Hello, everyone, and a warm welcome to this presentation of Skanska's Fourth Quarter Result and year-end result for 2014. My name is Magnus Persson, and I am responsible for investor relations. The presentation today will be held by Johan Karlström, who is CFO, CEO of Skanska, and Peter Wallin is the CFO of Skanska. After the presentations, you will all have the opportunity to ask your questions. With that, Johan, please take the lead.
Thanks, Magnus. Welcome, everybody. Good to see you here. Before I go into the numbers, I just want you to take a look at the picture I have behind me. This is a typical Skanska project. We can call it like, you know, one Skanska project. It's called Malmö Live, one of the bigger projects that we are doing in Sweden, down there in Malmö, in Skåne. Here we invest a lot from our own balance sheet. We are building a congress center, we are building a hotel that's a part of the project. We are building a concert hall, two residential towers, and also a building for commercial offices.
So this is like an entire block there that we are contributing to the city of Malmö. So I think it's a good example of what we are doing in Skanska today. So with that as a start, I want you to take a look at the little bit of the highlights and what we will present for you here today. Good results, I would say, across the board. We have increased revenue, we have increased the profitability. Earnings per share went up 18% to SEK 9.98, and we have also a very strong and solid cash position that we, during the year, have turned the net debt situation over to a slightly net cash position.
So, that's a good indication of the financial situation for the group. Strong order bookings, I would say, across the board. I will go into the breakdown, and we can discuss the various markets a little bit later here in the presentation. And also, record high divestment gain from the commercial development sector. And it actually shows the value creation that we deliver within the stream. So the board proposed to increase the dividend by 0.50 SEK or up to SEK 6.75. Switching over to construction, we can see that we increased the revenue, the top line, and the order bookings by 24%. If you compare with previous year in local currencies, which is the right measurement.
Another measurement, way to look at the order bookings is maybe comparing order bookings versus revenue, which is the book-to-bill ratio, where we landed for the year of 140%, which is an indication of that we will continue to grow the, the construction sector. We landed with an operating income of SEK 4.5 billion, which corresponds to 3.5%.
The 3.5%, that's very important for us in Skanska, because we have said for quite some time that we will deliver operating margin in the range of 3.5%-4%, and we have been slightly below that level, and we have got a lot of questions: "Will you ever come into the range that you have set up as a financial target?" And of course, for us, that has been an important achievement. Strong operational performance, I would say, in the Nordics and in Poland. The Latin American operation, we have moved out from the construction stream, because that is not part of the core operation going forward. We have decided that's gonna be closed down or divested there.
So that's now reported under the central line, and we took a charge, additional charge, in the last quarter here of SEK 100 million there. So if we move over to residential development, quite stable business, slightly higher revenue, despite that we sold a little bit fewer homes. We started close to 3,000 units during the year. And operating income came in above last year, and you can also see at the bottom line there that the gross margin ended up at 12.6%. We're on the way to move up to the 10-10 target, which we have as like, you know, the financial target for that stream.
10% return on capital employed, and 10% operating margin, which is important for us, and this is what we are aiming for. If we move over to the other stream, commercial development, we have had a divestment of close to SEK 10 billion with a gain of SEK 2 billion. I think it's actually a record time, an all-time high in divestment gain, if you talk about the gain from the development projects. We sold a lot of projects during the year. We will continue to increase and expand into the sector, if you talk about long term. But it will differ between the years, how many projects we will divest there. But long term, we will grow.
2014 was a year with a lot of divestment. It will be fewer divestment next year. That's not an indication of that we are slowing down, it's more like a little bit, you know, how the various projects are coming to an end, and are ready to be divested. Today, we have 43 ongoing projects with a total investment value of SEK 14 billion. When we compare the leasing ratios with the completion ratio, that's like a very good indication to see how these two ratios follow each other. You can see they are quite close now to each other, 47% pre-lease and 45% on the completion side. We always want to keep the leasing ratio higher than the percentage of completion in the project.
It's a good, like, an indication of, you can call it like a risk mitigator. I think that 26 projects that we started last year is also a record number of projects. So we have a lot of projects here, and this has been in the plan during the entire business plan period that we set up, that we wanted to expand the business. And you can also see that we have delivered on the plan, and we have created a lot of shareholder value here. Close to 300,000 leased square meters during the year. Looking at the infrastructure development, fewer projects in the portfolio compared to commercial development. But we have increased the value of the entire portfolio that we have, up to SEK 5.3 billion at the year-end.
And, we also managed to sell the last project we had in Latin America, the Antofagasta Highway, and pocket a gain of close to SEK 130 million on that entire project. So with that divestment, there is nothing left in Latin America for infrastructure development. During the year, we also took a charge of SEK 200 million when we wrote down the equity to zero on the Kyska Wind Farm up in the northern part of Sweden. And that's coming from lower energy prices and less cash flow and profit from that investment. We also have achieved some other important milestones during the year when we reached the financial close of the big highway in Florida, the I-4.
One of the largest PPP projects in the U.S., and that, of course, has been extremely important for us to land that project. And we have also been announced the preferred bidder for a hospital in U.K., and we expect to reach financial close on that project during Q1 this year. I should mention some of the projects that we landed during the last quarter. The biggest one was a metro project in California. There's a lot of activities going on in California now, especially on the mass transit side, and this is not the first project. We have several metro projects in our portfolio now, and the Californian operation in both for U.S. Civil, but also for Building, start to be a really big part of the operations we have in the U.S.
If you look at this very short list of projects that we landed, you can see that it's several projects in the healthcare sector. It's actually three out of the six projects you have on the list there. And it's also an indication that is a sector that we are focusing on. We are good at that one. We have a lot of knowledge, we have a lot of experience, and you can see that the projects that we have landed, they are in different geographies. We pool the resources, we pool the knowledge, and this is a synergy that we can get out from that sector that we're working on. So this is an important part for us going forward.
If you take a look at this chart, which shows the order bookings for I think that it's five years, and the two most important lines that you should compare with each other, that's you can see them at the top there. That's the dark blue and the light blue line, and they show the rolling 12 months order bookings versus, and also the rolling 12 months revenue. You can compare those, and you can see that the rolling 12 months order bookings is, like, higher up than the revenue line, and the gap there is, like, the 14%.
which is an indication of a growing backlog, and you can see the height of the bars there is actually the order backlog, which is a healthy situation that we are in today. And if I should comment the various markets a little bit, from an order booking standpoint, Peter will talk about the actual performance and the business units after me here. Sweden, 108%. I would say, like, the Swedish market is good today. It's okay. The building part of the market is, I would say, very, very strong, and you can see here that we reach higher order bookings than the revenue.
And the revenue consists of a high burn rate of the big Karolinska project. So we have, we have replaced what we burn on that product, and on top of that, we also added another 8%. So I think that this is a good indication of a strong market, but also good performance and, and a good unit here that we have in Sweden. Norway, a little bit of a mixed picture. Overall, it's good, and you can see the book-to-bill is slightly over 100%. Civil is very strong in Norway. We see somewhat of a negative impact from the oil price on the west coast, especially in the Stavanger area.
So it differs between the economies in Norway, which is related to the oil economy versus the other part of the economy in Norway. Finland, weaker, much weaker, if you talk about the market. The performance is good, though, and you can see it's also the lowest book-to-bill ratio, 89%. So we're eating the backlog in Finland, and I expect it to continue to be on a lower level going forward. Poland, very good economy there, and a stable political situation. One interesting thing, if you look at the slide up here, if you look out to the right hand, the bars there, you can see that the duration of the backlog is the shortest one. It's six months. And this is...
Here's another thing that you can read out of that, and that is that we have, during quite some time, changed the strategy for Poland to be more regionalized, to go out in the regions for midsize and smaller projects, for the bread-and-butter type of operation. And, the smaller and midsize projects, they have a much faster churn rate, so that's the reason why it's a shorter duration of the backlog there. And now, with the EU funds starting to kick in, because Poland have been really good at negotiating a big part of the EU funds, and they are now coming to the market. So our strategy in Poland, to have a base of bread and butter, the middle-sized products, region, out in various regions, and then top, on the top of that, have some larger infrastructure products.
Czech Republic has been very, for many years, in a lot of presentation here in this room, I've talked about it, like, in a negative way. I would say for the first time, for quite some years now, we see the light in the tunnel. Stable political situation, changed government. They have a clear strategy to root out and have a more transparent economy, to utilize the EU funds, which they were not able to, if you talk about the last tranche of EU funds. And we saw also, we can also start to see a growth in the underlying economy there. And we see it also trickles down into the construction sector, and you can see increased order bookings here, coming up, though, from a very, very low level, for many years of decreasing volume.
But they have definitely reached the rock bottom, and it's on the way up now. U.K., strong economy, and it's moving on, and you can see that the order intake 2014 has, you know, much higher compared to the year before. It's actually 19 versus 10, so it's close to 100% up. But the right measurement there for U.K. should be what is the burn rate of the backlog versus what we fill it up with, and you can see that the book-to-bill is 125%. USA Building and USA Civil, it's a good situation in the market in U.S. Much higher order intake in USA Civil, the 154% in book-to-bill.
One thing, though, that you have to think of and be aware of when we talk about USA Civil, it's always lumpy. Don't be nervous when it's low in a quarter, because we have fewer products in USA Civil, and they are really large. So when they are coming in, maybe one or two in one quarter, then the order bookings goes up, and then it can be another quarter when it's down. So it will always go up and down. Now it happens to be a lot here during the last year, but the trend is, like, going up slightly year after year here.
So all in all, I think that we have a good and healthy backlog going forward, and you can see the duration here of it. It varies between the various markets. So with that, Peter, I hand over to you so you can explain the performance of the businesses.
I will do my best. Hello, everyone. Okay, let's start with construction then. We posted our net sales revenue SEK 128.9 billion, which was up 8% in Swedish krona, 4% in local currencies. A fairly good performance leading to an EBIT up 16% to SEK 4.5 billion. If you look on the various margin components there, you can see that we are keeping the SG&A in very good order and expanding the gross margin. So you have a very nice impact on the 3.5% operating margin for the construction stream. Let's go into the various businesses that makes up construction. Sweden, good situation in the market, good situation in the organization, well-executed projects.
We have a very good development in Sweden, and I think you can say that many of the big projects we have in Sweden are kept at a very conservative profit take as well. Going to Norway, it's improving. All the efficiencies we put in the organization, all the changes, is showing up now in improved profitability. The business now is more of a civil operations compared to building operations, which is a change over the past couple of years. It also reflects the very strong infrastructure market in Norway. Finland, a very good execution in a very tough market. Good, healthy backlog produces good margins, and they are well executed. Here, the residential market is, of course, a very tough headwind, but the business is performing well. Another business that is performing well is, of course, Poland.
Completely different set of projects than you normally expect to find in many of the other competitors and peers, but you can see how good margin this business produces with small regional type of projects. As Johan mentioned, Czech Republic is not only improving in terms of the market, it's also improving in terms of performance. Last year, we took a charge of SEK 200 million in Czech, returning to profitability, and this profitability is, of course, nothing we are sort of happy with, with 1%. But given where the market comes from and where the business comes from, it's trending in the right direction. U.K., I would say a stable margin.
If you look a little bit into the margin, now you can see that the tough market we have experienced over the past couple of years is now sort of putting sort of a dent on the operating margin a bit. That, in combination, we are also extremely conservative of taking profit on the new big bookings that we have made, makes the margin sort of be a bit lower compared to previous years right now. USA Building, we're back to the magic 1.5%, which is where you should expect this business to be in. An extremely strong operating margin number for the fourth quarter, due to the fact that we are closing out some very profitable projects. It's not something you should extrapolate 2.1% going forward.
1.5% is what this business should produce, and that's a very good profitability. USA Civil, 6.4% is still a very good margin. I know that some of you do expect more from this business, but please remember that we have said for quite some times that between 6%-7% is what, is what you should expect this business to produce right now, given the backlog. So all in all, 3.5% for the construction stream. Going to residential, the net sales increased by close to 4% . The volume is down 4%, so there is more money to be had from selling now. It's a very good market in Sweden, as you know.
We're having a headwind in Finland, but all in all, a growth in terms of revenue. And as you can see, the magic number is the gross margin. It expands to 12.6%. Good execution, good market, predominantly in the Swedish context, and also maintaining SG&A at a good level. It means that we have an operating margin of 7.1%. Going into the various markets, you can see the Swedish market is improving quite dramatically, both in terms of EBIT in absolute terms, but also in operating margin terms. Norway is more or less at the same level. Norway volume is far too low compared to the size of the market than what we expect that to be. We are starting up more products in the fourth quarter, and we do that with a conservative profit take.
So, the margin for the year is good, but you should expect this margin to... As we start up more projects, on a higher volume, you should expect the margin on the early phases of those projects to be a bit lower. Finland, here we are doing block sales. We are selling apartments to investors, which uses them for leasing. And then you live, give a certain discount, and that's why the margins is a bit hampered, in Finland. It is, however, also mitigating some of the risks in the business in a good way. So overall, Nordics is a very positive movement, and Central Europe is also a very positive moment.
Predominantly, the Czech business is doing well, Polish business is starting to do better, and then we have also sold some land pieces in the close down business, RD U.K. So there you have the order business. And, look, if you look on the, the sold and started, you can see now since we did a retake of this business stream, you can see how stable it is in terms of performance. And this is one of the secrets to make a consistent volume, because then you can drive good profitability at a stable setup of the organizations on the S&A level. So we are started close to 3,000, and we sold a little more than 3,000.
Homes in production, and from this, you can read how much we have sold of the ongoing projects, and you can also see how much we have of completed unsold, which is the orange bit on the top there. You can see that we have 72% of the stock sold, which is a too high number, because you have too little on the shelf to sell for eager customers. So we will try, try our very best to start up new projects, but they need to be ready to be started so we can make sure that we have a strong execution. The Swedish business have definitely proven their worth here big time. In terms of unsold completed, it's down compared to last year. We are keeping our eye on the Finnish market and the Finnish context, given how the market behaves here.
But we think that the overall level is, of course, in a very confident level. CD, going into this business, a stellar performance with SEK 10 billion of sold projects, SEK 1.7 billion in EBIT. The SEK 2 billion is actually then added SEK 300 million of eliminations that we turn around. So SEK 2.3 billion of capital gains on a group level in this business. A fantastic performance, and we had a very strong end of the year, as you all know from the press releases.
If you look on this, in over time, then as Johan said, we have increased investment in this over the past couple of years, as you all know, on the back of the strategic plan and on the back of expanding this business, which is really creating shareholder value. Surprise, surprise, when you increase the investments, you also increase the gain from selling projects. It's good to remember that. Next year, 2015 will be a bit lower in terms of sales, because we have sold a lot of the projects now, and to be ready to be sold, they need to mature a bit more in terms of leasing and in terms of completion. So you should expect this to grow over time as we grow investments.
But this year, 2015, is gonna be a bit lower compared to definitely the year, record year of 2014. If you also look on the number of products we have sold, which are still under completion, especially in Central Europe, you can see that we are a bit more conservative on the profit take there because they are going to be completed during the Q3 and Q4 as of 2015. Very healthy projects in terms of where we keep them compared to the market values. Normally, we sell a bit higher than the market values we estimate as well. And if you look on the bars behind me, the growth is on ongoing projects at completion.
This is not the book value, this is on completion of the ongoing projects. You can see how it grows. And if you were to look at the various markets, you can see that CDN, the Nordic business, is very stable, whereas CDE grows dramatically, and then on top of it, you have the incremental growth of the U.S. business, which did not exist, before 2009. So we are sort of spreading our wings and having a good balance in the portfolio here. As Johan mentioned, the completion rate and the leasing rate is something which we are looking closely on our portfolio. It's good to look on the portfolio. But it also gives a context on the mix of the geographies and the type of leasing culture that you have.
For example, in CDE, you start the project and then you lease, whereas in the Nordics, you lease and then you start the project. It works roughly the same in the U.S. You lease a little bit later into the projects. To, so some quarters, you can actually expect the leasing to be below the completion. It's also a view on what, where we believe the market is and the potential we see in the market. Leasing is the key. It's the key to creating value. It's the key to mitigate risks. And here we see a very strong growth in the outsourcing businesses in Central Europe during the last year, and they are a big taker of new residential, of the new commercial space.
And there is, there is a lot of drive into the cities where you find universities, a lot of young people, well-educated, and so forth, for these businesses. So this is something which we expect to continue to see. Coming to the last but not least, stream, infrastructure development. We had a good profitability. At the very last days of 2014, we sold our last product in Latin America, the Antofagasta Highway in Chile. We also took down the impairment of SEK 200 million of a wind power plant up in the north of Sweden, Kyska, SEK 200 million.
So if you, sort of, if you take out those two, the the sale was roughly at the same level as last year, and if you add back SEK 200 million, the improved profitability is actually improved profitability in the projects we are now owning in this portfolio. So it, it's a good growth of, of profitability there. If you look on the value in this business, of course, currency, since most of these projects, except for Nya Karolinska, is, is denominated in other currencies. So of course, you have a huge impact here of, of, of the strong dollar and the strong euro, and the strong pound compared to the krona. But I would like to point out that the de-risked time value of 0.3, if you add back Kyska of SEK 200 million, it's 0.5 over the 4.9.
So it's, it's more than 10% growth, underlying growth in the market value here, before you then add on the, the FX impacts. So that's a pretty good indication of, of a good potential in, in the portfolio as well, which we keep at a very conservative, estimated discount rates. What happens if you put all these four together? You have the Skanska Group. So SEK 7.3 billion in operating income from these four streams. You have the center, which is, also including now Latin America. Here, you have a negative SEK 800 million for the full year, where we added SEK 100 million in the fourth quarter for the closeout, of the remaining, engineering and construction projects that we have. Then you have the visible operating income, 5,766, and, then the net financials.
The net financial increased compared to last year, which is entirely due to the fact that the FX movements created negative. If you look on the underlying financial net, it's decreased. Decreased on the back, of course, of the lower interest rate levels. You have an EBT income of the financial items of SEK 5.5 billion, and then you apply a tax rate of 25%. The underlying tax rate is 26% because of the mix of the business and the type of the business. And then we also had a one-off positive of SEK 70 million in the quarter. Net profit for the period of SEK 4.1 billion leaves the earnings per share 9.98, up 18% compared to last year. Cash flow is important, right?
If you look on the graph behind me, you know that we had a very good run, as always, at the end of the year, and this is not an exception. We had a lower net investment compared to last year, despite the fact that we have sold a lot of projects. Mind you, SEK 3.2 billion of the sales we have recorded in the P&L will come into the cash flow during 2015. So it is stronger, even stronger than it seems.
All in all, we have a cash flow of SEK 0.9 billion, and looking at the flow chart coming into the free working capital construction, you can see that the bars representing the fourth quarter are considerably higher than the other quarters, again coming back to a strong end of the year in terms of working capital. The orange part, as we have talked about, that will continue to drop because the revenue is increasing faster. We are still seeing an outflow in construction, SEK 2.3 billion, over the year, but we have extraordinary flows in the beginning of 2014 due to the fact that we have extraordinary inflow in 2013.
We are clearly focusing on this because this is, as you know, a source for developing and increasing the development activities in our own books. I'm faster than the computer. Improvising. Oh. It changes here, but not there. Help from IT. Okay, I think I continue. You have the papers, right? I think I remember the numbers. Now something happens. Let's see now. Here we go... magic. Based on this, on the numbers, you can see the most crucial number that we have is the, what we mentioned, operating net financial asset/liability, ONFL. A very ugly word, but a very important key ratio for our investment capacity. You can see that it's now increasing to SEK 8.4 billion.
And, we are, even if you then take in the fact that we have a lot of increases on the pension side, and the co-op side, we have a net cash position even after that, at SEK 0.7, which is more or less unchanged compared to last year. Pensions is something which is growing, of course, on the back of the much lower discount rates, and the headwind will continue, of course, with the much lower interest rates. And now this morning, the Swedish Central Bank announced a negative interest rate as well. So this will continue. More importantly, however, the low interest rate levels is improving the conditions for our business, so that's important to remember, even if we love pensions. We have a good, stable, and very strong financial position.
Again, remember the cash flow that we expect to receive of SEK 3.2 billion over the course of this year. So all in all, we have a very good financial position. You can see the breakdown here with the pension liability, taking out SEK 2 billion, adding SEK 2 billion to the liabilities. FX, of course, having a big cash in dollars, is very beneficial when the dollar increasing compared to the SEK. And then, we manage to be in a net cash position. Equity-wise, we are also, of course, hampered by the increase of the pension liabilities, so it carves out numbers there as well. And so it's a wash in terms of the translation difference and the increase of the pensions.
All in all, we are, as you can see, in terms of the capital employed, we are, stable in terms of RD. I would like to comment a bit on RD. If you remember, last year when we stood here, we had 0.8 in the excess land bank, which related to RD land. We transferred 0.6 of that back to the Swedish business. So despite that we transferred 0.6, we have reduced the capital employed in RD, showing that we are more, much more efficient and lean when it comes to capital now in this stream. Over the course of the past two years, we've had net divestments from RD of SEK 3 billion. So when we are at, at a consistent level, you should still expect, a net divestment in terms of the EBIT, more or less, industry.
Commercial, we are increasing on the back of reducing RD, and ID is more or less stable. Here we would like to increase, of course, but we, we are not dictating when the projects come out and when we win them. Johan?
You think that this magic tool will work now?
Yeah, I will help you.
Yeah, okay, good. Let me give you some general market perspective before we go into the streams, and we can comment that. You know that we have a little bit of an unstable geopolitical situation, especially here in Europe, with Ukraine in crisis. Is that impacting Skanska and the markets? Yes, to some extent. If you start with the negative side, coming out of that crisis, we see the biggest impact in Finland. We have sanctions between EU and Russia, and that has a negative impact on the trade between Finland and Russia, which means that the underlying economy in Finland is taking additional hit on, like, you know, the other problems that they have in Finland.
So, we see that the market in Finland will continue to be weak, and this is one of the reasons for it. The countries that is, like, in a closer to Ukraine in our footprint, in our geography, that is like in Poland, the Czech Republic, Slovakia, and a small business that we have in Bucharest, in commercial development. Are they impacted? Yeah, but paradoxically, in a positive way. And because we have seen a lot of capital that used to go into Russia, not go into Russia any longer, has to find other places. So we see an increasing interest in the properties that is up for divestment in those markets. So that's, of course, good for us.
The Polish economy continue also to be stable, so that's a little bit like, you know, of what we see from our end, and the impact from the Ukrainian crisis. Another thing that's impacted the overall economy out there, that's the oil prices, the lowering oil price. And that's, if you start with the negative part first, that this has, like, impacted the part of the Norwegian oil economy, especially on the west coast, Stavanger, maybe up to Bergen. Lower consumer confidence, so they are more cautious to buy apartment there. We don't see an impact on the other part of Norway. Then in Houston, which is like, you know, the energy center, the capital of energy in the U.S., much lower activity.
And that has also had a negative impact on the real estate and the property market in that city where we have some products and some operations. If you then turn over to and look at like in the general picture and what's coming out of the lower oil price, the total picture and the total impact for us is actually positive. Because with the lower energy price, it's boosting the underlying economies. We see, like, it's helping the GDP growth, we see higher consumption coming out of that, and that is like in a driving the economies throughout the geographies where we have operations.
That is like in a a more positive effect than we can see, like in a these two negative things coming out in these two smaller part of geographies. The lower inflation and interest has definitely an impact on, the residential development and, commercial development, operations in a positive way. Because with the lower interest, it's like when we see more buyers, both for our apartment, but also a flight into, areas where, where the capital can get some good, return on. And of course, the property market and our product is like in a good place for capital. So that is, of course, good for us. Turning into construction, it's more or less the same picture as, we talked about, last quarter. The Nordic markets is stable, Sweden good, Finland weaker.
In Norway, the civil part is stronger than the building part. We talked about the impact from the oil economy. In Europe, U.K. has definitely to turn in a positive direction, and we start to see the light in the tunnel in Czech Republic. Poland continue to be a stable political situation, and I expect that the market will continue to grow there. And in North America, the underlying economy is good, and we see a healthy pipeline of a lot of projects both on the general construction market, but also coming from infrastructure development as well. But of course, there's a lot of companies out there that want to be a part of that market. Residential development is more or less reflecting the...
What we have said, Sweden strong, Norway stable, Finland weaker, Prague good, and Warsaw also like on the way up. And on the commercial development side, I would say, like across the board, it's positive. The only exception for that is like in a place where we have to be cautious, and we won't start up any new projects and speculation that's in Texas, in Houston. Otherwise, there is a strong demand for office space throughout the various metropolitan areas where we have businesses. And in infrastructure development, we see projects in the U.S., they are definitely on the table, and we can select which one we go for.
Otherwise, it's a thin pipeline, except for Norway, where the government announced it's gonna come out three mega construction project that's gonna be procured through the PPP model. They are not out yet, but they have announced that, that it will come. So with that, I think that we are through the presentation here. Magnus, what's gonna happen now?
Now we will have a Q&A session.
Okay.
We will do it like this, that, we will start with questions from the live audience here. If you have a question, raise your hand, you will get a mic, and then you state your name and the company you represent, and then you ask your question to Johan or Peter. If there is time, then we will go to questions from the telephone conference after that.
All right, I'll start off. Thank you. Erik Granström, Carnegie, here in Stockholm. I'd like to start with U.S. Building that reported, at least in my view, very, very strong order intake in Q4 in itself. I think it was just north of SEK 10 billion. Could you say something about sort of the underlying orders? What kind of sectors are you seeing growing within the building operations? Because it seems like there's very good momentum at the moment.
We see healthcare coming, we see a lot of hospitals, and that is like in a market that we focus on. Aviation, which is a name for like in airports and all the investment that needs to be done there, that's another area. And then also commercial offices. That's like, you know, the example of segments where we see several products coming in and where we have our focus.
Okay, thank you. And then, just to continue within construction, or well, not actually construction, I guess it's central nowadays. Latin America, the write-down that you did in Q4, could you say a little bit more about what the order backlog looks like right now? For example, how many projects are still to be completed this year? How much do you expect, if any, to go into 2016?
... We have seven big construction projects that we are on the way to complete or just completing now. One of them will go into, will not be completed this year. All the others gonna come to a completion this year. The charge that we took in the fourth quarter is coming from an increased cost within that part of our Latin American operation.
Okay, thank you. Then lastly, my question is on RD, and it's related to Finland. You were talking about the fact that you were a little bit concerned about the buildup of unsold apartments on the balance sheet. Would you consider discounting in order to get them out, or is that gonna hurt the market too much? What do you think about your strategy in order to mitigate any risk that you might have on in terms of that? Thank you.
I think that we, I mean, we are considering all kinds of measures in order to keep it in a good place. But as you say, we are not prepared to destroy the market. But we believe that there is still a healthy demand from the type of customers and investors that are buying sort of block numbers of apartment, where one could do a number of deals. Then, of course, they will be made at a discount. These properties, the units that are completely unsold are kept at the investment cost, not at the expected sales cost. So from that point of view, it's gonna be sort of a reduction in margin. So that is the impact that you will see.
Thank you, Erik. Next question. Nothing? Okay, let's take a question from the telephone conference then. Operator?
Ladies and gentlemen, if you have a question, you have to press zero and then one on your telephone keypad, and you will enter your queue. I remind you, you have to press zero and then one. Our first question is coming from Mr. Jonas Andersson from Danske Bank. Please go ahead, sir.
Jonas, are you there?
One moment, sir. We are experiencing a little bit technical issue right now.
Okay.
Hello, Magnus?
It seems to be like in a very easy Q&A session here. Operator, can we move to the next question, or?
Press is live now. Sorry, sir.
Can you hear me now?
Yes. Hi, Jonas.
Oh, perfect. Hi, it's Jonas here from Danske Bank. Two questions. The first one on the ID business. So if I strip out the capital gain and the write down, it's really a strong result of SEK 175 million in Q4. Is that the normal run rate now, or is that boosted in any way, the underlying result in the ID in Q4?
Hi, Jonas. It's the underlying run rate, you can say, right now.
Okay.
Yep.
Perfect. That's a strong number. The other question is really on Central Europe. It seems to be a high margin for the residential part at 14% in margin. Is that a one-off there, or is that... Why is that?
That it's, as I try to explain, it is to the fact that we have a few remaining land plots in the U.K., which belong to the RD U.K. business that is now closed down. And a part of what you can see reflected in the gross margin are gains made from selling that land. So it's unfortunately not repeatable when we have sold the land.
Okay. Thank you. That's it.
Thank you, Jonas. Next question, please.
Next question is coming from Tobias Loskamp. Please go ahead, sir.
Yes, good morning. It's Tobias Loskamp from HSBC in Düsseldorf. I have a couple of questions. The first one, you highlighted that, in the commercial development, you expect, the disposals not to be as, as strong in 2015 as you have seen it in 2014. Can you give us a bit of a feeling for, let's say, how many units you have sold in, 2014, and how much you're expecting to recognize, in the segment profits in 2015? So we get, let's say, some kind of a feeling where, let's say, where the sales could go to. Second question, related to that, could you also update us on the return on capital employed that you have, achieved in, in the development businesses in 2014?
Third question that I have is on the write-down in the wind project. First of all, first question here, why has the second wind project, why is it not affected, the Mullbergs project? And, isn't it... Or normally, don't you secure the prices via feed-in tariffs from the government, or why, or what's going on here? Thank you.
Okay. I picked up two questions, but you said three questions. But I will try to answer those two that I heard. When it comes to the CD gains, you can see the SEK 2.3 billion on a group level that we reported is gonna be hard to repeat in this year. Over the course of the eight years, on average, we've been close to gains of SEK 1.1 billion. So you should expect us to be closer to the average than to the peak in 2014.
2015.
...The peak was in 2014 because of this. Yeah, but that was regarding the expected outcome in 2015. When it comes to the wind project, as you know, depending on how you buy the land and the development rights for developing the wind power plants, you come in at different levels in terms of cost for acquiring that option. So essentially, the cost for the option where we broke down was higher compared to the other plant we have in Jämtland, Mullbergs. So they are more or less at an equal basis right now. Those are the two assets we have in the wind sector.
So the answer is, my friend, is blowing in the wind, and that is the fact that the energy prices we get on the open market right now is the reason for the reduced results and hence the need for a write-down. Then you said something about the development and capital employed, but I couldn't quite hear the question.
No, I was wondering if you can give us the numbers in terms of return on capital employed in 2014 for the three development businesses.
You should expect RD to be very flat. You should expect an increase in CD. Then you will have to do a bit of forecasting yourself, and then we can have a discussion.
All right. Actually, I mean, I was wondering about 2014.
The capital employed in 2014?
No, the return on capital employed.
Ah, the return on capital employed is 10.4% for the development streams.
Okay. And then last question on the margins in the Swedish construction business, which has improved year-on-year quite strongly. Is this already accounting for some profits in the Karolinska project, or is it simply strong execution, or a high number of projects finished, or what's the reason behind that?
We have a strong strong operation and strong business in Sweden, and the 4.5% that we have pocketed for the full year, I think, is like in a good result, and we expect that the business in Sweden will continue on a good level. We don't want to comment any specific project.
Okay, thank you. Fair enough. Bye.
Thank you, Tobias. So do we have more questions online?
We have one more question from Mr. Niclas Höglund from Nordea. Please go ahead, sir.
Yes, good morning, first of all. A couple of questions, if I may. I'll try to be brief. If we first could start out on the commercial development side, when we look at the accounting issue, you were mentioning that you're still waiting for SEK 3.2 billion in cash. Could you help us with when this cash will be readily available? And if you, from an accounting perspective, will be able to utilize this capital going into the year?
I don't fully understand the question, but, I will... So the SEK 3.2 billion, of that SEK 2.8 billion, relates to the CD business, and, and you should expect that to sort of drop in over the course of 2015. We are not assuming and taking anything for, for granted in terms of, reporting anything until we have received the actual cash. But the investors that have acquired the, the projects, are very stable, and we have letters of credits or bank lines that shows that the money are in place, if that was the question.
When we look at your capital employed tied up in the commercial stream, and then maybe think a little bit on returns going forward, and we should then likely reduce that part with around SEK 2.8 billion. Is that a fair assumption?
Yeah, less the markup.
Less the markup. The markups, how much are those?
Well, I can do all the forecasts for you, but that, then this guessing game-
Thank you.
is not going to be interesting. But you can see the margin, the average margin is 20%, 21%. So, that's the margin. The markup is then 24, 24% on average. So 1.24-
Okay.
- divided by 2.8, and then you have the number.
Okay, fair enough. And then coming back to the construction stream in U.S. Civil, you correctly have been telling us to look at the margins on a 6%-7% basis. Now we are below the 6.5% on a rolling 12-month basis, and given the very strong backlog, should we expect the margins to be in the lower end of that range going forward?
The business we have in U.S. Civil, it's, and the backlog there is a stable operation, and we are coming from a situation with much higher margin, as you know, and that was pride that we landed in a very favorable market. Today, it's gonna be like in a mix and, in, around where we are today. Where will we be in that range? Depends on when, where, which project we complete and where we are in the cycle of starting up and ending, and I cannot answer that question exactly. I won't, even if I could.
Okay. Yeah, just to follow up on that, when you look at your U.S. operations, well, your sales grew 11% in 2014, while the EBIT declined with 6%. Do you expect to turn the trend on EBIT growth going forward?
Well, we have a good backlog. We will grow top line. We say that we expect between 6% and 7% in EBIT, so that would turn the trend a bit.
Okay, fair enough.
Mm-hmm.
Thank you.
Thank you, Niclas. Okay. Time flies when you're presenting a quarterly report. It's 11:00 A.M., and we will conclude this now. So thank you all for being here, and hope to see you next time. Thank you.