Good morning, and welcome to this presentation of the Q1 earnings for 2020 for the NCC Group. My name is Tomas Carlsson, and I'm the CEO. With me here today, I also have our CFO, Susanne Lithander. These are not normal times. Because of the corona pandemic, we are not holding this presentation downtown Stockholm live, but rather as a webcast from our headquarters here in Solna, outside Stockholm. What is normal is that I normally present the highlights for the group as the first slide, and here goes. The first quarter for NCC is characterized by good orders received. All business areas has orders received larger than revenue, building backlog.
We have strong cash flow with more than SEK 1 billion from operating activities, and earnings up from last year, both from our Property Development business, as well as the underlying construction business. I'd like to remind everybody that this is the season when we have low activity due to the winter. More of that later. But before first, a little bit about the coronavirus. To date, to this date when we are reporting, we have no material impact from the corona impact impacted on the group. We have high activity in all projects. All projects are running on according to plan despite that there are local challenges, but the local organizations are finding effective workarounds to deal with them.
We have limited impact from the travel restrictions between cross-border and in-country, even though we had some initial challenges in Norway. We also have limited impact from supply chain problems throughout Europe. Sick leave for the entire group is on manageable levels. That's the current status. I will get back to some thoughts about the future, possible future development later on. Strong orders received in the group on par with last year, which was a really good orders received quarter. This is true for the group. It's true for all business areas. The orders received are almost SEK 4 billion larger than our revenue, and this is true for all business areas, meaning that all business areas are building order backlog as well as the group in its entirety.
Strong order backlog on the level that is historically high. Net sales on par with last year. The slight development up, but basically on par for the entire group. But then the main question is: how did we do? Nominally, we have improved earnings from SEK -352 to SEK -69 in the first quarter. Large part of that is coming from our property development business, but also from Building Nordics and into Infrastructure contributing to this improvement. So how can you think about it? If we split the earnings in two groups, one is business area Property Development, with a large recognized profit from the sales of this building, our headquarters in Solna. And then you can clearly see that there's an improvement from Building Sweden, Building Nordics, Industry, and business area Infrastructure.
Now, if you look at the earnings in total, there's also an other, an elimination post, mainly referring to the sale and leaseback of this quarter, this quarter. Susanne will get back to that. We have a maintained low accident frequency level for the group. The rolling lost time injury frequency for the group is at 7, which is continuing the improvement trend that we've been on, but this is a continued focus for the group, because we want to get this down even further. The one disappointment in the quarter is the sales of Road Services, and there's no other way to put it than we haven't been able to find a solution that would have been responsible towards the shareholders.
The divestment is taking longer time than expected, but what we have done now is that we have an independent legal structure in place, to facilitate the sales. We are continuously working with the turnaround activities in the Road Services business, and we have taken a really prudent approach to tendering, which you also see in the orders received for the Road Service business. And with that, I hand over to Susanne Lithander.
Thank you. Well, after Tomas' overview, we will continue and start digging into the business areas, starting with business area Infrastructure. They had a stable orders received, amounting to SEK 4.4 billion in the quarter. They have a positive book to bill, and they end the quarter with a really strong backlog of SEK 20.8 billion. Their net sales increased to SEK 3.8 billion, and that's primarily driven by the increased volumes, thanks to the high workup rates in their mega projects in, primarily in Sweden, but also in Norway. Seventy-one percent of their sales comes from Sweden, so Sweden is their largest market, followed by Norway, 21%. Their earnings are up. EBIT is on SEK 39 million in the quarter, and the margin is at 1%, and it's the fifth quarter with improved earnings compared to previous year.
On a rolling 12, we can see that the margin is now up to 1.4%. We continue to have a cautious approach to profit recognition in the business, and we still recognize some of our large, complex projects to a zero margin when they are in the early stages with a lot of uncertainties still. On the bottom there, you also see Road Services that Tomas just mentioned, diminishing. We have been very prudent in our tendering, and we can see that in the volumes and the order intake. On the earnings side, they are pretty much in line with what we expect in the first quarter. Moving on to Building Sweden, they had a really strong order intake in the quarter, SEK 4.5 billion, and that's primarily driven by two healthcare projects in the mid part of Sweden, in Sörmland.
They have a positive book-to-bill, and their order backlog end at the same level as after the first quarter of last year. The volumes are slightly down compared to last year, and that's also what drives the earnings that are slightly down as well. The margin is at 2.6%, which is above where they ended last year, and we think it's on a quite competitive level for this market. Building Nordics had orders received of SEK 3.3 billion, which is down compared to last year, first quarter. However, last year's first quarter was exceptionally strong. They had 9 large projects re-registered. This year, we only had 4. Denmark continues to increase, and they end the quarter with a really strong backlog of SEK 16.9 billion.
Denmark is the market that has the strongest backlog. And as you can see, Finland is the largest share of net sales, and they stand for the largest increase in sales as well, the SEK 2.9 billion in sales. 53% of that is Finland, 33%, Denmark. Norway is the smallest market. Earnings increased to SEK 50 million in the quarter, and the EBIT margin is now at SEK 1.7 billion in the quarter, and on a rolling 12, at 2.1%. The improvement is due to increased volumes, of course, but also to much better project margins and less write-downs in our projects. Industry business has a tough first quarter every year, with really tough financial situation. They, however, they have an increased order intake, SEK 3.4 billion, driven by the Hercules foundation business.
Net sales are also slightly up compared to last year, SEK 1.3 billion, and that is thanks to our stone materials business. Sweden is the largest market, standing for 60% of the net sales in Industry, followed by Denmark, 24%, and Norway. Finland is the smallest market there. They have a negative EBIT of SEK 362 million, which is a quite normal level due to the low activity in this, at this time of the year. It is, however, a slight improvement compared to last year, driven by the volume increase in the stone materials business. Operating margin on a rolling 12 is at 4.1%, which is slightly above their target level of 4%. Return on capital employed, 9.3%, which is a bit below the 10% target level.
The volumes for stone and asphalt is on this slide, and we can see that the stone material volumes have increased compared to the previous quarters. That is not a specific event or a specific project that drives that. It's an increase across all lines, basically. Also, the asphalt is slightly up, but it's on a quite normal level for a first quarter. Moving on to Property Development, which have a strong quarter due to the sales of this building, K12, here in Solna. The net sales reached almost SEK 1.6 billion, and the profit level is SEK 323 million. In addition to K12, we have also taken land sales and earnings from previously sold projects into our profits. The capital employed is down to SEK 4.6 billion after the sales of K12.
The margin, the rolling 12-month margin is at 15.5%, which is above their 10% target, and return on capital employed is also above the 10% target, and ends at 12.7% for the quarter. We started one new project in the quarter, Project Next in Finland, which is a headquarter for Fiskars. We sold one project, which means that we exit the quarter on the same level that we entered, with 15 ongoing projects. Six of these 15 projects are already sold, and four of them are planned to be taken to the P&L this year. The letting is on a normal level, and it amounted to 13,500 sq m in the quarter, primarily driven by Project Next, but also letting in Valle View in Norway and Frederiks Plads in Denmark has contributed.
We note also that in spite of the corona uncertainties on the market, we have continued to let in April, and among other, we have let space here in Solna, in our neighboring building, K11 here. And this slide shows that we continue to have a healthy relation between the letting ratio and completion ratio, with a letting ratio of 50% compared to the completion ratio of 44%. That brings us to the income statement for the group. We have reviewed the business areas that contributed with SEK 122 million. We now come to the unit other and eliminations, that typically have a negative impact on our earnings. And on the first line item, we see NCC HQ and other adjustments. That contains of the costs for our headquarters and also our subsidiaries, common group subsidiaries, that doesn't belong to a specific BA.
That had an impact of SEK -45 million. That's an improvement from last year, coming from the fact that the subsidiaries had a better profit level this year than last year. Internal gains is where we eliminate the profits in development projects during the construction phase, and when we take profits in PD, we reverse those. And since we have now taken K12 to the P&L, we reversed eliminations here that had a positive effect, so we ended up at SEK +1 million on this line. Other group adjustments is accounting matters that we have to do, and it's primarily pensions and IFRS 16 adjustments that we make here. And the lion part of this SEK 147 million contains the adjustment that we have to make for the sale and leaseback of this office, K12, here in Solna.
That adjustment we then reverse over the 10-year lease period that we rent the facility. So in total, SEK 191 million negative impact from other and elimination in the quarter. Ending up on an operating profit of negative SEK 69 million, and with financial cost of SEK 21 million, we have a, a net profit for the period of, of negative SEK 84 million. Cash flow, our strongest point this quarter. We have a very strong quarter when it comes to cash generation on all items and all lines across the whole group, actually. The cash flow from operating activities, positive impact SEK 34 million, primarily driven by the Property Development investment, but also contribution from most of the business areas in their earning improvements.
Cash flow from property projects, positive of course, due to the sales of K12, and also a positive impact from cash flow from working capital, and that is driven by all of most of our business areas, and also contribution from settlement of a couple of old claims. Cash flow from our investing activities is improved also compared to last year, and usually in this quarter, we do have investments, specifically in Industry and our asphalt plants. But this year we've pushed some of those investments in time, so they will come later in the year. So all in all, our cash flow before financing is over SEK 1 billion, SEK 1,018 million, which we are very happy with. Net debt decreased compared to the first quarter of last year.
We ended at SEK 4.5 billion, compared to SEK 4.8 billion last year. The corporate net debt is now a positive SEK 874 million. Our pension liability has increased to SEK 3.2 billion, and compared to last year, that's driven by actuarial changes. Our leasing liability has also increased to SEK 2.2 billion, and that's driven by the K12 leaseback arrangement. Our net debt to EBITDA target is to be below 2.5 times. After the first quarter, we're at the negative 0.39. With that, I give it back to you, Tomas.
Thank you very much. I'm just going to wrap up. First, some thoughts around NCC and corona going forward. I'd like to stress that to date, we have no material impact from corona on the NCC group. However, the future impact is really difficult to assess. You can come up with almost limitless number of scenarios. But what we'd like to remind everybody of is that the construction industry, in general, trails the GDP development with some mitigation. There's a time lag depending on where the change in GDP occurs. There's also an effect on how long the change in the GDP development is, you know, whether this corona pandemic will continue for a longer or shorter period.
There's also an impact, depending on what mitigative actions we will see from society. We will closely monitor that and come back in future quarterly reports. Finally, the way to think about the first quarter for the NCC group is that we had a good start of the year with strong cash flow and continued improvements, good orders received, building order backlog, not only for the group, but also for all business areas. We had a really strong cash flow with more than SEK 1 billion from operating activities and earnings up from last year, driven by a sale of one property within the Property Development business, but also from improvements from the underlying business. This is a season with low activity due to the winter. Building activities are impacted somewhat.
This infrastructure, civil engineering activities are impacted more because they have more of their business outdoors, and the asphalt activity business is impacted a lot because we don't deliver any asphalt during the winter. And with that, I open up for questions, and since we don't have any audience in this room, I hand over to the operator to take questions from the listeners.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Tobias Kaj from ABG. Please go ahead.
Thank you and good morning. I would like to start to ask regarding Building Sweden, where revenues declined 8% year-over-year, despite a very mild winter. Should we expect revenues to continue to decline in coming quarters as well, or did you have some temporary effects in this quarter? And also, you wrote that the EBIT is impacted of lower volumes, but do you also see impact on the EBIT margin, or is it more related to the lower volumes?
I think there are a couple of things. Good morning, by the way. There are a couple of things to consider in connection with Building Sweden. First of all, we had a couple of quarters last year with somewhat lower orders received, and that's what's reflected in the lower revenues. So it's a time lag from when you have the orders received, and that was completely expected that that would happen. We are improving the margins sequentially, and as we reported in the fourth quarter and in the third quarter, we are—we have some improvement activities ongoing also in Building Sweden, and those are developing.
What we see now is the effect of activities on during the second half year last year, but we are improving sequentially to an okay-ish level, margin-wise.
Okay, thank you. And, regarding the mild winter, and this is mainly, maybe especially regarding Industry, do you expect to see any significant positive impacts on the profitability in the second quarter?
We'll get back-
Sorry, earlier.
We'll get back to that in July.
Okay. And, in general, regarding your profit recognition, have you made any adjustments in the first quarter because of the corona situation? If you, for example, expect increased sick leaves in coming weeks, have you already adjusted your profit recognition because of that?
No. We have maintained our really prudent approach to profit recognition. But we have not made any special adjustments because of the corona situation. Overall, sick leaves are on a okay level. You see, slight increases in some parts of the business, but overall, it's relatively benign.
Do you see big difference between the countries, given that the government has been acting quite different?
There are differences between countries, partly due to different activities from governments, but also due to different social security systems in the countries.
Okay, thank you. One final question, maybe more detailed, but just if I understood it correctly regarding the gain from your sold headquarters. Did you report 100% of the gain within profit - Property Development, and then reversed 40% of the gain in Other and Eliminations?
Yes, that's correct.
Thank you. That was all my questions.
Thank you.
Next question comes from the line of David Mortensen from DNB Markets. Please go ahead.
Yeah, hi, this is Simen from DNB. I have a few questions, two of them were asked just now. I see you have received a plot in Kristiansand, which seems to be a residential development. Can you just give us a clarification on your views on entering the residential development market again?
We are not. We are working with a partner that is active within for the development part. We are the building partner.
Okay, thank you. Can you give us also an indication of your exposure and how the situation is on the supply chain in, in, towards oil, and especially bitumen with the Nynas, the restructuring going on, and how you look at that, given where the current oil price is, et cetera, and how you look at the supply risk in that?
We have no direct exposure to the oil industry. We are exposed to the economy in Norway, and we are closely monitoring and acting on the situation with regards to Nynas.
But you, how much does Nynas give of your oil supply in terms of bitumen?
Nynas has historically been-
David-
Nynas, Nynas has historically been our main supplier. Given the current situation with Nynas, we are taking a number of actions, both with regards to the reconstruction ongoing in Nynas, but also on acting on the open market for bitumen.
Okay. Thank you. That was my questions.
Thank you.
The next question comes from the line of Fredrik Skoglund from Carnegie. Please go ahead.
Good morning, Tomas and Susanne.
Good morning.
A few questions here as well. Starting off with your comment about disruptions to sales, that you have been able to mitigate that so far. Is that comment based on the situation at the end of the quarter, or is that based on today's situation? Because I guess the situation has worsened in the last month.
We have closed the books for the first quarter, but our view is that up until this day, we have no significant or material impact in the group.
Okay, and then,
We have still lots of customer contact and customer activity.
Okay. And then going back to Nynas. I mean, how certain do you feel that you can mitigate and find alternatives if the situation worsens for that company?
There's a material risk in connection with the restructuring of Nynas. That's absolutely clear, and I think that's true for the entire, primarily Swedish and Norwegian asphalt market. I feel more certain today than I did a couple of months ago, that there will be a positive solution to the situation.
Then my final question. One of your aims when you came back to NCC was that you wanted to increase PD investments. Of course, now you're being quite successful in divesting assets, but given the economic circumstances, I guess it would be more challenging to let space going forward. You still believe you will be able to increase capital employed in PD within for the next two years?
Well, the cycle for investments in PD is really long, so I will not give you a timeline. My overall ambition is to increase investments into PD. But given the current situation, we will have to be a little bit more cautious until we really understand where the market is going.
Okay, Tomas, thank you.
Thank you.
As there are no further questions, I'll hand it back to the speakers.
Thank you very much. Thank you for listening in to this presentation of the first quarter for the NCC Group. Good start, strong cash flow, continued improvements, and strong cash flow in... with more than SEK 1 billion in this quarter. Thank you all for listening in.