you do M&A. It's, you know, both, you need to find a buyer and the seller, you need to find a cultural fit, you need to find a business fit, and then there are many stars to be aligned, and we will be very careful when we do that. We're equally interested as before.
Yeah. Is it the same segments that you talked about before? I know you have mentioned Industry and maybe some energy. Is it that still?
Yeah, and also in General Contracting if we find the right target.
Okay. Perfect. That was all from me. I will jump back in the queue.
We now have a question from the line of Granström, Erik with Carnegie. Please go ahead.
Good morning. I can't really hear the operator.
It's you.
Was it Erik Granström at DNB Carnegie? Was that the one?
Good morning, Erik. It's you.
It's me.
Yeah, it's you.
Okay. It's me, it's not you then. That's good.
No, it's you. Your time is.
That's okay.
Not up yet.
Okay. I'll try to keep my questions short. Could you perhaps quantify a little bit on the volumes? You mentioned volumes coming down in Contracting because of large projects leaving the order backlog. Is this only related to Infrastructure or is this related to Building as well? If so, how much on a year-over-year basis was affected within Infrastructure?
It's primarily Infrastructure. I would say it's more than SEK 1 billion on the Infrastructure.
Okay. Obviously this will, I assume then, slowly become smaller as we move throughout the year in, year-over-year comparison.
That's the expectation. My estimate is that, sometimes during the second half of this year we will see that revenue is coming back.
Okay. That's clear. Thank you. Then on increasing energy prices, Tomas, could you explain to us what you expect in terms of the effect both for volumes but also cost, and how do you actually handle it in your Contracting? I assume this is mainly within Industry.
It is the most immediate and largest impact is within the Industry. It has normally two types of, two general types of impact. One is for bitumen that we use a lot for the asphalt business, and the other one is general energy that we use from for asphalt production, but also transportation. That's the impact. What we are doing now is that for for bitumen and also for transportation cost and energy cost, we are trying to make sure that we have index clauses in our contracts. If we can't do that, we try to hedge energy to the best of our abilities, both energy and bitumen.
We keep our proposals to our customers have a very short duration, so we will limit the risk exposure during that time. We are determining the energy prices in our offers only minutes before we send them. That's sort of the big thing that we do. Right now, we don't see any impact at all. Fundamentally, we think that we will be able to handle this situation quite well over the year. There's an increased risk that we will have an impact from increased prices that we cannot cover towards our customers, of course. There's also a risk that the demand will go down, but we don't see any sign of that so far.
For example, municipalities have a fixed budget in terms of something like paving-
Exactly.
That budget will be affected. Okay.
Exactly. Th ey have a minimum area that they want to have paved during the year. B ut they also have a fixed budget. If they have, you know, remaining budget room in their budget towards the end of the year, they will have additional orders. There's of course an increased risk that will impact demand there towards the end of the year. We don't know.
Okay. Thank you. I have two more questions. The first one is on Property Development. Now that Bromma Blocks is 90% fully let, do you see an opportunity to sell anything during this year? Do you have a selling process ongoing or do you wait until the market improves?
We have continuous dialogues, and we have had that for a long time, but we have, we think that the probability or the opportunities to sell it has improved.
Okay. Good. My final question is on the tax ratio, the deduction limitations. I assume that that will be affecting you throughout this year and going forward. Could you give us a little bit of a guidance what you internally, what you expect in terms of effective tax ratio?
The 26% is what we expect for the year with no profit recognitions for our properties, basically, 'cause that's what it's the local tax we have to pay in our Sweden and Finland, where we have property fully that we have lots of loans for.
That changes if we sell anything.
Okay.
Changes if we sell anything.
Yep. Yes, that's understood. Thank you very much. Thanks for taking my questions.
Thank you.
We now have a question from the line of Sandberg, Albin with SB1. Please go ahead.
Yeah, hi guys. Sorry, I didn't really know how to disconnect from my line. I heard the question about the tax was just answered, so that's fine for me. Thank you.
Operator, do we have any more questions? Operator, do we have any more questions on the line?
We now have a question from the line of S hirvanpour, Keivan with SEB. Please go ahead.
Yeah, good morning. I just have a couple of questions. The first is related to the falling net sales in your Contracting division. You mentioned that it was most affected in the Infrastructure division, but could you maybe say something about the trend onwards for Building Sweden and Nordics, given that the backlog is at the same level that it was last year? Do you expect a similar type of year-on-year decline onwards in for net sales in these divisions as well?
We expect to have a slightly lower but still decline in the second quarter and maybe into the third, and then we expect it to come back sometime during the second half of the year. That is, you know, partly projects that has ended, but it's also an effect of the prudence, prudent tendering that we've been working with for a long time. We expect it to go up sometime during the second half of this year.
Okay. You, you also mentioned that this could maybe also positively affect the margins in these divisions since you have some lower margin projects that are now gone. What could you maybe say about the margin trend onwards to expect a similar type of improvement as in Q1 or to what extent?
We expect the margins to improve on the exact, the exact, margin that we will have for an individual quarter. You know, that depends on a lot of things, but we expect them to go, increase going forward.
Okay. I just last question on industry. You mentioned that higher energy prices have had a quite limited impact on the Q1. Based on what you know with your current orders and the hedging and so on, do you expect a significantly lower margin in upcoming quarters due to the effect that you can't really offset to the end client? Do you expect, like, is it more of a minor impact in coming quarters as well, or do you expect it that it could maybe be material?
Given what we know now, we expect that we will be able to handle this. The most important part for the total earnings in the quarter is whether we have a dry and warm November month.
Okay, thanks. That's all for me.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Tomas Carlsson for any closing remarks.
Thank you for listening in to this presentation of the first quarter of 2026 for the NCC Group. I hope to talk to you later on today. I hope to see you at the Annual General Meeting next week. If nothing else, I hope to talk to you again for the second quarter report in July. Thank you all.