Good morning, and a warm welcome to the presentation of Skanska's second quarter report. My name is Antonia Junelind. I am the Senior Vice President for Investor Relations here at Skanska. With me here today to take you through an update based on our second quarter is our President and CEO, Anders Danielsson, and our CFO, Jonas Rickberg. In a minute, they will cover an update on our business performance, financials, and also a market outlook for the coming 12 months. After that initial presentation, we will open up for questions. If you want to ask us anything here today, then please join us by using the HD audio link provided in the press release for this press conference or the telephone conference number that has also been provided. Then just follow the instructions by the operator.
With that brief introduction, I will now hand over to you, Anders, to kick off the presentation.
Thank you, Antonia. First, I would like to take a look at this picture. A classic view for those of you who have been in New York, and especially Times Square. In June, we celebrated that we have been a listed company for 60 years together with Nasdaq Stockholm. For those of you that might remember, we actually constructed the building that you see here for Nasdaq as a part of a larger renovation of Times Square back in 1999. We have been working in New York and U.S. for decades now. We started in the early 1970s. Long history. Now, let us go into the second quarter. It is a robust second quarter. Construction is in good shape. We deliver strong margin, and we have a good order intake and a solid project portfolio. Residential Development, we have strong sales and margin in Central Europe.
The Nordic market is, however, weak, continue to be weak. Commercial Property Development, we have made one divestment in the quarter in Europe. Investment Properties, stable performance, stable cash flow, and also stable leasing ratio. Operating margin in Construction is 3.9% compared to 3.5% the year before. Return on capital employed in Project Development, 1.4% on a rolling 12 months basis, and lowered by the low volume and weak market. Return on capital employed in the Investment Properties, 3.9% rolling 12, and return on equity, 9.5%, also there on a rolling 12-month basis. We continue to have a solid financial position, and we have reduced the carbon emission in our own operation with 62% since the baseline year in 2015. I am going into each and every stream now, starting with Construction. Revenue, SEK 43.1 billion in the quarter. If you look at the local currency, it is actually increasing.
Order bookings, SEK 56.7 billion, strong book-to-bill of 113% on a rolling 12 months basis. The order backlog continued to be on a very high level, historically high level, SEK 268 billion. Operating income, close to SEK 1.7 billion in the quarter, representing the 3.9% operating margin. Strong result and high margin across all main geographies, which is really encouraging. If you look at the rolling 12 months, group operating margin was 3.7%. The strong order intake is also across the geographies that we work with operating. Moving on to Residential Development. Revenue came in to SEK 2 billion, and we sold 409 homes. We started a little bit more, 420. The operating income is SEK 226 million, driven by the strong performance in Central Europe and representing a return on capital employed of 3.6% on a rolling 12.
In Central Europe, we recorded two big project starts and delivering more than half of the revenue. The Nordic housing market is still slow due to macroeconomic uncertainties and also low consumer confidence, which has actually gone down the last two quarters in the Nordics. All in all, this gives us a strong operating margin of 11.3%. Going into Commercial Property Development. Operating income here, SEK 86 million. We had a gain on sale of SEK 215 million, including some release of provision. A return on capital employed, 0.7%. So low volume here. We had one divestment in the quarter, Equilibrium 1 in Bucharest. We have 12 ongoing projects representing SEK 13.7 billion upon completion. We have 23 completed projects representing SEK 18 billion in total investment, and of those, 74% is leased.
We also had additional four previously sold projects that was handed over in the quarter, and the leasing activity released 22,000 sq m in the quarter. I move on to Investment Properties. Operating income stable at SEK 80 million. We have an economic occupancy rate at 83%. That was pretty much on the same level the last quarter, 84%. The total property value is unchanged, SEK 8.2 billion. Moving back to the Construction stream to look into the order bookings. Here you can see the last five years the development of the order backlog. You can also see the rolling 12 trends when it comes to order bookings, revenue, and book-to-bill ratio. Again, record high level on the order backlog. Very healthy backlog as well if you look at the quality here. We had a good quarter as well in the order intake.
We can look into the different geographies here on the next slide. You can see here that all geographies has over 100% book-to-build, which is encouraging. It's driven by good performance and good selection of projects, and we have been successful. Right now, all in all, 113% book-to-bill representing 19 months of production. We are really in a good position here. With that, I hand over to Jonas to continue. Mm-hmm.
Thank you, Anders. We are moving on to the income statement in Construction. As you can see here in the top row in the table, revenue are flat in SEK, but is actually up 6% in local currency, which is a strength. Moving on to the gross margin, we have a solid portfolio, deliver stable gross margin of 7.4% in the quarter and as the same in rolling 12. Further down, in the S&A line, you can see that it's 3.5% of the revenue, and that is actually showing that we continue to have a good cost control in the quarter also for the unit that is growing revenue. As always, I recommend you to look here on the rolling 12 for the longer time perspectives to normalize levels. Moving on to the income statement by geographies.
You can see here on the right-hand table that we have delivered strong margin across all main geographies. In total, operating income is coming up on 15% in local currencies, total to SEK 1.7 billion. Summarizing the second quarter Construction performance by emphasis then the strong margin of 3.9%. Stability in the result comes from a clear bidding strategy, targeting projects where we have a good competitive advantage. In other words, we bid on the projects where we have solid customer relationship, but also where we have the team in place with a good track record and also, of course, well-known contract models. Turning to our Residential Development business. Overall, a strong quarter for the stream. Performance in operating margin is mainly explained by two large projects started in Central Europe. This means that all pre-sold units in the projects were recognized in the quarter.
More than half of the total revenue comes from Central Europe with this. We also see that Nordic still facing difficult in the market with low volumes as a result. On S&A line, you can see the cost reduction measures that we have taken over the past years that are now visible if you compare to last year as well as with the rolling 12. Moving on, looking at the geographies, and you can see here in top or right-hand table, we have a weak result in the Nordic with 1.1%. It's mainly explained then by fewer homes sold and selling also from projects with weaker margins. Further down, you see a strong underlying result in margin in Central Europe, and this quarter it was actually boosted little bit extra with the release of provision of selling and of provisions and selling non-strategic land of SEK 44 million.
In summary, strong performance driven by favorable market mix, and we have a total operating income for Residential Development that was SEK 226 million and corresponded then to a margin of 11.3%. Continue looking at started and sold homes. We have 409 homes sold, fewer than last quarter, and the Nordic housing market is recovering, and that is taking longer time. We have the good pipeline in Nordic, but sales are slow, and we are prioritizing starting smaller phases to balance the risk. We're also making the most of the Central European market and started two new projects, as I said, totaling of 311 homes, which is then 75% of all starts in the quarter. Looking at our inventory. In total, we have approximately 2,500 homes in production, of which 52% are sold and around 500 that are complete and unsold.
This means that we have a good stock to sell from going forward. To wrap up the Residential Development area, we have a solid pipeline of products that are ready to be started. We will, however, remain selective when products start, as I said. Needless to say, all products that we are starting are built on solid business cases. Let's take a closer look here at the Commercial Property Development business stream. In the second quarter, we sold Equilibrium 1 in Bucharest and recorded a gain. In the left column, you can see the second quarter gains from divestment total of SEK 215 million. This also includes the release of provision from previously divested properties and sale of non-strategic land, which together adds up to SEK 139 million. As you are aware, this business is lumpy and sales can accumulate to individual quarters.
Let me remind you that the comparable quarter include five property divestments. Continuing with the portfolio overview. Unrealized gains, pretty much stable since Q1, following that no product started or completed in the quarter. On average, unrealized gain in relation to market value stands at 9% in the portfolio, but there are big variations, with more recently started products showing strong margins and some older products having very small expected gain. After closing Q2, we have announced that starting of second phase of Solna Link here in Stockholm after signing 15,000 sq m lease for that building, which good. Continuing with the completion profile. This slide illustrates the amount of unsold completed products that we have in our balance sheet and when in time our ongoing products plan to be finalized.
In total, we have 23 products completed, and as I said, one product was divested, reducing the purple bar slightly in the quarter to SEK 18 billion. The average leasing in the completed portfolio has increased from 71% to 74%. In general, we see good leasing activity in the U.S. portfolio of completed assets. All in all, divestments are in focus for us, but the market remains shallow and how it will develop will impact the timing of our divestments going forward. Moving on to show the leasing activity in the Commercial Property Development portfolio in the quarter, 22,000 sq m let in total. The average leasing ratio of 50% is matching the completion ratio of 54% in the portfolio, which a good situation.
To conclude on the Commercial Property Development, we have a good leasing fraction in the portfolio, and as you know, after closing the second quarter, we have press released two new leases of in total 45,000 sq m that will be recorded in Q3. Lastly, the Investment Properties business continued to show a stable performance in the portfolio, increase the revenue to SEK 180 million, and operating net is a result of a growing portfolio. Operating income of SEK 80 million is good. Compared the quarter include one of effects related to acquisition of the Citygate property in Gothenburg last year. As you can see in the column of rental values in the portfolio, it represent a good balance between the three geographies that we have chosen to operate in.
Concluding the business streams performance and moving into the income statement for the group and summarizing the quarter. You can see that operating income for the business streams totaled SEK 2.1 billion. Central items are increasing with higher costs, and that is mainly driven by IT and IT transformation and outsourcing of infrastructure. At the same time, we are seeing the net contribution from our legacy business reducing, and these are now including cost for BoKlok UK. Over time, the income from the infrastructure asset portfolio will also gradually reduce with fewer assets under management. As you know, costs vary between quarters, but the first six months is representative for the cost level. Net financial items are on par with last year, an effective tax rate of 21%.
All in all, delivering a profit for the quarter of SEK 1.5 billion, which corresponds to an earnings per share of SEK 3.69. Looking at the cash flow, following the green line, the strong rolling 12-month cash flow is a result of a good cash flow from the business operations, increased negative working capital, and being in the net divestment cycle in the Project Development, as you have seen. In the second quarter, cash flow from operations was positive by SEK 1.3 billion. During the quarter, we distributed also the dividend that was approved by the annual general meeting earlier this spring to a total level of SEK 3.3 billion and SEK 8 per share. Construction. Looking at the free working capital in Construction, it has come down in the second quarter as expected, following the strong inflow in the third and fourth quarter last year.
Total reduction of SEK 2 billion, of which SEK 0.9 billion is currency effects. The strong cash flow end of last year is impacted with rolling 12 free working capital in relation to revenue that currently stands on a high level of 18.2%. This does not mean that we have easier access to prepayment from our customer, but carries the quarterly effect from last year's Q3 and Q4, as I said. Investments. This graph illustrates our investment and divestments. Following the green line, the net divestment cycle continues for the Project Development business. During the quarter, we collected cash on five Commercial Property Development properties. One was sold in a quarter, and the other had already been sold before and now completed and ready to be handed over to the buyers. Net divestment for the group was SEK 1.6 billion.
In the left column of the table, you can see that total capital employed in the property business was SEK 61.1 billion, continuing down from SEK 62.18 billion in quarter one and better than last year, which is a strength. A brief note on the funding. We maintain a good liquidity position, as you can see, and have a loan portfolio that has a balanced maturity profile as well. To sum up, our financial position remains very, very strong. Our equity is SEK 59 billion, and the equity ratio is almost 37%. Adjusted net cash flow is SEK 9.7 billion, coming out of Q2. Here I would like to remind you that we have a limit that allows us to go into net debt territory of SEK 10 billion.
All in all, this leaves us with a good room to navigate uncertainty in the market and ensuring our customer that we will be around, and also that we can use our strength to act on good opportunities when we see them here going forward. By that, I hand over to you, Anders.
Yes, and I will go into the market outlook. Starting with Construction, the U.S. civil market remains strong and well-funded through existing federal funding programs, and the U.S. building market continue to be stable. The civil market in Europe is mainly stable, and we can see an increase activity in the civil market in Sweden, mainly driven by investment in defense, energy, water treatment facilities, but also including some infrastructure there. On the Residential Development, a good level of activity in Central Europe. The housing market is strong there, so we increased the market outlook for that. In the Nordic is a slow market, and the consumer confidence is low and the pace of recovery in the overall economy is also slow, so that negatively impact Nordic market.
Commercial Property Development, we can see that the transaction market activity returning in Europe, but lagging in the U.S. due to the high interest rate situation. Occupier market stable in Europe and improving in U.S. for top quality Grade A spaces. There is a clear trend to flight to quality. Investment Properties, polarized occupier market, stronger demand for high-quality spaces compared to older stock. We have a competitive market, but rents is expected to remain mostly stable. To summarize this quarter, robust second quarter. Construction is in good shape. We have good order intake, strong margin generated by a healthy project portfolio. Residential Development, strong in Central Europe, performing very well. Weak market continuing in the Nordics. Commercial Property Development, we have divested one project in the quarter, and Investment Properties, stable performance. So overall, we are maintaining a solid financial position.
With that, I hand over to Antonia to open up the Q&A.
Thank you, Anders. Yes, let's do that. We are now opening up the questions section, and we welcome your questions. As I mentioned before, you can either use the HD audio link that provides better sound quality, both for us here and for you. We encourage you to do that. There is also a telephone conference number that you can use if you prefer to. Then just please follow the instructions by the operator. I will now ask you to introduce the first caller.
Thank you very much. Anyone who wishes to ask a question may press star and one. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. Our first question comes from Keivan Shirvanpour with SEB. Please go ahead.
Yes. Thank you, and good morning. I have two questions, and the first is on the Construction margin, which looks very strong. Maybe if you could provide some details on the drivers here. Is there, for instance, any type of temporary effects here? How much could this be extrapolated given that the EBIT margin was down by 70 basis points in Q1, but now up by 40 in Q2? That is my first question.
Okay. Yeah, good morning. I can take the first question then. We have no one-off effect in the second quarter. This represents a very strong performance, and we have a healthy backlog, and the organization is doing great work to execute the successful project, profitable project. That is encouraging. Q1 is always a slow quarter due to we have winter effect on the more industrial part of our business. We have that mainly in Europe and in the Nordics, asphalt, concrete, manufacturing, and so on. There is mainly no revenue from those operations in the first quarter, but we do have the cost, obviously, for the facilities. It can also be a bit lumpy since it is low volume, so you should more look at the trend when it comes to rolling 12 months. Here, last quarter, we had 3.7% rolling 12.
We are at the same level this quarter. It is overall stable.
Okay, good. But have there been, for instance, any type of major project completions that have impacted margins?
No big completion you could consider as sort of one-off. It is more very good performance overall.
Okay. The second question I have is on CD. You have revenue divestments SEK 700 million in the first half of the year, which is down from SEK 3.5 billion, if we exclude the internal divestments. Maybe if you can say anything about your expectations for the second half of the year, if you have any discussions ongoing, and maybe something on the U.S. business, given that you have not divested anything over there materially in over three years now.
Yeah. As you know, we do not give any forecast for divestment. But we do have discussions with investors, and mainly we can see higher activity in Europe. We are working with that, and we have a good portfolio, good asset, and we have 74% leasing ratio. So definitely some of those are ready to divest, and we are working with that. In the U.S., you are correct, we have not divested in a few years anything. It is a very hesitant investor market in U.S., and we have not seen a lot of transactions overall in the market, if you look at the whole market. We have a good position since we have a healthy leasing ratio in those assets, and it is good assets, so we want to get the full value out of it when we divest. We are not in a hurry to divest.
They are ready to be transferred, but we have to see that the transaction market returns. The long interest rate at 10 years rate needs to come down a bit before I expect the investors to take some action. Right now, it is more opportunistic investors, and we do not want to leave a lot of money on the table.
But you have not noticed any type of changes in discussions throughout the year in the U.S.?
We have discussions, and we have investors that we have done business with before. They are definitely interested in our asset, and they know we are a reliable partner, we have good assets in good location with good tenants.