Skanska B Aktie

Good morning, and a warm welcome to the presentation of Skanska's second quarter report for 2026. And I'm Antonia Junelind and the Senior Vice President for Skanska Investor Relations. And here with me to present the second quarter report is our CEO and President, Anders Danielsson; and Group EVP and CFO, Pontus Winqvist. So shortly, they will take you through a business and performance update, look at the market outlook for the coming 12 months and provide an update on our financial position. And after that initial presentation, we will open up for questions. So if you have a question, please use the telephone conference provided in the invite telephone conference number that we have provided and then just follow the instructions by the operator and we will get back to you and answer your questions in a little while. But now I will hand over to you, Anders, to start the presentation.

Thank you, Antonia. And before I start, I wanted to look at the picture. You can see the Portage Bay Bridge in Seattle, where we are replacing the existing Portra Bay Bridge to meet higher standards when it comes to seismic resiliency standards. And we see a robust demand and good pipeline of projects for traditional infrastructure, and this is a good example of that and our capabilities and market position in the U.S. If I look at the second quarter, it's a solid performance. Construction, very strong operating margin and a record quarter when it comes to order intake.

Residential Development, strong results in Central Europe, but Nordics are impacted by low volumes, provisions and restructuring costs. Commercial Property Development, 2 project divestments, and we also have U.S. asset impairment charges in the quarter. Investment Properties delivered stable results, and we also divested the PPP asset 4 in U.S. during the quarter. Operating margin in Construction, 4.3% also if you look at the rolling 12 months, 4.3%. And the return on capital employed in Project Development on a low 1.3%. Return on capital employed in Investment Properties, decent, 4.8% and a return on equity of just shy of 11%. We maintain a robust financial position, which is critical for us. And we have reduced the carbon emission with 64% since the baseline year 2015.

So if I go into each and every stream here, start with Construction. revenue pretty much in line with last year. We have a record high order bookings of SEK 68 billion. which gives us a book-to-bill ratio of 114% on a rolling 12-month basis and a record high order backlog close to SEK 300 billion. Operating income, SEK 1.8 billion, again, representing an operating margin of 4.3%. So strong performance overall. I go into the Residential Development. Revenue was at SEK 1.7 billion, and we have a solid sales and strong profitability in Central Europe, weaker result in the Nordics due to weaker market. And the Nordic operations are impacted by low volumes, provisions and a restructuring cost. And we have started one project in Central Europe comprising 156 homes, and we started 2 small projects in the Nordics.

Moving on to Commercial Property Development. Operating income is minus SEK 170 million in the quarter, and that's due to the asset impairment charges on a few U.S. properties that negatively impacted the results. But we have a gain on sale in the quarter of SEK 217 million. We have 17 ongoing projects, which representing SEK 12.8 billion in total investment upon completion. And we have 16 completed projects, which corresponds to SEK 18.5 billion in total investment. In these completed projects, we have a decent leasing ratio of 77%. So we have a positive cash flow from those assets.

Two residential rental projects were started and divested in the quarter, and we also delivered -- handed over 4 previously sold properties to external buyers. Moving on to investment properties. Very stable operating income of SEK 85 million, and we have also a good economic occupancy rate of 83%. And the portfolio today consists of 7 high-quality office properties in Sweden with a total property value of SEK 8.3 billion and a solid performance in the second quarter. I move back to construction to look into the order bookings. Here, you can see order backlog, order bookings over time, over 5 years.

And you can see on the blue bar here that -- which is the order backlog, which is on a historically record high level. And it's a good -- I would say it's a good quality in the backlog. And we have been successful in positioning ourselves and winning projects in position ourselves where the market is strong and good, and that goes for pretty much all the geographies. And you can see almost touching the SEK 300 billion mark here, which is good. And if I look into the different geographies when it comes to order bookings. So here, you can see very, very strong order intake in Sweden and U.S., which contributes to the SEK 68 billion for the single quarter.

And here, you can also see the book-to-bill ratio rolling 12, ending up at 114%, which corresponds to 21 months of production. So it's unusually high also when we look at that. So with that, I hand over to Pontus to go into the details.

Then starting with Construction and the income statement. As you may remember, we had a somewhat weaker start of the revenue in Q1. You can see that we are now catching up by especially growing the Nordic business. U.S. revenue is still somewhat behind, but you have all seen that we have a strong order booking in the quarter, and you also saw that we released another order here during the day. So quite confident that we will gradually see an increase also with the U.S. revenue.

Totally, the revenue increased with 1% if you adjust it for currencies. Selling and admin of SEK 1.7 billion is resulting in an operating income of SEK 1.8 billion for the quarter and a strong operating margin of 4.3%, both for the isolated quarter and for the rolling 12-month period. Looking -- so looking then into the income statement for the different units, you can see that it's a strong delivery overall, and I would say, especially in the Nordics and in the U.S. Operating income increased by 12% in local currencies and resulting then in a margin of 4.3% compared to 3.9% for the same quarter last year.

Going into residential then, you see here that we have a lower revenue compared to last year. This is mainly because of fewer started and then consequently fewer sold units, resulting in an operating income of SEK 25 million and a weak operating margin, I would say, of 1.5%. For the different units then, we have had a low sales in Finland and Norway. It has been a better sales in Sweden, but still we are selling from a backlog with lower profitability. And added to that, we have taken costs for warranty provisions and restructuring for SEK 70 million in the Swedish business.

Central Europe is continue to perform on a very strong level, started 156 units and sold 132 units in the quarter and came out then with SEK 122 million in operating income, which is then 23% in operating margin. If you look into the rolling 12 months margin, it's 18% for the Central European business. If you were excluding the restructuring and warranty provisions, the total RD margin would have been 5.6% -- in the Nordics, 2 minor projects were started. And as I said, one larger project with 156 units in the Central European business was started. If you look into the sold unit, the absolute majority of the sold came from either Sweden or Central Europe.

I would say that we had stable levels of the homes in production, where more than half is within our Central European business. The sales ratio increased somewhat to 55% from 53% by the end of first quarter and the number of unsold completed is decreasing. from SEK 350 in Q1 to SEK 326 million. And here's worth to mention that Nordics is decreasing more actually. They are decreasing with 42 units and the Central European business is increasing somewhat with the completed unsold, increasing with 18. And that's basically good because we have a positive price momentum in the Central European business. Going then into our Commercial Property Development business.

We sold 2 rent residential projects in the second quarter, and we had divestments divestment gains of SEK 217 million, and those includes also some provisions from previously sold projects. We have, as you heard, made impairments in a couple of our U.S. properties. Total amount of write-downs was SEK 464 million. And the reason for that is that we have seen increased long-term interest rates within U.S., which also is then resulting in uncertainty among U.S. property investors. And therefore, we have seen that there is a need to reduce the value of our U.S. portfolio somewhat. When it comes to the development gains in our portfolio, it's stable unrealized gains. We completed one project during the quarter.

And therefore, you can see that it's a slight increase here of the completed properties and the unrealized gains. The completion profile of our unsold projects has increased. You can see here the bar far to the left increased from 71% to 77%. One project was completed. So generally, you can see that it's a good leasing activity in our completed portfolio. And there are some other, if you're tracking this, other increasing of leasing ratios if you compare to previous quarters. Yes, as I said, stable leasing in the portfolio. We leased out 54,000 square meters in the second quarter.

And you can see that we steadily are keeping the occupancy rate above the completion rate of our ongoing projects. Investment Properties continues with a stable operating income similar to previous quarter of SEK 85 million and an occupancy rate of 83%. There are no changes in the market value, and we have an average valuation yield on the portfolio of 4.7%. So summing up the group, you see that we have an operating income from our businesses of SEK 71 million, and that includes then the write-downs in the CD business of SEK 464 million and the warranty and restructuring costs of R&D of SEK 70 million. On the central line, we have a positive contribution of SEK 334 million, and that includes then a net contribution from our business operation of SEK 559 million.

This includes the profit from the PPP portfolio, including the divestment of 4 and also costs from legacy operations. Net financial items of SEK 241 million includes interest payments from dispute settlements. Tax rate is the same as we had in Q1 and ends on 24% Cash flow. We had a very strong operating cash flow during the quarter that was supported by payment and delivery of previously sold commercial properties as well as a positive development of working capital in construction. Also, the dividend was distributed out to the shareholders of SEK 5.9 billion during the quarter.

And you can see also after that, we had a positive cash flow in the group. continued strong development of the working capital. And by the end of the quarter, it amounts to SEK 33.9 billion. We had SEK 31.6 billion by the end of Q1. And SEK 1.7 billion on that is based on improved working capital within the business. And especially, I would like to mention that there are milestone and mobilization payments in recently started projects in -- especially our U.S. business. It's also SEK 0.5 billion in a positive currency effect of the working capital. Investments and divestments, we had strong net divestments during the quarter, mainly then because the earlier mentioned delivery and payments of CD assets Also, RD contributed with net divestments during the quarter.

This also then resulted in a reduced capital employed and sum up to SEK 63.4 billion. We had SEK 66.3 billion by the end of Q1. When it comes to available funds, it has went down somewhat from SEK 27.7 billion to SEK 23.1 billion, of which SEK 7 billion is unutilized credit facilities. And the reason for the decline here is that we have choose to reduce some of our unused credit facilities and also repaid some parts of our external debt in order to have a more efficient management of our financial position. Then we continue with a strong financial position with an adjusted net bearing interest net receivable of SEK 8.7 billion.

You can say that the reason for the reduced adjusted net cash position, even with the strong operational cash flow that I mentioned is explained by a lot of the cash that has been coming in is coming into our joint ventures and then is treated as a restricted cash, and that is then deducted from our adjusted net cash position. So by that, I hand over to Anders and comment about the market outlook.

Yes. If I look at the market outlook stream by stream, start with construction. So the construction market outlook is mostly stable. We have a demand in the civil segment generally robust and in all our geographies. And the building market is somewhat weaker, but improving, supported by investment in tech industry and defense sector and also other social infrastructure. U.S. market is stronger than Europe, but we do see increased activity in the Nordics.

So we have raised our outlook for the building market in Sweden and Finland based on demand in our important segments like social infrastructure, industry, data center and so on. Residential development market, a good level of activity in Central Europe with stable increasing prices. In the Nordics, slowly improving activity in Sweden, but it will take some time before full recovery of the market will take place. And the Norwegian and the Finnish market for new build remain muted. Commercial Property Development. In the U.S., the occupier market remains broadly stable, but the transaction market activity is constrained by elevated long-term interest rates and macroeconomic uncertainty.

Good access to financing and generally stable yields support transaction activity in the Nordics and Central Europe. And for the investment properties, it's a polarized market, but we do see a strong demand for high-quality space versus the older stock, and we can offer that, of course, high quality. It's a competitive market, but the rents are expected to remain mostly stable. So if I summarize this report, strong performance in Construction. It's a mixed picture in project development.

So Construction operating margin, very good and record high order intake. Residential Development, strong result in Central Europe and Nordic, they are impacted by low volumes, provision and cost for some restructuring. Commercial Property Development, 2 project divestment and U.S. asset impairment charges in the quarter. Investment Properties delivered stable results, and we divested the PPP asset 4 in the quarter. And cash flow from business operation was high, and we maintain a very robust financial position. So with that, I hand over to Antonia to open up the Q&A.

Thank you very much. Thank you for presentation of the second quarter performance. And as Anders mentioned, we're now going to open up for questions. [Operator Instructions] So I will start with -- now open up for the first caller. And I will ask you to present stating your name and organization. So Maruna, please introduce the first caller for us.

[Operator Instructions]

The first question from the phone comes from Julia Sundvall with ABG.

Julia Sandvall from ABG Collier. Just a couple of questions from my side. Starting on the residential, you are rebalancing the Nordic portfolio. Can you give us some more flavor how long will it take? When are you happy with it? What's the strategy and target?

Yes, I can answer that, Julian. Our target is 10% return on the capital employed in project development. That goes for AD as well, of course. So we are not starting projects if they doesn't support that target. And what we have seen now in the quarter with the increased sales in Sweden, most of them are from the older stock with low profitability, but we can see that projects that we recently started, they are performing as expected and supporting the 10%. And we also have sort of refocused our portfolio or strategy in the Nordics. We are focusing on fewer cities, and we are focusing in Sweden of the large 3 cities with the surrounding area and the same focus in Norway and Finland as well. So -- and that because we see that we need to come back to the 10% return on capital employed in a reasonable time.

Yes. Perfect. Sounds reasonable. And the restructuring provision cost you're taking. Is that the end of it? Or should we expect more in the future? .

We have done some changes in the organization, and we've taken charges for that in the quarter. But I cannot out rule any further action going forward. It depends on how the market will develop. But right now, we we see we have the right organizational structure in place to meet the current market. .

Yes. Perfect. And then another question on the commercial development. You take write-downs in the U.S. Can you give us some more flavor? Is it in a large project? Is it smaller projects, which regions?

The flavor I can give you is that there are in a couple of projects in our U.S. completed portfolio.

Okay. clear. And then on the construction, the margin is overall super. Europe is a little bit weak. Can you give us some more on that.

Yes, it's weaker than others. It's very strong in the Nordics and U.S., but I would say it's not something I'm concerned about. They have a good position, and I expect them to continue to perform on a decent level. .

Yes. And then just 1 last question for me. On the U.S. sales in construction. It's same reason. I think [indiscernible] understand it? Or is it some other reason behind it? .

You mean a U.S. -- what you're referring to? .

Yes, the construction in USA.

Yes. Were your question on top line or revenue?

Yes. Yes. exactly.

And just please repeat the question. It was regarding when the top line will increase or what -- sorry.

Yes, exactly. So it was a little bit weak in the Q1, and it's a little bit weak now with a decline year-over-year. .

Yes, yes. I mean it's lumpy. There are especially some projects related, you can say, to data centers where you have a quite quick burn rate in the project. So it depends a little bit when you are starting new projects and they are, so to say, burning into the revenue. But as I said in the presentation here earlier, you also see that we have quite a strong order intake in our U.S. operations. So I think you would gradually see an improvement during the year.

So we're going to move on to the next caller.

The next question from the phone comes from Han Graham with Jefferies.

I will ask 2 questions, and then I might jump back in the queue. And both on U.S. construction, actually. First of all, margins here, I think, exceptionally strong in the quarter. Just trying to understand if there's anything one-off in the print. We've seen some other companies booking tariff refunds as a positive. So just checking if there's any impact from that in the U.S. in your numbers in Q2 or anything else that you'd call out that drove that strong margin?

And then second question on U.S. construction. We've seen order intake in this market be very strong in Q2, particularly in some of these large civil projects. Has there been anything that's really driven this acceleration? We've been going through a period of quite a slightly softer demand, I suppose, so we've really seen that pick up in the first half of this year. So just trying to understand what you're seeing on the ground for order intake and what you're thinking or how the -- just outside of the order book is looking into the second half? .

Yes. Graham, if I start with the U.S. margin, we have some movements underneath this overall margin, which is very strong. And -- but it's more of a normal positive effect and also some right negative effects. So overall, and we don't have any impact from recovering from tariffs. That's not included in the U.S. operation. So that's -- but it's a strong performance. And of course, it can be a bit lumpy when you look at the single quarter. But it's overall very strong.

We have a very strong on a rolling 12-month basis, which supports the second quarter as well. So it's a strong performance. Order intake has been great, and we have been very successful. It is a strong market and have been a strong market over time. So we have a very good book-to-build of 126% in U.S. And that also supports the operation and the revenue going forward. So I'm optimistic we can see that the current infrastructure investment program is holding up, and we see that very good pipeline going forward. And we can also see that house representatives in the Congress, they are discussing new funding program for the future. But the current one will support the market for a few years ahead, definitely.

I might squeeze just one more in, sorry. Just on the buildings outlook upgrade for those Nordic markets. I think I can see that those have been weak for the past 3 years. And so just looking -- trying to understand what you're seeing there that's really driven that upgrade and outlook. Particularly, you mentioned around the data centers. Is that some where we could hope for a little bit more activity from Skanska in the Nordics region going forward? .

Yes. We see higher activity from clients, and we have a good experience from U.S. and U.K. from previous years. So we are coordinating and transfer knowledge and also the client relationships to the Nordics, and I would expect us to be part of that development positively. And as also said in the presentation that we see higher activity in other segments as well, social infrastructure presence in Sweden, very high strong demand and for sure investment in defense that is strong in the whole Europe. .

Very good. So we're going to move on to, I think, Bank of America.

Correct. The next question comes from Arnaud Lehmann with Bank of America.

Thank you very much, and good morning to everybody. Just a couple of follow-ups on commercial development. If I remember well, I think in the U.S., you have 7 completed projects. So I'm just trying to understand why considering interest rates have gone higher, why you think it makes sense to do some write-downs on only 2 projects. And why not the other 5, I guess, is the question.

And the second question in terms of the strategy in commercial development, you've been talking in the past about expanding in new categories, including life science, but it feels like maybe this is on pause at the moment, waiting maybe for more disposals in the office assets. Is that the case? Or are you already exploring opportunities in new product categories?

And in a way, your balance sheet is strong. So you don't really need to sell projects to start the one.

If I start with the write-downs there. You said -- sorry, you misheard me, I would say, it's a few projects. So a couple of progress that we have written down. Regarding the other questions, when it comes to other kinds of investments in U.S. segments. I would say right now, we are not starting any new projects. We are focusing on the existing portfolio. Then what happens later on, it's very difficult to say anything about right now. Then it was maybe somewhat more question.

No, that's it from my side, just for life science development, if you have any projects in the pipeline. .

We don't have any in a shorter pipeline? No. Then, of course, I mean, from a longer perspective, we can't say that right now.

So moving on to Keivan with SEB.

Can you hear me now?

Yes, we can hear you now.

Yes. Perfect. Just a couple of questions. The first is sort of a follow-up question on the Construction U.S. net sales. And you mentioned it has been a bit behind in the -- both Q1 and Q2, but given the backlog also, maybe you should expect some improvements in the sort of growth rate for net sales onwards. Could you maybe say something about what is sort of a reasonable run rate in Q3 and Q4 and maybe into next year given that your backlog is up by 20% in the U.S. compared to last year.

I can answer that. We don't give you forecasts. But I mean, we have very strong order intake, and it definitely supports growth in the future, but I cannot give you any figures on that. .

Okay. And then my second question is related to the CD. So you made some impairments in this completed property. I also would say that what is required for you to be able to divest any of these assets in the foreseeable future? Is it solely due to sort of long-term U.S. interest rates? Or is there anything else that could maybe open up for some divestments? .

The transaction market in U.S. is still muted, and we -- the transaction that we see in the market is more opportunistic. And we have very good assets, high-quality assets in good location with good leasing ratio. So we want to get the value out of those when we divest. And we have good relationship and the discussions with investors that we have used to do repeat business with. And we are -- but they are sort of standing at the sideline right now and waiting for the right moment.

And when they do take action, we have very attractive products and assets to offer the market. So that's -- so we're not in a hurry. We have a positive cash flow during that time.

Yes, that's good. And also another question on [indiscernible]. Are you willing to maybe deploy more capital within your better markets, that is the Nordics and Europe to be able to sort of compensate for the U.S. and be able to have sort of a pipeline to sell heading into next year and onwards?

Yes. We are starting projects and but we're doing it in Central Europe and in the Nordics, and we are prepared to do that where we see that the market activity is supporting our business cases. .

So moving on to the next caller. Miruna, you please introduce.

The next question from the phone comes from Coubrough Jonathan with Deutsche Bank.

Can I have a follow-up question on the construction order book growth and timing of converting this into revenues. I appreciate you don't give a revenue forecast, but it looks like over half of the growth in the order book in the second quarter came from tech industry, which tends to convert a bit more quickly. So is it fair to view this as order growth driven predominantly from the building side, which does execute a bit quicker?

Yes. The sort of the that type of tech building, there are quicker starts. So it's slower starts before we see revenue in more traditional infrastructure. So that's correct.

Okay. And then just a question on project development and how you view the occupier backdrop and whether you think leasing activity in general is improving and -- when you look at values across the portfolio, clearly, they've been dominated by yield movements. But do you view any support from the leasing environment?

Yes, I think we had quite a good quarter when it comes to leasing. We leased out 54,000 square meters during the quarter. And generally, you see that there is an increase also in our completed portfolio reaching now 77%. So I think, yes, there is a leasing market out there, and it's working, and it's actually working in all our markets, even though, I mean, as you understand, we are not currently divesting in our U.S. properties, but we are leasing out in our U.S. property portfolio. So yes, the leasing market is working.

Yes. I.

Very good. So I believe that we have a couple of more persons in the queue. So can you please introduce our next caller here.

The next question comes from the line of Nicolas with Morgan Stanley.

Just a couple of questions. First one on U.S. construction. So I'll leave aside the revenue debate, focusing more on the margin side. When we look at the makeup of orders over the past couple of years, you should continue to skew more and more towards civil and data center. which usually tend to carry higher margin. And if you stop me if I'm totally wrong. So that will -- I mean, should we continue to see improvement in the margin just out of the mix, considering you've been signing these projects in pretty healthy markets and backdrops.

So margin should be higher above and beyond what we've seen in the first half. So that's the first one. And then coming back on RD on residential development. So you -- okay, you've accelerated the kind of the cleanup of the backlog of completed and sold homes. that something we should expect to continue in the near future, I mean, mostly in the second half? Or this is going to be, again, on and off, on and off for let's say, the foreseeable future?

Okay. Thank you. First, when it comes to the U.S. construction margin, and you talked about if we will see improving margins coming from civil and data centers. You are right that we continue to see a strong increase of both general U.S. civil contracts and the data centers. However, there's a little bit mix when it comes to those different categories and margin expectations because the data centers are normally more of a construction management kind where you don't have the same margin levels as you normally have in the more self-performing works within Civil. So it's a mix, but you are right, it's probably growing in both of those segments.

When it comes to R&D and what you said, the cleanup of the backlog, Yes, we are, of course, continuing to divesting out of our current unsold residential development projects. So you will continue to have an impact of a lower margin from the current backlog. At the same time, when we are starting up new projects, those projects should support our margin ambitions. So it will take some time, but gradually, we will close out the backlog and have new fresh projects with good margins in.

If I may squeeze a last one. The you've seen in the U.S. a bit of a slow start to projects. It's something we've kind of seen as well in Europe. Is there -- is there anything new there? Or it's just once again, the makeup of the projects, which means it's a bit of a slow revenue recognition at the start and then we should ramp up. I mean you've won some big projects, especially in the U.K., for example, Flate, but it seems that's not yet contributing to the P&L, if I'm correct.

But it's always the case that you can win projects and it's not different projects are -- some are started directly after you won them, some is taking some time during the ramp-up. So it's not that you just direct after the win, you will see that in the revenue. And it's not one answer. There are many different projects. But if you are looking into the trend, I think you get a good guidance, and you have seen that we have a strong order intake. And that will, of course, at some time come into the revenue.

And final one from us, just on U.S. building, we've seen some relatively mixed numbers from the market in terms of excluding data centers, the market is basically at a standstill. Are you worried when it comes to the outlook on the building side ex DC? -- in terms of what you're seeing on the ground? .

I can take that. No, I'm not concerned of that. It's a stable -- continue to be stable stable market outlook. And we are well positioned. We are building mainly social infrastructure, like schools, hospitals, universities, airports, which is a big need and also that we've been discussing the data center. So I can see a healthy pipeline going forward on a stable market. .

Very good. Okay. So I believe we have one last person in the caller queue. Miruna, can you please introduce.

We have a follow-up question from Mr. Graham Hunt with Jefferies.

Sorry to keep you here. Just 2 for me, please. Just coming back on -- maybe one for Pontus and one for Anders. Just maybe on the -- you called out, Pontus, the underlying margin -- operating margin you would have seen in resi ex the one-offs, but are you able to give us that on the gross margin level as well? I'm just trying to understand the -- and apologies if I can pack it out from the numbers in the print, but just trying to understand the profitability of the housing you're selling before the restructuring costs, if there's anything captured in the gross margin that is?

And then second question, maybe for Anders, just on margin outlook for Construction. When you set or when you lifted the margin target at the CMD last year, I believe, could you see this positive development that we're seeing now? Was that what was giving you confidence to sort of raise the target? Or have you been positively surprised by the delivery this year? And in that context, sort of how are you seeing delivery for the full year and beyond? Is it running ahead of your expectation?

Yes. Okay, Graham. Yes, you were asking a little bit about the underlying gross margin within the RD business. Yes, I said that if you were excluding the one-offs there of SEK 70 million, it would have reached a 5.6% EBIT margin on the total RD business. That is, of course, quite tilted towards the positive margin that you have in our Central European business. When it comes to the one-offs, part of that is within the gross margin. I would say the majority is within the gross margin, while a smaller part of that is included in the selling and admin. So I don't know if that's a clear answer. But of course, it will take some time until we reach the margin that we would like to see from the Nordic operations. But as you see, we are selling in quite a good pace, I would say, from our Swedish business. It's more slow when it comes to the Norwegian and Finnish part.

Yes. I will comment on the second question regarding the margin targets Konstra. You're right, we increased the margin target end of last year. And we saw it -- we talked about it on the CMD also that we have a very, very good quality in the backlog, and we also showed some trends there. And so I'm not surprised, but I'm very pleased with the performance in the construction organization. They have performed well over quite many years now. And it's -- we have a very high quality in the backlog that definitely supports the 4% or more or higher operating margin. But we have to execute, of course. It's not in our hand, but I'm very pleased to see that we continue to perform on a higher level than our current target. So that's -- I'm satisfied with that.

Very good. So that means that we've come to the end of this session, your questions, and therefore, we're going to wrap up this session. Thank you very much, Anders and Pontus for presentation and answering the questions here today. And for everyone joining us, engaging with questions and listening in on our webcast. Thank you very much for that. We will be back with more comments in the presentation when we release our Q3 report later this year. Thank you very much, and have a lovely day.

Good morning, and a warm welcome to the presentation of Skanska's First Quarter Report for 2026. I'm Antonia Junelind, Senior Vice President for Skanska's Investor Relations. And here in the studio, I've got our President and CEO, Anders Danielsson; and Group EVP and CFO, Pontus Winqvist. They will take you through the first quarter results in just a minute, and they will also provide you with a general business update and the market outlook. And after the initial presentation, we will move over to questions. We're expecting questions from our invited guests. So both from the online audience. If you do have a question, please use the telephone conference number provided. And if we got questions in the room, we will also accept them, of course. And I would ask you to start by stating your name and organization. But we will get back with more information on that.

So now we're moving over to a comment on the first quarter performance, and Anders. On the first page here, we see a beautiful bridge. And this is an order that we booked in the first quarter, Vincent Thomas Bridge.

Yes, indeed. You can see it on the picture here to the right. And it's a proof of the very solid market we see now, especially in the U.S. when it comes to the traditional infrastructure. And we are well positioned to take advantage of that market. And I'm sure you have noticed the press releases we have sent out the last week, one of them a bridge replacement in Boston, which was booked for SEK 9.3 billion. So solid market indeed.

Perfect. Okay. How about Q1 then?

Yes. Let's move into the first quarter. And we have had a solid start of the year, very encouraging. Construction started the year on a good performance, and we had come back to that. But good margin in the first quarter. Residential Development, with the strong performance in Central Europe, a bit softer still in the Nordic operation. We started two projects divested to, it was in Commercial Property Development. Investment Property Portfolio was delivered very stable margin and good performance there. And the operating margin in Construction, 3% in the isolated quarter. You can see it's above the last year comparison. And if you look at a rolling 12-month basis, we had 4.2%, really encouraging and also above our recently increased target.

Return on capital employed in Project Development ended up at 2.1% on a rolling 12, return on capital employed in Investment Property, decent, 4.7%, rolling 12 same as the last time. And the return on equity, 10.4%. So we have also a robust financial position. So we are -- and that's very important for us because that gives us a competitive advantage where we can start a project when we think it's right. And we managed to reduce the carbon emission with 66% so far compared to the baseline year in 2015.

So I will go into each and every stream now. I will start with Construction. Revenue here is slightly decreased compared to last year. We'll go into the details. Order bookings is good. You can see we have a book-to-build of 107% on a rolling 12-month basis, which means we're winning more order than we produce, which is important for the future. So if you look at the backlog, order backlog in Construction, it's on a record high level still. So historically, very, very good position here. And operating income, SEK 1.1 billion, which represent again 3.0% operating margin.

So healthier result in a seasonally slower first quarter, and very encouraging to see that all geographies are performing. That's important as well. So the order intake was good, then backlog remains on a high level.

Let's go into Residential Development. Here, we have pretty much the same revenue as last year. It's still slow in the Nordic market, but very good performance in the Central European market. We're selling a lot of apartments, and we have a really good profitability from those. So that's very, very encouraging for the future. We started one project in Central Europe and one in Finland, a smaller one. And we also have a strategic land acquisition, both in Sweden and in Poland. And that's also depending on we have a really good financial position to be able to do that.

We'll walk into Commercial Property Development. They had operating income in the quarter, SEK 71 million. Also a gain on sale of SEK 174 million, which represents a return on the capital employed of 1.4%. We have 17 ongoing projects, which represent above SEK 15 billion (sic) [ SEK 15.4 billion ] upon completion in total investment.

We have 18 completed projects right now, there is -- the value of those is SEK 18.4 billion in total investment, and decent leasing ratio in those completed projects of 72%, which means that we get some positive cash flow from those assets.

Two divestments in the first quarter, and we also started two new projects and several project was handed over to external buyers during the quarter. And we have a good average leasing rates both in the ongoing and in the completed, as I said earlier.

Investment Properties. Operating income, SEK 81 million, the economic occupancy rate is stable, 84% right now. Pretty much the same level as last quarter and also compared to last year. And the portfolio consists of seven high-quality office building properties in the three larger cities in Sweden, which represent a value of SEK 8.3 billion. So a solid performance in the first quarter.

I will now move back into the Construction stream again and look at the order bookings. Here, you can see the order backlog over time on the blue bar. And as I said earlier, we are on a record high level, and you can also see it here in this slide. Here, you can see the -- also the rolling 12 months basis, the lines here on book-to-build revenue, order bookings and order bookings per quarter. And I can say, as I said, record high level. And when you look at the first quarter, we were able to book data center and semiconductor facility of SEK 6.9 billion in the first quarter. So it's a strong market and contribution here.

So when I look into the different geographies, we can see the -- we are on a very high level when it comes to book-to-build, 107%, and we have a good duration. We have 19 months of production, and the tendencies here that the duration of the project is getting more extended, it takes longer time. And so we have a good position here. And basically, in all geographies has contributed to this order backlog.

Which is good. With that, I hand over to Pontus.

Thank you, Anders. Then going a little bit deeper into the numbers. And you heard from Anders regarding the order situation. And you can also see that we have a slightly decline in revenue during the first quarter. It's also the [indiscernible] Revenue. and it's also so that we -- in some cases, especially in U.S., we have an uneven profit or revenue recognition of the backlog cause some projects are moving faster through revenue, and that could be a little bit different between the different quarters. And it was quite significant, such an effect in the first quarter.

If you then go down and looking into the operating income, it's basically in line with the level that we saw the same period last year, but it is an increase if we go to the local currency.

Actually, the operating profit increased by 5%.

So then going more into the different geographies within Construction. There, you can see that we had improvement or same margin level that we had last year, and we had an average margin of 3%, which I must say, is quite strong for the first quarter with normal winter and seasonal effect. But in this quarter, I said it was a little bit more than normal. You can also see there that the operating income is on a healthy level on all units.

Going then into RD. You can see that the revenue here is on a similar level as we saw last year, and also that the margin is increasing. You heard from Anders that our European Residential Development business is performing on a high level while there are some challenges, I would say, in the Nordic businesses. We keep the selling and administrative costs on the same level as we did last year. And you can also see that, that is impacting an increase in our gross margin.

Looking then into the different geographies. And here, you can see that we had a negative result in the first quarter in the Nordics, while the Central European business again is contributing with a strong margin above 20% and the result then of SEK 138 million. So this is, of course, I would say, probably stronger than what you can expect going forward from that business. But on the other hand, we should expect better development from our Nordic operations.

If we then look into the number of sold and started units. You can see that we started 212 units, and the absolute majority, 176 of those was started in the Central European units. We had a smaller project then that was started in Finland. And if you look into the number of sold, we are on basically the same levels that we have been last year, which you also can see on the rolling 12-month basis that we are hovering around 1,500 units for the moment when it comes both to started and sold units.

Then looking into what we have in production, you can say that we have around 3,000 units in production, also this stable level. You can also see that it's slightly improvement of the number of sold and a slight decrease on the number of unsold completed homes.

Worth to mention there is that we see that we are selling more of these uncompleted homes in the Nordic, which is good because they are the low margin units that we have, and it's actually increasing somewhat of the unsold units within the Central European business, and that is good. Of course, we have a very strong market there. So there, it's more a potential to have units to sell, which haven't really been the case in the Nordics.

Going then into CD with a revenue of SEK 1.2 billion. We divested two projects during the first quarter. And you can see there the gains coming out from this business or from the gains, SEK 174 million. We also have an impact there from previously divested projects that we have sold, but they are not really completed. So then we are recognizing profit gradually when we are, I should say, reducing the construction risk from a development perspective on that divestment.

So that, having said that, we have said that a couple of times before, but sometimes that is a part of the business that we are releasing gradually profits from divested projects that still are under some kind of construction. There have also been a small land divestment included in that number.

Looking into this slide, the unrealized gain from our Commercial Development business. You can see it's very stable, not very much has happened since the first quarter. What you can see and what I also think is important to highlight is that the absolute majority of the unrealized gain is from the ongoing projects, and it's quite little of unrealized gain that we have in our completed portfolio within our CD business.

This is normally a popular slide where you can see our profile when to complete and what is completed, and the dots there that you see, they are representing the occupancy rate in those projects. So you see that we have completed -- a completed portfolio within CD of [ SEK 17.6 billion ] or something with an occupancy rate there of 71%.

And then you can see that we will complete here during Q2, nothing in Q3 and so on with the different leasing ratios. And if you're following this and comparing this with previous slide, you can also see that there are slight improvements in some of those future completing projects.

Leasing during the quarter was 18,000 square meters, of which, three came from -- 3,000 came from rental residential. You can see on a stable level. But of course, we would like to lease out even more, but you can also see that there is a healthy difference here between the occupancy rate and the completion rate. We continue to have a higher occupancy rate in our portfolio than the completion ratio.

Going then into Investment Properties. I think it was a very stable quarter here, you can say that the revenue operating net is basically on right now, a very stable level and same level as we have seen in the last quarter. Also the occupancy rate is basically on the same level, 84% that we have seen during the last quarter. And there has been no revaluation in this portfolio and the yield for the portfolio is 4.7% as we have seen then for a couple of quarters.

Going then into the total group statement. Here, you can see that the operating income from the businesses is actually increasing. It's up 18% if you go into local currencies, that will be 5% in Swedish krona. Looking into this cost, central costs here, you have a slight increase. It's also a slight lower contribution from our PPP business that's included in that. And it's also, I think, if you -- of course, here, we see something that sometimes that the estimations regarding our central items is not perfectly correct, but I think the rolling 12-month basis is what you should expect on an annual level when it comes to central. Then there will be some effects during the different quarters. And that is especially if you see a major impact from the PPP portfolio in that line.

Otherwise, elimination, I mean they will also vary a little bit dependent on which project we are starting and selling because the majority there is, of course, the profit that is coming from Construction for our internal projects that is then eliminated on a group level, and that will then be reversed when we are selling those properties.

Taxes, SEK 316 million, 24%, quite representative, I would say, both for the quarter and what we could expect going forward with the business mix that we have right now. Cash flow. We had an operating cash from the businesses of minus SEK 1.3 billion in the quarter. That is mainly because we have some development in the working capital, and we also have net investments in our Residential Development business that is impacting this.

Looking into our free working capital within construction. And as you can see, it's also here on a very stable level. It's an underlying outflow of SEK 1.1 billion, but that is met by a positive currency effect of the same amount. So you can see it's the same as we had during the fourth quarter, which also takes us up when it comes to the relative number if we compare this with the revenue, it's up from 18.3% to 18.6%, which, of course, from a historical perspective is a very strong and high number.

And then if we look into our group investments and divestments and capital employed, I said that we had some slight outflow from our investments in RD. If you also dig a little bit deeper into this, you see that we had actually a net divestment situation from CD. But you see that the capital employed is increasing somewhat, and that's because of currency effects. We had SEK 1.1 billion in, you can say, increased value in Swedish krona in the capital employed, and basically our U.S. properties because the currency, the relative strong currency or strong U.S. dollar during the first quarter.

And our liquidity situation has continued strong, I would say, as you can see here, we have available funds of SEK 27.7 billion, and we can draw funds of above or around SEK 20 billion within 1 week, if that would be necessary.

So then the financial position of the group is, as you can see here, on a high and stable level. You can see that our adjusted interest-bearing net receivable that we are following here is going down by around SEK 2 billion, and the reason for that is, first, we had, as I said, SEK 1.1 billion in cash outflow, but also then that we are increasing the number of restricted cash, and that's cash that we have in our joint ventures together with other partners. It's our cash, but we deduct that number from our adjusted net cash position. So it's actually that we are getting more and are reducing that in this measurement that we are following.

So by that, Anders, I'll leave it to you to talk a little bit about markets.

Sure. Thank you. So I look at the market stream by stream, starting with Construction. We continue to have a strong civil market in the U.S. And we don't see any slowdown there, and it's very encouraging. And a stable market when it comes to the building sector. We are in the so-called social infrastructure, if you will, we're building schools, university, hospitals, airports and, of course, data centers.

If I go to the European market, the civil market in Europe is stronger than building because we are more exposed to the residential market and the commercial market in Europe, but we do see a strong civil market and stable in most countries, driven by infrastructure investment in defense facilities and also the energy sector. So that's encouraged. And in the short term, we don't see any impact from the Middle East conflicts, but it's, of course, something we watch very carefully going forward.

Residential Development, again, strong market and activity in Central Europe in the Nordics. The fundamentals are there. There is a demand and underlying need for apartments, and there have been some regulation easing up the mortgage and the amortization rules and so on. So that helps, of course. But what needs to happen, the consumer needs to get their confidence back. So we need to see some stability in the world and also that the economy is growing more than it's doing right now.

Commercial Property Development. Transaction market is gradually improving, especially in Central Europe and in the Nordics. It's still slow. Investors are still hesitating in the U.S. market. And we can see that also the leasing activities are higher in Central Europe and Nordics. But we also see that our asset in the U.S. market is attractive. So we lease out there as well and have a decent health leasing ratio in the U.S. as well.

Investment Properties. It's a polarized occupier market. You need to have Class A buildings in the right location, and that's exactly what we can offer in the market. So we have a stable leasing ratio, as you have seen, and we also have a stable performance. So that's about the market.

So I just want -- before I leave it to -- hand over to Antonia to open up Q&A. So just to summarize, solid start of the year. Construction started in a very good way of good performance. Residential, splitted picture here, as we have been talking about. We started two projects and divested two projects in the Commercial Property Development. And again, Investment Properties, still stable result. And of course, we are maintaining our financially very strong position.

With that, I hand over to Antonia.

Thank you very much. Okay. So it's time now for your questions. So first, to the online audience. If you have a question for us here, then just use the telephone conference number provided and follow the instructions by the operator, and we will be back to come back to you soon.

But we will start with questions from our guests here in the studio. And I will ask you to limit your questions to maximum two at the beginning. And then if we have time for more, we will come back. And I can see that we have a question up front here. So can you please start by stating your name and organization.

Stefan from Danske Bank. So the first question is on CD. You made two divestments there, and I was surprised about the realization profit there because looking at the bookers building, the biggest one. It seemed like you made a loss there of SEK 50 million, SEK 60 million or something like that given the press release when you started the project. So I'm just trying to understand, was it a dramatic profit on the elderly care center that you sold? Or is there some one-offs that I need to understand?

You know that, Stefan, that we are not commenting project for project, but I think you are not really correct if you're assuming a big loss on that divestment. It wasn't.

When you press released that you started it, you said SEK 450 million in investment and you sold at SEK 400 million. So that's why I...

Okay. I don't know exactly what stand in the press release and the outcome. But what I know that it wasn't a big loss. So then things have happened, and that's quite common that the project changed a little bit after we have released the press release from the project start, it might be some different areas, et cetera. But you shouldn't have expected a big loss on that because it wasn't a loss at all.

And the second question there is on IP. You had ambitions when you started that to grow that, and we haven't seen growth in a while. Could you maybe just elaborate a little bit on that if we should see something coming through? Or this is the level we should expect for some time now?

We're still aiming at the range between -- to build up a portfolio between SEK 12 billion to SEK 18 billion. And we definitely have the pipeline to do that in the three largest cities in Sweden. But the market has been tougher in the last three years. And so we haven't been able to start and complete projects in the recent times. So we have a very firm rules when we can have a transaction to Investment Properties, and that is when we have at least 80% should be completed first of all.

And then at least 80% leased out and also at least 60% occupied. And then we take a decision.

But I wouldn't be -- I'm not concerned that we don't have the pipeline. And we have an ongoing project and the pipeline today definitely support the upper part of that range.

Very good. So we got another question up front here.

Albin Sandberg from SB1 Markets. So looking at the drop in sales in the Construction division, you're referring to weather and also conversion from the backlog, as I understand it. But so does that mean that there should be a catch-up of the sales? I mean that sales is not lost forever? Or is that how we should view it, just postponed to coming quarters?

Yes, you're right. We are referring to that. And I would say you can also see that we have announced quite a lot of orders. We have a positive book-to-build. So I think that should give some kind of indication that it's reasonable to believe that there will at least be some catch-up.

Great. And the other question is on just general capital allocation. Now obviously, you mentioned the FX effect, but also higher investments in RD. You still have your net cash position. Is your target to be a net investor for this year in your development stream, is that what you want to use your cash flow or anything?

We don't give any forecast. We have said that we have enough capital in the project development overall. And then, of course, it can be different between different quarters. And that's -- we, of course, we plan to release some capital from we complete the project.

Very good. So then I believe that we are ready to move over to questions from our online audience. And I will ask, please, if you can, operator, if you can introduce our first caller here.

The first question is from Julia Sundvall, ABG Sundal Collier.

Yes. I would like to start asking a question about the Construction and the U.S. part. We said decline year-over-year. And you say it's on FX. Is there something you've seen the trends over there? Any like softening in the U.S. public infrastructure activity or any other trend? Or is it purely FX and timing?

Yes. We don't see any slowdown in the U.S. market. It's more on the order intake supports that talked about the recent week as well. But what we have seen in the first quarter is more the combination of the current backlog is take a bit -- a little bit -- some project take a little bit longer time to get rolling and get up to speed. So it's more that if you compare to previous quarter when you look at a single one. So I'm not concerned over the market per se.

And a follow-up, why does the projects take some longer time to start up?

It could be that we are in a design phase. We need to do some preparation, mobilization work before we can get going. So that's typical example why it can take a little bit longer time than other projects.

Okay perfect. And then a question on the Europe Construction. The margin jumped quite a bit from 0.6% to 1.4% in the quarter year-over-year. Is this a jump that we should extrapolate further on in the year? Or is it some one-off effect or what this year?

I think it should look more on a rolling 12 months basis when it comes to profitability. They can be quite a lot of differences between -- if you look year-over-year in the single quarter. So that, it's not a specific reason for that.

So moving on to the next person in line.

Next question from Keivan Shirvanpour, SEB.

I have a couple of questions. So the first question relates to the unrealized gain for the CD portfolio, completions versus ongoing projects. So you stated here the unrealized development gain of 23% for your ongoing projects, but the completed project again is down to 3%. Could you maybe elaborate on the difference between the ongoing projects and the completed project? And what does that imply for the margins in the completed units?

Yes, I think it's quite -- you see the reason is that within our completed portfolio has during now a couple of quarters and years adjusted the value in order to reflect the market values of that portfolio. And it has, in some cases, as you have seen in last time in Q3 resulted in write-downs. And of course, if you are writing down a project or you have first adjusted down the surplus value, which means that from a portfolio -- total portfolio, it is a very little headroom between the market value and the book value.

On the other hand, in the ongoing project portfolio, this is when we are starting up new projects, and we are not starting up projects with a 3% margin. So therefore, I mean we need to have the profitability that is good enough for us. And therefore, you see above 20% on the ongoing projects. That's, of course, based on the assumptions at this time. Things can change in both directions.

Yes. Okay. And what makes you so comfortable in achieving above 20% gain on this new project? What is the difference other than that you have adjusted the development gains in the completed units?

I mean it's from a project-by-project basis. And we have a view on how much it will cost to build. We have our land that we are putting into this. We have potential cost for financing. And we add all this in together, and then we get to compare it with the current market prices and then we get to a value. And that difference then should be strong enough in order for us to support a start of project. And that's always the case. We are not starting a project if that's not supporting our targets.

Okay. And then I just have a final question. And that is -- what can you say about the potential divestment activity in the U.S. for the completed projects? Do you have any type of ongoing dialogues or such or do you believe that you would be able to make some divestments from that portfolio this year? Or given that you haven't made any divestment above SEK 1 billion in over four years now?

Yes. The market is -- the activity is slowly recovering, but what we see is more opportunistic investors. We see mostly fire -- so-called fire sale. We are not interested in that. We know the value of our assets. We have a positive cash flow. So we are -- we want to get the full value out of those. And we are, we have a good relationship with our investors that we have done business with for many years. But right now, they are waiting at the sideline, but they are ready -- they have the capital, they're ready to step in when the conditions are right for them. And when that happens, we have a really good asset off the market. But it's -- I wouldn't stand there and say when that will happen.

Okay. So moving over to Jefferies, right?

The next question from Graham Hunt, Jefferies.

I think just two questions from me. First one, if I could just go back to U.S. Construction. You've seen some really large orders signed in Q2. I'd just like to get your sense, Anders, as to whether that's kind of a sign of things to come? What you're seeing in the in the pipeline beyond what you've announced just kind of in the awarded but not contracted stage? And I think some of your peers have talked to a really positive outlook through Q1 from the federal side. I'm just wondering if you're seeing that as well? And if that's making you confident on your margin target?

And then second question, if I could just ask a little bit. I don't know if you can give us any color on what you've seen through the first month of Q2 in resi and particularly, I suppose, Sweden, where the market has been weak for some time. But just if you have any color on recent trading and if you can give us any snippets, that will be super interesting.

I can start with the U.S. Pontus can give some color on the rest and more. The construction market in U.S., the civil market is really strong. You can see the order backlog is great. We have a book-to-build way above 100%. And to your point, we have announced a massive order last week here in the beginning of Q2.

So we haven't changed our outlook. I've said the quarter -- many quarters now that we strongly believe in the U.S. infrastructure market, and we are well positioned there. We see a good pipeline. We are in the right location. We are strong on the coast where most of the investment takes place. And we are -- have a fantastic organization that are ready to go and take on those orders. And the performance is great. So I'm very confident in that operation going forward.

And maybe some color on the resi market?

Yes. Obviously, we are commenting the first quarter and not the second quarter right now, but what we are seeing and from a general market perspective, we have seen some positive. You probably have seen that as well when it comes to numbers from external parting that is looking into the residential market, especially in Sweden. I think that it looks a little bit more positive in Sweden compared to Norway and Finland, where we also are.

But having said that, there is still a lot of uncertainty. I mean, there is a lot of people that has the potential or possibility to invest in new homes. But on the same time, there are many sitting on the sideline and waiting what will happen in the external economy. So I don't -- that might not give you any good answer, but we are following it closely. And yes.

Okay. Next one.

Next question from Arnaud Lehmann, Bank of America.

First question is a follow-up on U.S. Construction. Indeed, you're doing well. I guess focusing a little bit more on data centers. I think you won a few data center projects in the last quarters. But maybe you haven't won as many as some of your U.S. Construction competitors. So do you think you're doing well enough in the data center space.And do you think there's potential to gain more new contract there going forward?

And the second question, maybe a bit more for Pontus. On the net cash position, very comfortable at the end of Q1. What's the outlook there considering -- excluding any potential large divestments when you think about working capital and, let's say, day-to-day investments? Do you think the net cash will remain at similar levels going forward?

Arnaud, I will take the first question about the data center in U.S. We won close to SEK 7 billion as you can read in the report last quarter. We had a good order intake in the last quarter last year as well in Q4. And we have been building data center for decades in the U.S. So we have very good relationship with the large international players, repeat clients, and we are well positioned. And we also specialize the organization so we can work nationally in the U.S. here. So we do have the competency. So I'm confident in our position here. And I'm confident also that we can win more work within that segment as well going forward.

So I hand over to Pontus.

Regarding the cash situation, yes. First, we would like to have a strong financial position. And we have -- also you might have seen that we did quite big investment in Residential Development, one in the Nordics, one in Central Europe here during the first quarter that has consumed some cash. We also, which obviously is not a part of Q1, but we distributed out SEK 5.7 billion to the shareholders that's taking down the net cash at least for a while during the second quarter and moving on. So then hopefully, we will continue to have a business that is performing also from a cash perspective and that the construction business is delivering working capital.

We have right now a rate of 18.6%. That's, of course, very high. But I think that we should be able to rely on the high level of working capital, maybe not as high as we are seeing right now. But there are still good cash flow in many of our projects.

Was that an answer? Or do you have any follow-up?

No, it's great. Appreciate it.

Very good. So ready for the next question.

Next question from Jonathan Coubrough, Deutsche Bank.

Firstly, on U.S. Construction. You called out in Q1 the revenues were negatively impacted by uneven order book conversion. Has the same been to the margin in terms of the project mix going through the year? Could that have an impact?

And can we extrapolate the margin improvement in Q1 in the U.S. through the rest of the year?

Secondly, in terms of the Commercial Property business. I mean, interesting to note there was a minimal write-down in the quarter that despite rates having gone up. I wonder whether you think the disposal yields and values have changed at all since the start of the year?

I'll start with the U.S. Construction. The margin, we have seen very good performance last few years in the U.S. and I don't see any reason why we shouldn't -- don't perform going forward. But we don't give any forecast. And I think you should look more again, not a single quarter, look more on the rolling 12 months basis when you sort of look into our performance here.

I hand over to Pontus.

Regarding write-downs, I mean, we are following the values of our assets every quarter quite in detail. And we haven't seen any reasons do any adjustments of those values during this quarter. But of course, we are following that all the time, and you can never rule out what will happen in the future. And of course, we are impacted if the war is dragging out, especially if that impacts the interest rates and they will go up and stay on high levels. So it's the best I can say.

Very good. So to me, it looks like we've sort of reached the bottom of the list of people that wanted to ask questions here. So I'm going to ask the question now if there are -- if we have any sort of returning callers. And before we let them in. I'm going to turn to the audience here in the room and just double check if we got any more questions here.

So we got one.

Albin Sandberg, SB1 Markets again. So a question on the Nordic residential margins. I mean, one way is the way you recognize the profit in your segment accounting. So I guess you need to start a little bit more projects to get some margins up. But I just wonder, is there any adverse impact from the sales you're carrying out at discounted prices or anything like that in Q1 because, obviously, the household home went down? And also whether your overall cost base, is that assuming the current production rate or do you see that you can ramp it up with the same cost base? Or do you need to adjust that cost base in order for the margins to, let's say, improve?

First, when it comes to the cost base, yes, I think we have a cost base. I mean we have been working through the Nordic Residential Development business for quite a while. And I think we have a stable cost base, and there is room for expansion within that current cost base.

The other question when it comes to the relative low gross margin that we have had in our Nordic projects. It's, of course, that we have been trying to sell out from our completed project portfolio in RD. As you saw, I mean, we have also sold out more from the Nordic business. And with that comes, of course, some kind of marketing efforts that is impacting the gross margin, yes.

Very good. So turning one last time to the online audience. And operator, do we have anyone else waiting in the line now?

At the moment, there are no more questions from the phone.

Very good. So that means that we have answered all the questions that the audience had for us here today. Thank you, Anders and Pontus, for all of your answers and presentation. And thank you to everyone that joined us here in the studio for the first quarter report presentation. And of course, thank you for everyone watching online.

A recorded version of this will be provided and ready on our web page later today. And we will be back with more comments on the second quarter report in July. Thank you very much.

Good morning, and a warm welcome to the presentation of Skanska's Fourth Quarter and Year-End Report. I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations. And joining me on stage here in our studio today is our President and CEO, Anders Danielsson; and EVP and CFO, Pontus Winqvist.

Shortly, they will take you through an update as of the last quarter, provide you with some further insights on the business operations, financial performance and our market outlook. And after their initial presentation, we will open up for questions. And there is an opportunity for you to ask questions either if you're joining us here in the room or you can use the telephone conference number provided, and then the operator will put you through to us here in the studio. But more information on that will follow later.

So with that brief introduction, let's take a look at the fourth quarter performance. Anders, please take it away.

Thank you, Antonia. And good to see everyone here in the room, and welcome to you on the web as well. Before we start the presentation, I wanted to look at the picture here on the slide to the right. We had a very successful divestment quarter when it comes to commercial property development. And one of the deals was in Port 7, as you can see here on this slide in Prague, Czechia. That was 3-office building that was divested in deal. If you look at the fourth quarter report, so we had a very good construction margin in the quarter and also the full year. It is on all-time high levels. So very good performance by the whole organization, and we will come back to that. But all geographies, all units are performing on a very high level. So that's very encouraging and good.

Mixed performance in Residential Development. We continue to have a strong market in Central Europe, weaker in the Nordic. So we have divested some unsold completed in the quarter with lower -- that was started before the market went down. And by that, we also have a lower profitability on those. But it's good that we are able to divest completed homes.

Good divestment activity in Commercial Property Development. We managed to divest 8 real estate in the quarter and also solid performance in investment properties. Operating margin in Construction, 5.6% in the quarter, very, very high, strong. And for the full year, we managed to beat our new targets in Construction of 4%. So we managed to deliver 4.1% for the full year. Return on capital employed in Project Development, lower 1.8% due to the weaker market, rolling 12. And return on capital employed in Investment Properties is stable, stable result, 4.7% on the rolling 12 and slightly up from last year here.

Return on equity, 10.2%, rolling 12, and we continue to have a robust financial position. So we are able to maintain that. The Board has proposed a dividend of in total SEK 14 per share, which is SEK 8.5 in ordinary dividend and SEK 5.5 in extra dividend. And we also managed to reduce the carbon emission in our own operations, Scope 1 and 2 with 65% since the baseline year 2015. Here, we have a target of 70% reduction in 2030.

I will go into each and every stream now, start with Construction. Revenue close to SEK 44 billion, and we have some slightly up from last year, if you look at local currencies. Order bookings, SEK 43.5 billion, and we have a good order intake. And you can see that we have a book-to-build of 105% for the rolling 12 months, which means we are able to fill up the order backlog compared to how much we produce here. And the order backlog is continued to be on a high level, historically high level, close to SEK 258 billion. Operating income, SEK 2.5 billion, and we have an operating margin, as I said earlier, 5.6% in the quarter.

So strong quarter result and all markets, all geographies are delivering very good results. So great work by the whole organization and being consistent with the strategy and also able to execute the projects in a very good way. We -- as you know, we have raised our target. We did that -- communicated that in the Capital Markets Day in Q4. The target is at or above 4% operating margin, and we have beaten that for the full year. Order intake was good and remains on a high level.

Going to the Residential Development. The homes -- sold homes has been lower than last year. We have a revenue of SEK 1.7 billion. And you can also see that we started fewer homes compared to the same period last year. And you can see that we started -- the project we have started is in the Nordic countries. We haven't -- in the quarter, we haven't started any project in Central Europe. But that's a single quarter. You should look at the full year or rolling 12, and it's still a good market in Central Europe. And also, it's very encouraging to see that we are managing to sell the unsold completed and reducing that inventory to 358 homes.

Commercial Property Development. Operating income of SEK 670 million gain on sale, SEK 758 million, and that includes the divestment, of course, of the 8 properties, but it's also some release of provisions of already completed project. Return is on a low level, far below our targets on a rolling 12-month basis. So we are working hard with that and both to increase the capital turnover and also to divest the completed assets we have.

We have 16 ongoing projects, which corresponds to SEK 14.4 billion in total investment upon completion. And we have 21 completed projects, which correspond to SEK 19 billion in total investment. Of those, we have a reasonably high leasing ratio of 72%, which means we are -- we can see that we have a positive cash flow from those assets. It's good asset, high quality in good location. So I'm confident that when the investor market comes back in U.S., we can see -- we have a good product to offer the investors.

Again, 8 projects divested in Q4, 12 during the year, 2 projects handed over and 2 projects started in the quarter. We started the projects in Central Europe and the Nordics. And we can see a good leasing activity and strong average leasing ratio in the portfolio of both ongoing projects and the completed projects.

Moving on to Investment Properties. Stable result, SEK 83 million operating income. We have increased the occupancy rate to 85% compared to 83% in the Q3. And portfolio consists of 7 high-quality office buildings properties with a total property value of SEK 8.3 billion. Very solid performance in Q4 and for the full year.

We go back to the Construction and show you some order bookings here and the order backlog. Here, you can see the blue bars are the order backlog development 5 years back, and you can see the lines rolling 12 on the book-to-build, the yellow revenue, development on the green and order bookings on rolling 12, the gray one here. So you can see that we have a historically high level of the order backlog, and there's also some currency effect there. So if you compare Q4 2025 to the same quarter the year before, it's actually increasing somewhat in local currencies, around 3% increase. So we have a good position here, 19 months of production.

So you can see that on -- if you look at the different geographies as well. All geographies has over 100% book-to-build, and that's also encouraging for the future. We have 19 months of production. So a solid position here when it comes to our order backlog. And we can continue to follow our strategy to be selective in the market and go for projects where we can see competitive advantage and a good track record as well.

With that, I hand over to Pontus.

Thank you, Anders. So let's dig in a little bit deeper into the numbers. And you can see that we had a revenue of SEK 43.9 billion here in the fourth quarter. That's actually an increase with 1% if you take local currencies. If you then, at the same time, look to the revenue for the full year of SEK 171.1 billion, that's an increase of 7% year-on-year. The operating income in the quarter increased from SEK 2.1 billion to SEK 2.5 billion. That's an increase of 25% in local currencies. So quite a good increase here in Construction. And as you heard earlier, we had an operating margin of 5.6% in the quarter, which is good. But even better, I would say, is the margin for the full year of 4.1%, in line with our just raised targets.

And if you look into the different geographies here, you can see that we are actually delivering a higher profit in all of the geographies and also a higher margin if we compare to the quarter -- or to the fourth quarter last year. Worth to mention is that there is a release of a claim provision in the U.S. impacting with around SEK 400 million. But you should also remember that this is how we are recognizing our claims. We are very conservative, and we are releasing them when we are sure that there are no outstanding risks.

So in total, I think what you see here is a very strong delivery from our Construction business in the fourth quarter and for the full year.

Going then into Residential Development, is maybe not as good as Construction, impacted by the market. You can see also that the revenue in the fourth quarter is quite much lower than it was the fourth quarter last year. That's because we are selling less than we have done the fourth quarter last year. And that is, of course, some reflection of the market and also it comes a little bit different when we are starting projects. What you can see is though that the S&A costs has went down in the quarter from SEK 138 million to SEK 122 million, but even more for the full year from SEK 605 million to SEK 460 million. So I think that is a sign that we gradually has, what you say, adjusted the organization according to the current market standards.

We have also sold quite many of the previously unsold completed properties, and that has an impact of the gross margin because we -- it's good to be out of that stock of unsold residentials, but of course, impacting the gross margin and then the operating profit. So you see in the quarter, 1.8% in operating margin. That's, of course, not where we want to be. For the full year, 6.5%. That's better. But as you know, we have a target for this business to reach 10% or better.

Then if you look into different geographies within Residential Development, you can see that the Nordic operations is where we have a weak quarter. And the European operation is delivering a solid quarter, but we have a lower sales rate than we have been used to during the previous quarter. And that's not dependent on the market. That's dependent because we haven't had any projects actually to launch during this quarter, which means that we cannot have any new sales start, which then takes down the number of sold units and impacting the profit somewhat also in the European part of the residential business. And here, you can see how this -- that started, then is 376 compared to 620 last year. And that's a result then also of -- sorry, now I mixed, but it's around the same. You see that we sold 379, and we started 376 units here in the quarter.

And if you look then into the homes in production, you can see that the top of the bar here in the fourth quarter, the unsold completed, as I explained, has reduced. So we reduced from the end of last year from 477 to 358, and we have also decreased that during the fourth quarter as such. And as I said, when we are selling those residential units, that is impacting the gross margin for the quarter for the Residential business.

Going then into the Commercial Development business. As you heard earlier here, we divested 8 different projects, representing a revenue -- or a divestment of SEK 4.6 billion. And here, it's also worth to mention that these divestments is positively impacted from release of previous -- release of provisions from previous projects. So if you are looking into the Commercial Development portfolio, I would say a more representative profit content is looking into our unrealized values that we have than to take what we actually delivered this quarter. So it's good, but it's also very good to see, I would say, that we were able to divest in such a good manner in the fourth quarter. So it's the highest number of divestments in a single quarter for quite a long time.

If you're then looking into the unrealized gains, you can see here that what I just explained regarding how you should forecast the coming gains from this business that the top of the bar here has decreased, which means that the unrealized gain within the completed properties is quite low right now.

Then if you look into the completion profile of when our properties in Commercial Development will be completed, and you see that in the different bars here. And at the same time, you see the leasing ratio on the green dots. You can see that then we have around SEK 17 billion of completed properties with a 72% occupancy rate. It's one quite big property that has been ready in the fourth quarter. So it's taking down the total leasing ratio in the completed properties somewhat.

But if you're looking into the total profile here and if you would -- are interested and compare it with earlier Qs, you can see that it's actually quite a positive development in many of these different assets. So do that. That's quite fun.

And then here, you can see that we had a leasing in the quarter of 46,000 square meters. And you can also see that we have a higher leasing ratio in the ongoing projects than the completion ratio, which is always a good sign that we have -- we are leasing in the same tempo as we are continuing our projects. So that is good, I would say.

IP, Investment Properties, I would say, quite a calm quarter. We have a representative operating net here. We haven't added any properties. We haven't done anything with the values. So SEK 83 million is very representative for, I would say, that portfolio that we currently hold here. What is good, though, is that we increased the occupancy rate from 83% by the end of quarter 3 to now when we have 85% leased. So a good development there.

And then if we are going into the total group and the income statement here, you can see that we had an operating income of SEK 3.3 billion. Then we have central costs of SEK 281 million. Those are impacted of that we have a little bit less of income from our combined portfolio of asset management and BoKlok UK. And we also have a negative impact of periodization effect from insurances, that actually was positive in the same quarter last year. I would say, though, that the full number of central costs of SEK 712 million is quite representative for what you could expect going forward if there is no special things that is happening.

Going a little bit further down, you see a financial net of SEK 141 million for the quarter and a tax of SEK 653 million. That's a tax rate of 21%, same tax rate that we are showing for the full year. And I will also say that this is reasonable, representative with the current business mix that we see right now. Of course, if we have 1 quarter where we have more divestments of properties, that could impact. And if we have more -- another geographical composition of the profit, that could impact somewhat. But I would say that this is representative.

Going then into the cash flow. Here, you can see that we had a strong cash flow here in the fourth quarter, SEK 2.5 billion, actually the same as we delivered in net profit. So I would say, a continued good and stable cash flow generation from the business. And an important part of that cash flow is, of course, coming from our working capital development within the Construction. And here, you can see that the working capital came up from SEK 30.1 billion in September to SEK 31.7 billion here for the full year.

And even though it looks like it's a decrease compared to the fourth quarter last year, if you were looking into real cash flow, it was actually an increase with SEK 1.4 billion. But then we have a currency effect, a negative currency effect of SEK 4 billion for the working capital. So you can also see if you're looking to the average free working capital compared to the revenue that, that is stable with a slight increase. So solid cash flow generation from our Construction operations.

Looking into investments and divestments, you can see that we are actually now in some net investments territory. We have, for a couple of quarters, been in net divestments, but it's also so that we divested a couple of those Commercial Development properties here in the fourth quarter, but they will be transferred to the buyer and paid of the buyer during the first half of this year. So that will improve then the cash flow from divestments during Q1 or Q2.

If you look into the capital employed, you can see that, that has decreased somewhat from SEK 66 billion to SEK 63.8 billion. Also here, you have, of course, a currency effect. So I would say, without currency, it's relatively stable.

And this cash flow then takes us into, I would say, a very stable situation when it comes to our ability to use funds. We have available funds of SEK 28.6 billion. And here, you can also see that we have a quite balanced maturity profile of our outstanding debt.

And this takes us then to the financial position, where you can see that we have our adjusted net cash position of SEK 11.5 billion. And you also remember that here, we have a target to below -- to be above the net debt position of minus SEK 10 million. So the delta there is SEK 21.5 billion. And you can also see that we have had quite a stable development of the financial position here during more than a year. We ended last year with SEK 12 billion. We have now SEK 11.5 billion. And it's also then actually taking up our equity to asset ratio from 36.6% to 39.9% by the end of the fourth quarter.

So by that, Anders, some comments regarding the markets?

Sure. So if we look at the overall market outlook, it's unchanged overall compared to the last quarter. But if I comment on the different streams here. Construction, the civil market in U.S. and Sweden is -- we expect it to continue to be strong. On the building sector -- in the building, its -- the market outlook is stable. We could see a good inflow of data centers in the fourth quarter, close to SEK 10 billion, which is encouraging, and we expect that market to continue to be stable.

The civil market in the rest of Europe is pretty much stable, which is good, driven by infrastructure, defense, investment and so on. So weaker in U.K., however. And the building market in Nordics are weaker due to the less residential construction and commercial property construction, but stable in Central Europe.

Residential Development, very good activity in the Central Europe. We believe it's going to continue to be a strong market and weaker in the Nordics. And we can see some improvement when it comes to interest rates decrease. We can see amortization rules are easing up in Sweden. But I believe it will take some time. And we -- even though it's underlying need for homes in the market we are operating in, it will take some time. It requires economic growth. So the consumer confidence increases. But we are ready to start. We already start project today where we see that we can deliver according to our targets.

And Commercial Property Development, stable in Central Europe and in the Nordics. You have seen the divestment activities here. We also have a good leasing activity. Weaker -- continues to be weaker in the U.S. market. Recovery is lagging compared to Europe. But there is a clear trend that flight to quality, so to say, in all markets. And we have very attractive building to offer the market. And we can see that we have a healthy leasing ratio. But the investors in the U.S. are still hesitating before they go on and invest in properties.

Investment Properties, polarized occupier market. We have a healthy leasing ratio. And also here, we can see a polarized market. You have to offer Class A building in a very good location, high quality, and that's exactly what we can offer. So I'm confident in that. But it's a competitive market, but we believe that the rents will remain mostly stable.

So if I ending up this presentation, we're looking into how we're doing compared to our targets and limits here. 4.1% in Construction margin, above our recently increased target, very encouraging to see. Return on capital employed, 1.8%. We were not satisfied with that, obviously. So we are working hard to increase that return for the project development. Investment Properties, 4.7% is on a good level to reach. Be able to reach the 6%, we need to see some market increase -- market value increase in the properties we have. So that's an ambitious target for the future.

Return on equity, 10.2%, also below our target. And we have a very strong financial position of net cash -- adjusted net cash of SEK 11.5 billion. And the payout ratio, as you can see, we have 40% to 70%, but that goes for the ordinary dividend. And we have proposal, is SEK 8.5 in ordinary dividend, increase from last year, before was SEK 8. And then we have this extra dividend, which gives us an outcome if the AGM approves that of 93%.

With that, I hand over to Antonia to open up the Q&A.

Very good. Thank you for that. So yes, now it's time for your questions. If you are joining us online, please use the telephone conference number provided and follow the instructions by the operator, and he will put you through to us here in the studio, and you will be able to ask your questions to us. If you are here in the room with us, then you can just raise your hand. We will bring a microphone, and I will ask you to start by stating your name and organization.

So looking out into the room and checking with our external guests here, it doesn't seem like there are any raised hands at the moment. Or yes, we have one over here. Yes. Thank you.

Yes. [ Oscar Sandstrom ], entrepreneur. Regarding Construction, you're growing in the Nordics, but do you see any bottlenecks that could hinder further growth?

I see good opportunities when it comes to the civil market, if you're asking about the Swedish market. So we see increasing investment in infrastructure. The need is very high on that. And we also see increasing investment in defense. So that's -- I'm encouraged by that. Then on the lower side in Sweden is Residential construction. It's not only our development that is on the low side here. It's all, very few new homes that are coming out in the market, and that goes for the Commercial Property Development. So we are dependent on economic growth as an industry. So I would like to see some GDP growth, and that will absolutely help us. But we are in a good position.

Excellent. So I will then move over to the online audience, and I will ask you to please introduce the first caller.

The first question comes from the line of Keivan Shirvanpour with SEB.

I have just 2 questions. And the first question is on capital allocation. So you have about SEK 11 billion in net cash, and you expect nearly SEK 6 billion in cash flow in the first half of the year from -- transfer from property projects. So that equates to the size of the dividend that you are proposing. Given that, what can you say about opportunities here in terms of capital allocation? How should you allocate your capital in 2026?

Yes. We don't give any forecast of that. We have a dividend policy to 40% to 70%. Our ambition is, of course, to continue to deliver good results and be able to be a predictable dividend provider for shareholders. But we don't give any forecast for this year, obviously.

But would you consider increasing investments in CD projects or potentially evaluate buybacks would be an alternative?

We said in the Capital Market Day that we have -- right now, we have enough capital for the project development operation, and that, we have the same view right now.

Okay. Good. And the second question is then related to commercial property development and the completed portfolio that you have. So you made quite a lot of divestments in Q4, but you also have this completion in the U.S. So if I'm not mistaken, your completed property portfolio should be about 80% to 90% in the U.S., including some residentials. What can you say about the prospects for divestment of these assets? And do you consider residentials to be potentially easier to divest than the commercial buildings in the U.S.

First, I would say, regarding our portfolio in the U.S., you are right. It's reasonably big, and it's both commercial offices and some rental residentials. But you can say we are evaluating each and every project as such, working with leasing the properties in order to receive a decent operating income from those. Then if we think that we get the price that they actually are worth, we are absolutely ready for divestments. But because we have a very solid financial situation, we are not interested in any kinds of fire sales, but we are interested in reasonably good deals.

Okay. And you have previously mentioned that when the bond -- 10-year bond yield is about 4%, you see that divestment prospect is quite weak. Do you continue to have that view?

We continue to have the view that we are following the market. And if someone, as I said, is interesting to buy and pay a decent price, we are interested to negotiate.

Thank you very much. And we will move to our next person in line here to ask questions. I think it is from Jefferies.

[Operator Instructions] Our next question comes from Graham Hunt in Jefferies.

I'll ask 2. Maybe I'll just come back to the capital allocation and try in a different way. Just on the special that you have announced, would you be able to just provide some color on the thinking around why you felt that was appropriate to propose? And should we take it as a signal that you're relatively comfortable with now the level of net cash that you have on the balance sheet and this is a signal that you're limiting any further buildup there?

And then the second question, I think just back on Construction. I wondered if you could comment on sort of what you're seeing in the early stages of Q1, how you're seeing particularly on the data center segment where, as you mentioned, you had a flurry of good orders in Q4. We've seen some enormous CapEx numbers from some of the hyperscalers this week. I just wondered if you could comment a little bit on how the outlook for those types of projects in the U.S. is looking and whether we could expect -- if you're seeing anything in the pipe already for 2026 on that front?

Okay. Thank you, Graham. I'll start with the first one, and I think Anders take the second question. And regarding the capital allocation, and as I understand your question, it's about our reasoning -- or actually the Board's reasoning when it comes to the special dividend and the ordinary dividend. I think it's clear, as you see, we rose the ordinary dividend from SEK 8 to SEK 8.50. And then we think that, yes, we have a stable financial position, which allows us to also distribute some extra dividend. And having said that, that is, of course, taking in consideration to be able to be active in our market and take the opportunity for potential deals that may occur both in CD and RD. So I think it's a balanced adjustment of where we are and what we know right now.

Graham, I will take the last question on the data center. We have been talking about the data center market for quite some -- few quarters now. And it's a good opportunity, important part of our operation as well, especially in the U.S., but we also see some investment in data center here in Europe. We believe it will continue. So we have a good pipeline. We have repeat customers, and we saw that the order intake in Q4 was really good, close to SEK 10 billion. So I'm confident in that, and we are well positioned to take advantage of that market going forward as well.

And maybe just one quick follow-up on the capital allocation. Are you considering any other investment opportunities given your flexibility on the balance sheet beyond your core business lines around Commercial and Residential Property, whether that's in -- you have been in the past in PPPs or some of your peers are looking at data center development itself. I just wondered what your thinking was around that.

Yes, I wouldn't rule it out, but our main focus is on the core operation, Residential and Commercial Property Development and also that we will continue to invest in the -- our own portfolio within Investment Properties. That's for sure, to build that portfolio just above SEK 8 billion today, and the target is between SEK 12 billion to SEK 18 billion over time. So that's the focus.

Thank you, Graham. So we will now continue with the next caller.

The next question comes from Albin Sandberg with SB Land Markets (sic) [ SB1 Markets ].

Sorry, SB1 Markets that would be. But a question on the reversal of the U.S. provision. Pontus, you mentioned that -- you said it was business as usual when you reverse this kind of provisions when you feel sure enough about it. So the question is if you could quantify if there are substantial left of these provisions? And how long are they dated? Are we going back to the 2017, 2018 issues? Or that is too long to go back? That would be my first question.

Okay, Albin. So I'll try to answer. When it comes to provisions or potential, this was actually a claim settlement. And you -- what is happening here is that we were not taking any kind of profits when there were claims there that was connected with some uncertainty. Then when this was solved, this situation, then we released that part of the claim. And there are, of course, other potential claims out in the project portfolio, but it's nothing that we can comment also for the future. They can happen, and they will probably happen from time to time when we have some kind of issues with our clients.

So I would say it's a part of the regular business. But this was, of course, quite big. Normally, they are smaller amounts, and then we don't think that there are any reasons to comments on those. But when we have this $43 million, it's substantial, and therefore, we think it's worth for you to know.

Great. And any comment about how old project this was related to? Was it a new one or older one?

It's completed, I can say.

Okay. And my second and final question was on the starts in Residential. And you mentioned that we should look upon it on a rolling 12-month basis, still see you have a quite positive market outlook for that business. So I just wondered were there any specific reasons for no starts in Q4? I don't know what that could have been or -- because maybe I would have expected a little bit higher number for starts. And whether there's a sort of, I don't know, if you can call it, a catch-up effect heading into 2026 because of the fact that there were no starts in Q4?

Yes. I would say that the lack of start in Central Europe in Q4 is not any signs of lower market outlook. We believe, in that market, we have a good pipeline, but it's -- if you look at a single quarter, we didn't have any project, was ready to start in the fourth quarter, but we are working with the pipeline, and I'm confident in our position going forward.

Thank you, Albin. And I will just check now with the operator here. It looks like we've come to the end of the list of people that want to ask questions for us here. Can you please confirm that?

There are no more questions over the phone.

Perfect. Thank you very much. So that means that we have answered all the questions that were here for us today. So I would like to first say thank you, Anders and Pontus, for your presentations here. And I would like to say thank you for all of those that joined us here in the studio in Stockholm. And lastly, thank you to those of you that watched us online. A recorded version of this webcast will be available on our web page shortly after this. And we will be back with more comments and presentations when we release our first quarter report in May.

Thank you very much, and have a lovely day.

A warm welcome to Skanska's Capital Markets Day 2025, and a warm welcome to Seattle indeed. This fantastic office tower is the result of bringing our strong capabilities in project development together with our strong capabilities in construction. And the result, the quality that you see here is the quality that you see in all our buildings and infrastructure projects. And that is what our customers chooses us for. I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations, and I'm very happy to see so many of you here in the U.S. This is a very important market for us, and our operations here have grown significantly over the past few years. Now representing a construction order backlog of more than SEK 150 billion and SEK 20 billion worth of investment in properties.

So today, we will provide you with a firsthand view of our operations here in the U.S., you will get the chance to meet the top management team and learn more about our market, the context that we're operating in and our capabilities here. You will also get the chance to tour this building, along with two very interesting construction sites, namely the Highway Intersection project, the Brickyard and also the Microsoft campus, but we've been collaborating with them for the past 25 years.

Part of the day is also going to be broadcasted live. So I would like to turn to the cameras and say to the online audience that you are most welcome. There will be a chance for you to interact with us here on stage later in the program during the Q&A session. But now our U.S. legacy goes way back in time and across the nation. And here to give you an overview of our operations in the U.S. I give you our EVP, member of the group leadership team and ultimately responsible for our construction activities in the U.S., Richard Kennedy.

Good morning. Thank you, Antonio. Thank you, everyone, in the room. Thank you, everyone online for joining us for Skanska's Capital Markets Day. We're excited to talk about Skanska today. You're going to hear a lot about us, where we are as a company, where we're going. But we thought, first, it would be good to start with a review of how we became a fantastic company here in the United States. So I'll kick us off with that.

Okay. Skanska, we have a foundation built on growth in the United States. Skanska's first job in the United States was in 1971. I'll get to that in a second. Between 1971 and 2004, we acquired 17 companies all around the U.S. that laid the foundation for Skanska in the U.S. today.

Today, we have a national presence, and we are a national powerhouse of construction and development across the U.S. The dots on the map represent our offices around the U.S., 25 offices in total. The orange dots represent markets where we have shared business units, one or more business units, in the U.S. So if you look up at Boston on the right-hand side of the map, we have all three business units there. We're real powerhouse in the Boston market right here in Seattle, across the map is exactly the same thing. The green dots are USA Building offices. USA Building has the largest footprint in Skanska, except for the green Dot in Los Angeles, Southern California, that's a USA Civil office on only today.

So where did it all begin? New York, 63rd Street subway line extension. That was Skanska's first project in 1971. And since then, we have completed over $38 billion of transportation markets or transportation projects in that market alone. We have a fantastic Skanska legacy in the New York market. Here are just a few examples. Moving New York forward together, World Trade Center Transportation Hub in the upper right-hand corner, [ Moynihan ] train hall in the bottom left-hand corner, two of my most favorite projects in Skanska, USA Building, USA Civil working together, delivering One Skanska to our market, 7-line extension second avenue subway, two great extensions of our subway system in New York, moving passengers around Manhattan efficiently and effectively. Connecting communities, one bridge at a time. We have a great bridge building and bridge repair company in Skanska. You can see up top George Washington Bridge. We've been upgrading that bridge. [ Cosco-Usco ] Bridge down in the right-hand corner, we built that bridge, that new beautiful cable-stay bridge. Looking in the middle of the panel there, you can see the [ Bayon ] Bridge. We raised the deck of that bridge 64 feet to accommodate large container ships into the Port of Newark. That's a personal source of pride for me. I grew up in [ Bayon ], New Jersey. I saw that bridge my whole life, and I was so proud to stand in the center of that bridge when it was opened to the public in February of 2019.

Moving up the coast to Massachusetts. Again, we are a powerhouse in the Boston market, civil building and commercial development. commercial development moved into that market around 2010 and was among the first to reimagine Boston's waterfront shaping today's innovation district. If you have a chance to get up to Boston, go down to the Seaport, when I was a young man, that was an open parking lot now. It was a beautiful new gleaming part of the city created by Skanska. If we move down the coast into Washington, D.C., There, too, we have all three business units, building civil and commercial development. Here's just one example of a school project that USA Building has built down there, the Brooklyn new middle school. It's one of our smaller projects, but building spaces to shape the next generation. Skanska truly builds for a better society.

Keep moving down the coast into North Carolina. We have very strong USA building operations there. We've been working at North Carolina State, James B. Hunt Library, was one of our amazing projects. You can see that in front of you. We hosted some investors there back in September of 2024. That was a fun meeting. We've been working for this customer for over 2 decades. We work for Duke University. We work with the University of North Carolina. We have very strong health care builders down there, really great USA Building operation in North Carolina, and we also have a strong civil presence and building civil presence there as well. If you move down into Georgia, that is a U.S.A. building only market, we're taking advantage of a lot of the data center work that's going on there right now, tons of data centers right outside of Atlanta. Our teams are on those projects now. We've also been working for Warner Bros. Discovery. Since 2012, we've completed over 70 projects there, creating spaces to connect people and stories. CNN broadcast out of this campus. I had the group leadership down there in February this year. It was super fun to tour that campus, meet the customer, meet our people see our amazing projects.

Moving down the coast, continuing into Florida, strong, strong building operation in Florida, a big health care builder. We've built over six projects for Lee Health alone since then, we're healing and innovation meet to build a healthier future. We also have a good civil presence in the Florida market, and I'll talk a little bit about that later today. Moving across into Texas. Look at this beautiful library we built for Texas A&M University since 2012, we completed over 70 projects, good strong U.S.A. building operation in the Texas market. and we also have commercial development in Houston, and we've done some great things there, delivered some amazing offices with tremendous profitability to the market in the past 15 years. Moving across the coast to Arizona. data center facilities. Great, great data center work going on there right now. I walked a few of those jobs with one of our super attendants ones. And one of them said to me, Richard, we are building the matrix. It's incredible. You see acres of data centers in Arizona. We're part of that. Rush, we also have a very strong building group down there or a civil group down there as well. We'll talk more about data centers later today.

Moving into Southern California. Here we have another fantastic project by Skanska, Six Street Viaduct replacement, this bridge replaced an old failing bridge. It is built to withstand a 1,000-year seismic event. It was one of the most technically complex toughest construction projects I've ever seen us build. If you get out to Los Angeles, I always say to people, get out there, put your feet on this bridge. You've never seen anything like it. It is an engineering marvel built by Skanska. Moving up the coast into Oregon. That's a USA building only operation. We've been in that market forever. Semiconductor manufacturing since 1990, over 170 projects. We have a great reputation in that market, great experience there. We're bringing that to bear not only in the U.S., but globally. I'll talk about that a little bit more later.

And then finally, back here in the state of Washington, Boeing has been a fantastic partner of ours for over 50 years, building facilities where innovation takes flight. You can see a paint hanger on the right side of the photo there. We built that for them. It's amazing to see a 777 get painted. I recommend it to you, check it out on YouTube. Just one of the many types of projects that we've built for them. Then we look to extension mentioned L300, another fantastic One Skanska USA Civil, USA Building, light rail facility built just north of Seattle to alleviate traffic completed that in 2024, amazing piece of work to build that over an operating highway i5 amazing construction project by Skanska.

And finally, right back here at The Eight, completed within 2024, landmark tower, where wellness and creative inspiration meet. This is a fabulous building. It's just one example of what Skanska is capable of doing in this market. So 50-plus years strengthening communities, creating connections and building impact in the U.S. We have an amazing operation in the U.S. I'm so happy to see you here today.

Thank you for coming. All of this is made possible by the amazing culture, values and people in Skanska. We have an amazing culture in Skanska everywhere I go, either in the U.S. overseas, Nordics, Europe it's the same. You can feel it. You're going to feel that today. For those of you who are in the room, you're going to feel it online through our presentations. And it's all built and driven by the real values that we have in this company. You feel those everywhere, too. And those values are lived every single day by the amazing people we have in Skanska. Every time I get on a stage like this, I'd love to talk about our amazing people. That's what we're a collection of -- you folks in the room, you're going to have an opportunity to meet some of them today. So welcome to Skanska. Welcome to Skanska's Capital Markets Day. I'll turn it back over to Antonia.

Thank you, Richard. And yes, now it's been 2 years since our last Capital Markets Day. We then met in London in November '23. And a lot has happened since then, in the world and inside our company. So we're going to use this day to provide you with an update, challenges that we're facing and we're going to talk about our way forward in terms of financial targets and our ambitions.

And here is the agenda. We will start with the group perspective, and then we will dive further into our four business streams. We will look at the demand deeper into our financials, looking at operational performance, cash flow, balance sheet, capital allocation strategies. And we will have a couple of breaks throughout the morning program, and the broadcasted part of the day will end just before the second break. And I will be back with you with more information on the agenda thereafter.

But now to kick off the more formal part of the day, I give you our President and CEO, Anders Danielsson.

[Presentation]

All right. Once again, welcome to the Capital Market Day, and I will go through the performance and also the way forward. But before I go into the performance, let's just have a short overview of the company.

We are one of the world's largest and leading construction and project development company. And we have operations in different parts of the world, and we are diversified when it comes to geographies. You can see here the split in revenue. The largest market is here in the U.S., but we have a large operation also in the Nordics and Europe, which stands for Central Europe and the U.K. You can see to the right here, the split in revenue also between the stream. So the largest operation when it comes to revenue is the construction stream, as you can see. But all in all, we have around SEK 180 billion in revenue, and we also have more than 26,000 highly skilled employees in the company.

So let's start with an overview of the different streams. The construction stream, which is the majority of the operation where we have -- yes, we build both civil construction projects and also building projects for external customers, but we also build it internally, of course, where we develop commercial office building and also residential building. residential development, we buy land. We develop residentials. We sell them to consumer, and that operation is in the Nordic and Central Europe today.

Commercial Property Development, where we have the operation in the Nordics, Central Europe and in the U.S. we also buy land, and we developed office building, multi-rental residential buildings and also we divest them eventually to the external investors. And sometimes, we divest them to our internal investment properties, which is our most recent stream that we started a few years back. Here, we focus on highly -- high-quality building office building in the three largest cities in Sweden. And right now, we have been building up a little bit above SEK 8 billion in the portfolio.

When it comes to driving the company like Skanska with more than 26,000 employees, you need to have a governance that is very, very clear and also a clear direction of the company. We are a decentralized organization, and I strongly believe in that. That creates a lot of responsible accountability out in the organization, and it's a local business. So that's critical for us. but we need to hold the company together, and we have common values. You can see them to the left here.

Common values that goes along the whole organization. Every time I'm out on sites and meet people in the organization, I can see that these values are true. We -- the organization really lives our values, which is really encouraging for me. And those also drives the culture, of course, the performance culture and also the customer-focused culture, and that's key for our success. And of course, it's all about creating value for our shareholders and our customers. EBIT generation is, of course, important part of that. So that -- we will come back to that, how that has looked like.

But it's also about revenue growth. And we have seen growth now here in U.S. in the construction, the last 2 years, we have been increasing the revenue with close to 20%. And we have also seen growth in residential development in [indiscernible] and we've also seen growth in commercial property development in Central Europe. And of course, we have all seen the buildup in the investment property portfolio the last few years. And also creating value, capital efficiency. It's -- we will come back to that, what we are doing to increase the capital efficiency to really get the return back on the level we want to see.

But before I go on into those issues, I want to present my team, Besides me, we have all -- the whole team is here, so a lot of opportunity to discuss with them and ask questions. But I'll start with Jonas Rickberg, CFO. Please stand up. We have Asa Thunman, General Counsel. Asa and Jonas, they came from recently this year from other industries, creating more diversity in the team. We have Lena Hök heading up sustainability and innovation. Richard Kennedy already met, heading up our construction operation here in the U.S. We have Claes Larsson, heading up the Commercial Property Development and Investment properties. Stale Rd, heading up Construction in Central Europe, Norway, U.K. and Residential Development. And we have [ Tere Tegner ], heading up our Human Resources. Let's go into the performance way forward and the targets we have. So I will start with the history of the performance for our different streams. This might see a bit complicated, but it represent the performance year-by-year for all streams. You can see the dark low commercial property development. And you can see investment properties that we have been contributing already the last couple of years here with positive cash flow and profit.

And if you look at the history here, we are a diversified company, which is -- makes us more resilient. So if you look at 2017, '18, we were struggling big time with the construction stream in the company. The performance was unacceptable. But we took some important strategic decision at the time. And we have been disciplined we have been selective for projects we go for. When for projects, we have seen that we have a competitive advantage. We have the right team in place. We have a good track record and a good relationship with the client. And that has really paid off. So the last 4, 5 years, we have been on the target 3.5% that we have been working with up until now. So I'm really proud of the organization who has been doing this during difficult time in the market as well. So that's great. We can see the project development, residential development, commercial development, that has been performing very well, if you look 15 years back. So they have definitely been on our targets, and I will come back to our targets. But the last 3 years, we have not reached our target. So we have been hit by a very tough market and market condition, both when it comes to commercial and residential. So we will address that during this today, and we will also address the actions that we will take to restore the profitability here.

I'm glad to see, again, the investment properties contributing to -- already now contributing to the cash flow and profit here. And of course, we have clear operational synergies since we are working in the whole value chain. And that's quite unique if we compare to our competitors around the world. So that we can use the knowledge from commercial development, resi and also investment properties when we start new projects, internal development projects. We can also use that knowledge to be competitive and win projects for external customers as well. So that's a really good position. And we also see some clear financial synergies in the company. We are creating a lot of cash flow free working capital in the Construction stream that we use for project development, so we are in a position where you don't need to ask any bank. You should they want to start a project or buy land. We can decide that on our own. And that is a really competitive advantage, and we can work contra-cycle as well.

And of course, it's all about return, profit generation, return on capital employed. So we want to be a reliable dividend provider for our shareholder as well.

I'm talking about that. Here, you can see the equity position over time back to 2018, so we have been the blue dark blue bar here. So we have been able to build up the equity year-by-year from SEK 29 billion. Last quarter, we were at just about SEK 60 billion in equity. So the -- we have been building up because as you have seen, we have been increasing the investment in project development. We're building up the investment property portfolio. So we need more equity for that.

And the payout ratio, as I talked about, the dividend, has been around 50% the last 5 years. And if you look at the total shareholder return, the last 5 years, we have been on 10% in average, which is competitive.

Margin. We just recently sent out the press release that we have increased our margin in the construction stream. And we are -- I'm confident that we -- this is a relevant target. Where you have all seen how we have built up the profitability over the years. And today, we have a really good position when it comes to order very, very high quality in the order backlog today that definitely support this 4% or above targets over time. And you can see the last quarter we were at 3.9% on a rolling 12 months basis.

The rest of the targets we have kept, we think they are very relevant for us. We have a return on capital employed target of 10% in the project development, including residential and commercial. The outcome, though, is below our target. And we are not satisfied with that. 1.4%, that is something we will address how -- what is our plan to restore the profitability here.

The return on capital employed in investment properties. Here, the target is 6% or above. The outcome is decent, 4.7%. To be able to reach the 6%, we need to see growth in the value -- market value of our properties. And 60% target is also competitive if you compare to similar real estate companies in different markets.

Return on equity, we have about 18%. That's definitely something we aim at the outcome right now is 10%. So we need to -- all streams need to contribute and be on their target to be able to reach the 18%. Adjusted net debt limit, we have a limit of minus SEK 10 billion. The outcome last quarter was SEK 9.3 billion in net cash position. So we have a lot of headroom here to take action if we think it's right to start the project or if we want to buy land in good markets. And we also kept our payout ratio on the dividend between 40% to 70%. The outcome last year was 57%. And we also have some group sustainability target and -- when we talk about our own operation and that includes group 1 and 2. We have a target of minus 70% compared to a baseline year 2015. And we had the outcome right now is minus 64%. So we are on the right track. This should be reached at 2030. So I'm confident that we will reached that target, even though we have picked some low-hanging fruits here.

We also have a carbon emission in the whole value chain in project development of 50% reduction up until 2030. And here, right now, we are at a 37% reduction. So also there, we have seen some good progress. But the ultimate target is to be net zero by 2045. And to be able to reach that, we need to work with the whole value chain, including our clients, including our subcontractors and suppliers. I see a lot of change and transformation in the industry and in our company, when it comes to digital transformation, and that's -- I think the industry as such has been lagging behind other industries for some years. But now we can see real trend. It is strong. A lot of things happening when I'm out in different projects. The [indiscernible] our challenge, but also the biggest opportunity is how can we scale this up to really take the benefit of this. And that is something we work hard with that we will come back with that as well. So it's about aligning the company when it comes to developing people, processes and technology. So I'm really encouraged what I see here, a really big potential.

If I go into the different business stream and switching to the commercial direction. In construction, we have seen that we have been growing, growing the business. But we also see potential for further growth, both when it comes to revenue, but also when it comes to increasing the profitability we're going to deep dive in that in a few minutes. Residential Development, we are in a good position. We're performing very well in Central Europe. And it's a strong market. The market has been slow in the Nordics. And we need -- I think we need to see some growth in the economy. But when the market eventually pick up, because the underlying needs are there, I think we will be in a very good position to benefit from that. And on the Commercial Property Development, it's all about maximizing the value creation in a slowly recovering market. And we can see some positive signs in the market, especially in Central Europe, but also in Nordics. And investment properties, we are building up that portfolio as planned and I'm really encouraged to look at this into the future. We definitely have the competence, we have the pipeline to continue that growth.

So now we're going deeper into the commercial direction for the different business streams. And we will start with construction.

[Presentation]

Yes. And together with me on stage here with Stale and Richard to go deeper into this construction stream. If I start with the past here, looking 5 years back, here, you can see the bars, blue bars, revenue, the green line is operating margin over time, rolling 12. And you can see that our old target here at 3.5%. And you can see that we have quarter-by-quarter increasing the revenue, and at the same time, we have kept the profitability here, and that's what I addressed earlier. I think that's a really good achievement by the organization. Have been selective and focused on cost management, and we have seen organic growth in strong market. Average has actually been 3.6% on a 3 years perspective.

And if we look at the order backlog. You can see the blue bars here represent the order backlog, and we can see that we are now on a historically high level. And we have high quality. We will into that, how it looks like in -- after break, but it's high quality, and we can also see that the book-to-bill rates, the dotted blue line here has been pretty much above 100% all the time, which means we're building backlog. And to the right, you have our market outlook. In the Nordic, we see a stable market outlook in the civil business. The building is impacted by a slow residential and commercial development market. In Europe, it's more stable, both when it comes to building and civil. A lot of EU funding coming into Central Europe creating good projects in the infrastructure. And U.S., we have expected a strong civil market going forward. We are mostly in the traditional infrastructure and we see a lot of good pipeline there. And on the building side, we are -- we see a stable market outlook there. We have a good pipeline both for the building schools, hospitals, airports and also for data center. So with that, I hand over to Richard.

So as Anders said, we've had good strong revenue growth in Skanska over the past 5 years. We've had solid and stable margin development and performance over the past 5 years. And as you can see here on the screen, we have a healthy record backlog based upon a selective bidding strategy. So for our construction stream, we feel like this gives us a very strong foundation to seize growth opportunities in the market. And we see look to the left-hand panel, technology and AI. We see a rapid transformation in those sectors, double-digit growth forecast for those sectors, very exciting opportunities there for us. In the middle panel, demographic and economic development. We see strong fundamental economic and demographic growth in our home markets that's giving us opportunities. And resilient societies. Pre-pandemic, it was just-in-time delivery was the word of the day. Post-pandemic, resilient societies has been more of a theme. That creates lots of opportunities for us here at Skanska. So let's get into those.

Technology and AI, again, I mentioned earlier, we've had over 2 decades of data center experience here in the United States. We've had over 3 decades experience building semiconductor plants here in the U.S. We have a proven track record, great customers. Last year, we created a specialized team for this called Skanska Advanced Technology that allows us to serve our national customers across the U.S., combining with our local geographies. So I think it's a really strong and important evolution of the USA Building business that we're able to run across the entire United States and also tap into our local strength in a very good way. So I'm very happy about that. It sets us up well to serve those national customers.

It also supports our ability here in the U.S. to help our colleagues in the Nordics and in Europe to seize data center opportunities. There's plenty of data center and also semiconductor opportunities coming there, and we're very happy to share our experience and expertise and knowledge and customer relations as we can. Very good opportunities for us in the technology and AI space.

In terms of demographic and economic development, I mentioned strong fundamentals, demographics, people moving into our markets. We need infrastructure. There's a lot of big need for that here in the U.S. In the U.S., I'll talk about that in Florida, in particular. I mentioned earlier, we have a very strong USA Building business in Florida. We've had that for a long time. We've been there as USA civil for many years. We've had our challenges, but we've learned our lessons from those projects. We've incorporated them into our operations, and we've built amazingly good customer relations by delivering for our customers in Florida over many years. What we see happening in Florida today is big population growth a lot of need for infrastructure, what we do, water, highways, so forth and so on. So we're going to take a position in civil, down in Florida, working with some key customers we think projects in the $150 million to $500 million range or our sweet spot there. We're going to build on that from our experience to date. And longer term, what I see, and I talked about this earlier, up in Boston. You see it here in Seattle. We have great One Skanska opportunity down there. We have USA Building, very strong operation. We can build our civil presence there, and I can see really great opportunities in the future, those two units coming together as we have in other markets, including this one.

Utah, Arizona, we talk about those as more opportunistic markets. I showed you the slide before our acquisitions over many years. There was a company in Nielsen that we purchased back in 1998. That headquarters was in Colorado. We have people from that region. We've been in these markets before Utah and Arizona. We're actually in Utah or Arizona today with civil. So we have good experience there. We have good customer relations. But we decided to close down that office a few years ago because those markets are cyclical, and we didn't feel it warranted a full-time office and everything that goes with that. But what we see today, as we say here, these opportunities in those markets, you have the Winter Olympics coming to Salt Lake City in 2034. We see some good highway work, some good transit work coming there. Same thing in Utah. We see mining work there. We have good mining customers. We can pivot into these territories from Southern California and from up here in the Pacific Northwest. We have people the experience there and ties there. Really good opportunities for us in Utah and Arizona. And we can see the U.S. civil business, in particular, growing there. So with that, I'll turn it over to Stale to talk about growth opportunities in Central Europe and resilient societies.

Thanks, Richard. As Anders said, the residential market in Central Europe has been really good over the last years. And actually, we see good opportunities in the Central European market going forward. very much being funded by what we believe now increased investments, both national, but also EU funding going forward, that will go straight into, say, traditional infrastructure like highways and rails, where we are very strong today. You can say it's our sweet spot in Central Europe. And it's, for us, very easy in a way to transfer our competence and capabilities across different border there.

In addition, we see an upgrade now within energy and the energy infrastructure in Central Europe, partly because of, in a way, the consequences of the war in Ukraine has a lot of investments flying in there. And we believe that in a way, the demand for new housing, that will continue. This leads me over to the right here, resilient societies, as Richard mentioned. And you can say a lot of the investment I mentioned. And you can say the obvious one is that we have actually now to adapt to the consequences the climate changes. More rough weather conditions, more water and flooding, et cetera. And that is now being built into all the projects we see. We have to withstand in a way, the consequences of the climate crisis. It's already here. We have to handle it. As a consequence of the war in Ukraine, all the countries are now more focused on how can we build a resilient and good infrastructure in terms of energy. Both in terms of the grid system, but also in terms of new production, right? Within the next 2 decades, Poland will have its first nuclear power plant. -- right? And that is a sign of transforming from fossil fuel into something else.

Generally in all our markets, but also in Central Europe, most of the, say, water and wastewater infrastructure has been built, say, 100 years ago. And there is a huge need to modernize that, to upgrade that to, in a way, meet the future needs. And then we also see that also because of the war in Ukraine invest go into defense. And our geography with Poland, Czechoslovakia, they're all in way close to the Ukraine border. We're in a way, the front of NATO a lot of investments there, and we see work coming up for us, both on the civil side and on the building side to support that.

So we're looking very positive tie on the market in Central Europe. And back to what Anders addressed around in a way, having a diversified portfolio, right? Standing in different geographies in different sector, this is a focus for us going forward as well. Makes us less in industry. So looking at this slide here, you can see our sector distribution, both in terms of our civil operation and our building operations. We are spread between different geographies, we're spread within different sector, makes a solid foundation for us going forward.

We also have a very clear view on what kind of customers we would like to work for and what kind of customers we have. On the civil side, we have mainly public clients, mainly public clients, mainly public clients that is supporting that. But on the building side, we have more like 50-50, 50% private clients, 50% public client. And out of the 50% private client, we also our client ourselves through our development operations within residential within commercial. We're approximately 10% of that volume.

As I say, the portfolio management that we are so focused about very much goes down to making sure that we take on board project where we have the right clients and the right conditions that enable us to handle and control and steer the risks that are embedded in all the projects we have. And that can be related to the different contract types that we have, the procurement route that the different projects have and the responsibility overall that we take on as a company. And you can see here on the right-hand side of this slide, you can see how our portfolio and our in a way, project portfolio has evolved from 2018 to today. Where back in 2018, we had 60% building in our portfolio and 40% civil. Looking at today's portfolio, we have 60% civil few years here, and it's been done by purpose.

So then Richard would like to elaborate a little bit more on that and our journey through the last years here.

Thank you, Stale. Okay. So we've talked about this so far. We've had good revenue growth. We've had solid and stable profitability and margin performance. We've got a healthy backlog based upon a selective bidding strategy. We have good growth opportunities in our home markets. We have a good way of looking at our customer types and our contracts, make sure we're getting to the right projects, the right way. So we're ready for some growth in construction. And with all that, predictability remains our priority. If you look to the bottom left-hand corner of the slide, you can go back to 2018. The blue line is our margin performance at a group level at that time. Obviously, it was unacceptable. We were sub-1% and we came together as a group leadership team, and we committed to bringing this back based upon a dual strategy of profit before volume and selective bidding. We can't say that enough. And I'm very proud to say that we've done what we've promised. I mean we brought this back, you can see the blue line. We came out of '18. We brought ourselves back to profitability in '19, '20. Our teams did an amazing job pushing through COVID, through the pandemic to deliver high profitability in 2021. And then you can just see it's a strong, strong margin performance, '21, '22, '23, and now we've turned it up. So we've done what we promised to the market. We've brought construction back to profitability. We feel very good about that.

And at the same time, we've lowered the volatility in the system. If you look at the gray area around the blue line, you can see our standard deviation around our margin. We've just slowly narrowed that over time. We're in a perfect position right now to grow this business. It gives us all the confidence we need to set this new target of 4% or greater over time. We think it's a relevant target as Anders said, and we can achieve it. And the activities that have led us to the performance that we have today are listed here on the right-hand side, and they're the same activities we will follow going forward because they work strong customer focus. Andrew has mentioned it before. We've always been a strongly customer-focused company. We have about 300 people who've come into Seattle for this week. We have a big meeting tomorrow and the next day, it's called our leadership meetup. We're going to spend a lot of time talking about customers. We have a great customer focus today, and we're going to get better.

Resilient portfolio and deliberate business mix. Stale just talked to us about that. We know how to profile our customers, our clients, our opportunities, make sure we're getting into all of our projects the right way, with the right margins and setting up our teams for success.

Growth and selective bidding. These two things have gotten hand-in-hand for us over the past 8 years, and they're going to continue to do so. selective bidding is our north star. We're going to continue to follow it because it works.

And then the final two bullets, cost management focus productivity and efficiency. For me, they go together and they apply both externally to our customers and internally to us here at Skanska. For our customers, we have to be cost competitive. Budgets have been -- or costs have escalated significantly in the last few years. Our customers' budgets have been challenged because of that. We need to help them to get into their -- get their projects into budget. We've been doing a great job of that. Focusing on productivity and efficiency in the field, the way we deliver. This is what we do every day to create value for our customers. And we do the same thing for ourselves internally. We need to have a tight machine in Skanska. We need to be fit for purpose out there in a competitive landscape. Always keeping our S&A tight. Our teams continue to focus on that, and we're going to continue to focus on that in the future. And we see some digital technologies we think that can help us do that as well for some back-of-house functions. We have a really good tight ship today, and we're going to keep doing better. And Jonas is going to show you some of that later in terms of our gross margin and S&A development over several years.

I talked about digital tools just a second ago, we not only build semiconductor plants and data centers that create the digital tools that are powering our economy today. We are also consumers of those tools in Skanska. The key for us as a consumer of those tools is to find the right ones that enable our teams to be successful, predominantly out there in the field and also in our offices. And we need a tight, efficient, productive workforce and digital tools help us do that. You can see this photo here on the right. Drone technology. We've been using that for many years. There's nothing whizbang about that in terms of technology. But there are a lot of software programs that are coming out, allowing us to harness that technology in a better way. One example is doing flyover of our project sites on a daily basis that feeds back information to our teams, they can see in real time what's happening, they can plan better for the next day, help them be more productive more efficient. This is it.

Anders talked earlier about scale. We're harmonizing our platforms across Skanska, across the global company so that we can help our teams gain the benefit of the knowledge that we have in all of our different local operations. decentralization is a strength. It can also be a hindrance too, if you can't scale it. So we're finding ways to scale all the knowledge and experience that we have in Skanska and use it for the benefit of the company as a whole.

Leveraging insights and knowledge sharing across our markets and disciplines. We have a really good focus there. We're going to continue to get better. We see momentum building, and I can see this becoming a more and more important part of our construction delivery in the coming years. With that, I'll turn it back to Anders to wrap up with the commercial direction.

Yes. As you have seen now, we have a great potential. We are in a really good position in the construction operation, and we have a great potential to continue to create value. And we will continue to secure a diverse and resilient portfolio because that makes us less vulnerable. And of course, as we have been talking about, we see potential to increase the profitability even further. And we are positioning ourselves to growing in different segments, sectors but also in geographies. Delivery on customer demand for sustainable environment that I can see that a lot of customers require a high standard when it comes to sustainable products and projects, and we can offer that. We have the competence in-house. And of course, productivity efficiency and digital transformation. That is our own challenge and opportunity. That is something we can impact ourselves. So that is a great opportunity for the future. So with that, we will go into the residential development stream, and I hand over to Stale.

[Presentation]

Presenting the commercial direction for our residential development. I'd like to start with somewhere around this project that you can see on the picture of the animation behind me here. This is a project in Central Europe. It's in Prague. It's called [ Muransky Sukarat ] and it's a very good example of a project or the type of project that we like to do in Skanska and that we're really good at doing Skanska. This is a multiphase project. It's converting previous brownfield into a new fantastic residential project. It's been very attractive in the market. We have a good sales rate, and we are approximately halfway through this project now with the third phase ongoing here. You can see the part of the legacy here with the chimney from [indiscernible] area. And this is a good example of how we are, say, converting cities to new residential areas.

The next slide here shows, in a way, the geographical footprint of our presence now and going forward, where we are focused in the three largest cities in the Nordics, both in Norway, Sweden and in Finland. And in addition, we have activities and a strong foothold in Central Europe in Poland and in Czech then in Warsaw, Krakow and in Prague. And you can say that we -- the housing market is very often exposed to demand cycle. And those demand cycles, they very often follow the economic cycles in the different markets. And the Nordics have been heavily affected by the cost increases and the inflation and in addition, the interest hikes that we've seen over the year. And also in the Nordics, actually, you say the global uncertainty has affected the market a lot. So there's been a weak market. And as a consequence of that, the consumer confidence in the Nordic is quite low.

To the opposite, the Center European market has been really good, really good for us. And in general, we see it really good also for others. We have had, say, good sales in all our projects. And this is because that the unemployment rate in Central Europe is extremely low. It's extremely low. And there's a good underlying economy. In this market, we find a lot of cash customers who come to us actually to place their cost into new homes. With in a way, the solid, say, economic foundations that we see a lot of private hub here, a lot of our investors in new homes, they are actually, say, scaling, bringing up new quality in their homes, moving from old premises into new premises that we can offer on attractive location.

There is a population growth also in Central Europe. And this is a market where we see that development continues to be strong. It's a market where we actually see that here is a potential to grow as well.

Looking at the next slide. This starts with in we show in the history, building a little bit on what Anders showed previously. And this shows in the revenue in the different markets, the Nordics, which is the dark blue here, and then you see the Central Europe, which is the gray one. And you see the return on capital employed, that is the green line that varies here. And we have built up our residential development activities over years now to deliver approximately 6,000, 7,000 homes every year. And through the last years, we've seen the deepest and longest downturn in the market for decades. And we've done a lot of actions that I'll come back to in a way to adapt to those market situations. But the fact is that the sales now are approximately half of what we had when this was on top. So the actions we have taken, as you see here, we have a low-cost segment called BoKlok, and that segment was spread across the Nordics in Finland, Norway and then in Sweden, and we also were in U.K. But as a consequence of the markets, we have exited Finland. We have exited Norway. We also exited U.K. in terms of the BoKlok segment. So the only market where we still have BoKlok is in Sweden.

We have also exited some geographies within the different countries. As I say, we are mainly focusing now on the three larger cities in Norway, Sweden and Finland. And that's where we see that, in a way, the demand is there and say, the financial or economic fundamentals are expected to come back faster, and that's the market we want to be in. Then we have done a significant job trying to adapt to the market situation. With revenue going down, we have to take down our cost base, and we've done a great job of that over the last 2 years. We are also focused on making sure that unsold completed units are not growing and getting old on our balance sheet, right? That's tying up a lot of capital not making value for us, not making value for our shareholders.

Despite the tough market, you have seen and probably seen that we have started projects. We have started project in this difficult period in markets that support it. And just to elaborate a little bit more on the cost reduction that we've done over the last years, we have taken down our sales and admin costs related to residential development by approximately 50%. That's a significant achievement being done by 2 years. But that allows us now to have, say, a very efficient cost base that is based on the revenue and the volume we have now, and it gives us an opportunity to have return on capital employed that is going the right way, as you can see on the green curve here now.

The next slide, you can see the distribution of our residential development portfolio over time. The blue bar here is the land bank that we have, the gray bar here is the ongoing production. And then the green bar here is the unsold completed unit. And you see how that has developed over time. As a consequence of the difficult market, the ongoing -- construction ongoing production has gone significantly down, as I said. But at the same time, the land bank has been more or less stable. We have a very attractive and solid land bank today. And the good thing about that land bank is that, that land bank is very much sold. So when the market picks up again, we have a lot of good land that we can deploy to the market, starting new projects, generating more profit going forward.

As I said, the [indiscernible] completed unit that has grown over the last years, but we are focused hard to make sure that, that say, portion of capital employed is not growing old on our balance sheet.

Going forward now, we don't intend to deploy more capital into the stream, but we will focus very much on rebalancing the portfolio. starting new projects in the right locations with good business cases, say, converting the land that we have in our land bank into new production and new profit. That's our ambition going forward. and making sure that we're not in a way, building up more unsold completed units. So that is our strategy going forward.

And looking at our market, right? You say understanding the customer need is the starting point for our offering in all the markets. And we're focusing very much on understanding what is it our customer needs and what are our selected customer target groups in the different areas, in the different locations, in the different geographies. And we're building up an offer on the basis of that. We have a trusted brand, and we have satisfied customers. We see that from the feedback we get from our customers that buy in our project that they are generally very happy with buying from Skanska. And we see that in a sitting on both the development side and the construction side here that we can build in quality in our project, and we can adapt to the needs that our customers tell us that they want.

We're very much focused on placemaking. The project we love this multiphase project, where we can convert parts of City into new different areas. For example, we are going to Norway, they are focused over many years for what we call empty nesters. People who today sit with their large villas. And they come to a, say, a phase in life where they would like to convert that into more easy living, nice apartment, good location, good amenities, and we can offer that to the market. And when you have those offering, then you can actually withstand some of the cycles that we've seen with slowdown in the market because that customer target group they are not so affected about the changes that we've seen in the market in general.

We're also focusing on building in sustainability features into our project that, in a way, meets the running cost of our customers, right? We want to help them to reduce the running cost therefore, focusing on building energy-efficient buildings, some of them actually also with energy production with solar panels, that has helped reducing the energy bill to our customers. And in Central Europe, where water is a scarcity, our gray water solution is also highly appreciated by our customers.

So summing up our commercial direction, we will position ourselves not for a normal that was behind us. We don't believe that the market will come back to how it was pre-pandemic, at least in the foreseeable future. We will position ourselves for a new normal in the market, and that is our focus going forward with, in a way, focusing on capital allocation to the strongest market, where we can see return to our expectation. We will start projects going forward, converting our good land bank into production in markets that support it. And there is an opportunity now with -- where we -- with our balance sheet can have an opportunity to actually buy land that would normally not be available in what you can say, a normal market. So having a strong balance sheet can give us that opportunity.

We have make sure that we deploy our pipeline and keep our financial flexibility. As you can see, we have taken down production quite significantly over the last years. But with a good solid land bank that is already very much zoned, we are ready to start fast new projects if the market returns. So that's our strategic direction or commercial direction for residential property. Now we will focus on the commercial direction for commercial properties, and I'll leave the word to my colleague, Claes Larsson, to present this.

[Presentation]

So over to Commercial Property Development, and I would like to start with this picture. But in a nutshell shows our customer offering to our two customer categories. We have the tenants that leaves us the premises from us, and you have the investors that buys the completed projects. And this is all about. You need to pick prime locations, obviously. It's very hard to fix that later if you get it wrong. Prime location for us is central locations or if not central, close to public transport like metro station, et cetera, very appreciated by both tenants and investors to keep property value over time. Then we pack these projects with innovative solutions to enhance customer offerings or experiences. And of course, wellness amenity service is super important, healthy indoor climate, outdoor space is here, gym, et cetera. And then, of course, the sustainability aspect is super important to design these projects from the beginning with the right kind of material, low carbon footprint and energy-efficient solutions.

But it has been a rough ride the last 5-plus years to be a commercial property developer. You all know the history about this. We had a terrible pandemic, obviously, completely unexpected, first one for 100 years in the world. And that caused then the new concept of hybrid work to surface. And we still have a lot of post pandemic effects in the market. So companies are struggling with how to get the people back to the office? Is it 3 days a week, 4 days a week, completely flexible or back full time every day a week. We will not go back to where we were before the pandemic. We need to adapt a new normal here. But we see that companies are striving to get people more back to the offices to create company culture, creativity around the coffee machine inspirative environment, et cetera.

Then we had the terrible invasion of Ukraine and shock waves in the older supply chains, causing material prices rise, construction prices rise, very hard to underpin new business cases for us, and we had cost increases in existing ones as well. So we have to adjust that as well. And then on top of that high inflation, high interest rates and the effect of that is obviously, for any investor that need to put debt most of them on their purchases. The cost goes up for debt, then you need to have a higher return on your investment, which puts the yields and cap rates going up and then puts pressure on the market value, which is another hit for us as a developer.

Having said that, there are some bright spots here, and I'm really happy about the 57% leasing ratio in ongoing projects. That is a really solid number. We have 60% invested, meaning that we are investing at the same pace as we are leasing in the ongoing project portfolio. 77% also in completed projects, that is projects not belonging to an investment property portfolio that I will cover later, 77% leased. I think a pretty solid number, given some of these projects has been completed fairly recently. Talking a bit granular about the three main markets here, wealthy markets. Central Europe, may be the best one for us right now when it comes to leasing. We see a strong demand and what tenants see is that there is a supply gap coming here. Very few developers has started lately. And you can see the next 2, 3, 4 years, what are the completions in my market. So if you're a tenant wanting quality space, you need to hurry up to secure that basically. So we feel a strong demand here, definitely.

In the Nordics, maybe a bit slower. We see it as a stable market. You can see vacancy is on the rise. But it's a polarized market. So it's a quality game, and we're in the upper segment. Most of the vacancy increases we see in wrong location and inferior products, and that's not where we belong. Also in U.S., I would say there are bright spots. We have secured a couple of really good contracts in the last couple of years here. And it's, again, flight to quality that matters here. A lot of companies would like to downsize and upgrade so they can pay much more rent per square foot per square meter to get more qualitative space to attract people back to the office. Having said that, it's the weakest market we have is in the U.S., but I feel good about the development when it comes to leasing in the U.S.

And enabling factors, we offer top quality projects, sustainable, innovative, top location, et cetera, customer mindset. So if a tenant is looking for space where we have a presence, we are always in the game. And then, of course, in these shake times, if you sign a lease with Skanska during construction, if you buy a building from Skanska during construction, we will be there to deliver on time and quality, and that's an extra add-on factor for our customers.

Moving then to investor market. And also here, I would say Central Europe sticks out as maybe the strongest market for us. And you see that we have taken up our arrows to stable markets in Europe when it comes to commercial property development. We see raising demands from local capital in Central Europe here actually. And you saw here last week, for instance, we secured a core divestment of 100% leased property in [indiscernible] Poland, sent to prod in Phase 2 with a repeat me that we also did business with in Warsaw last year. So very good strengthening of the market in Central Europe. Also a lot of Nordic capitals. Germany is still a bit hesitant, but they are starting to look back and especially then, you could say, in Warsaw.

Nordics, I would say, stable transaction market. There are core deals done. They are picky want the right location, high leasing ratio, high top quality, et cetera, but it's a stable market. If you go over to this part of the pond, it's a completely different picture. It's still very much dominated by opportunistic money. Would like to see distressed pricing. And that is kind of the core reasons why you haven't seen us active in the divestment, and I will come back to that later here. Actions then is to be very active trying to divest and actually divest as we have done this year, properties in Europe. When it goes to the U.S., we are focusing on completing the asset, we're focusing on leasing the remaining space and we are focusing on being razor shop in asset management. And then we need to backfill the pipeline with new starts obviously. So we are starting projects here on a selective basis where we can meet the fundamental that is in the market today. So everything we have started the last couple of years, I feel really good about.

Then you are probably interested in our big portfolio of completed projects, which actually is bigger than what we have in investment properties. 22 in total here you can see the leasing ratio is actually, as I said earlier, fairly good. It's 75% here in the U.S., 79% is Cental Europe, 84% in the Nordics. And we have several projects that are 100% leased. For instance, three projects in Copenhagen office, 100% leased. We have a bunch of them as well in Central Europe, a couple of them in Prague, et cetera. But the big part here is in the U.S., 68% of the capital employed is in the U.S., SEK 3.1 billion. And I bet your interest, you can see the breakdown where they sit. So a lot of it in the capital city here, Washington, D.C. and adjacent markets, which is Northern Virginia we cover also here, Tyson core and the Arlington corridor.

So there where we have most of the capital also in this region, which consists of [ Sete ] and Bellevue, which is sort of the twin market in the [indiscernible] region here where we sit today. and the rest then is allocated to Houston. Mainly office projects, you can see the right, but also some rental residential or multifamily as we call it here. Then you see two other stuff here in the legend, Boston and Life Sciences are sort of connected. We are between activities now in Boston. It's just more a timing issue. We have had a fantastic run with all our Boston projects so far, but nothing completely nothing ongoing. We're working really hard with a fantastic land bank within life science office and multifamily for the future, most on super strong locations. I feel very happy about that as well.

Then this one, I really love. This is the completion profile of our ongoing projects at present. And these are the ongoing projects not sold segment-wise. So we have the exit risk, and we have the leasing risk on this. But look at the green dots here. The blue bars height is obviously capital employed up on completion for each and every project here. And you see the first one of the office one is 42% leased end of Q3. It's actually approaching 60 as I'm standing here. This is a project in Warsaw, Studio B, fantastic location. The only one that has a bad location is probably ourselves Skanska. I feel very confident this will be a leasing success, and we have until Q2 next year to complete. Then you have a 95% completed product in leased product in Copenhagen, 57%. That's our next headquarter in Sweden, 100% leased in Budapest. You have to go to Q4 2027. That's 2 years ahead before you see something that is a low leasing ratio.

You see the stripe small bar there. We actually started that product this quarter in fourth quarter. That is fifth phase of a project in Boston, Regina City in Poland, where we had a tremendous success on the previous 4 phases called Novae. So the last one to be commenting up on here, and you might wonder I'm so happy with 12% on that one. That's a multifamily project. And it is designed very low leasing ratio to begin with, we start leasing those just before completion. And the game is then to lease up to stabilization within 18 months. So we have plenty of time to do that. It's a completely different leasing profile while we like to lease offices, if possible, during construction.

So let's talk a bit about the capital allocation. I know there's a big interest in the audience for that. Let's explain here a bit what we have story showed a similar breakdown for the residential before. The blue parter is land bank. That's the raw material strategically important to have future product. We need to have a big land bank.

I feel also good about our current land bank in commercial property development. When you start a project, you move that piece of land the book value for it up into the gray area. And then you add whatever is invested on top of that for the project. Once completed, moves out on the gray, moves up to the green and when we divest it, it moves out from the stacked bar. So that's sort of the transition from start to finish for a project. So the problem here right now with the allocation, and you'll understand this, I guess, is that land gives no visible returns. You get returns from the completed if you have leased them. And if you are at least them fully, you get a higher return, obviously. So depending on the profit content, the leasing ratio and the location, you have our product, you might get 4% to 7% or something in return on investment in the green port, far below the 10%. So the magic occurs in the gray part. We need to shrink the green part, we need to increase the gray part, and we need to have a healthy size of the land bank. So that's the game we're playing right now. So we need to sell in a responsible way from the green part here.

And I mean, the U.S. market, I touched upon it earlier. it's very muted right now these opportunistic actors just wanting to have distressed pricing. Look at this building. The ones here will to it later today. We don't want to sell a top-quality asset here at distressed asset prices. We have stuff still vacant premises in some of them. We focus on that and asset management. When the market is back on more stable levels, we will start more active divestments in this region. Through responsible divestment from the green and also selective product start from the gray. That is what will increase the return on capital employed over time.

Focus forward here. geography is super important. We constantly assess and evaluate our geographies, which cities should we be present in, but also importantly, which submarket in each city. So we pick the submarkets that are sustainable over time and not just have a quick peak and then they disappear. And when it comes to product allocation, here you can see the history. We used to be more or less an office developer, we have stepped up in rental residential lately. And then if you see to the stack bottle right, this is when depicting the total investment of all future products in the current land bank we have, then there will be a big distribution between almost equal distribution between office, life science and multifamily. And then we also have in the Nordics, we do logistics and occasionally hotels. But this is a snapshot of the land bank as of today.

Saw the commercial direction forward. Anders alluded to maximizing value creation in a slowly recovering market here to have patients with some of the assets in the muted market and really make sure that they are ready to divest. Maintain this good leasing momentum. We are in the quality trophy premises game here and attract the tenants that are really pick here. And we have had successes in the last 2 years. but we have more to lease here, and that's a very strong important priority for us.

Capital efficiency, redistribute a bit between asset classes to drive returns upwards. But also right now, we are moving much more into selected project starts. We have the financial capacity to start products, very few others have. We are the one that can solve the supply gap in the market and give the solutions to the tenants. And then, of course, I talked about the U.S. assets. We need to continue to just maximize the value creation and wait for the moment to realize that value. And of course, when we do asset management in the U.S. or in Central Europe or in the Nordics, we take all the help we can get by knowledge transfer from investment properties since Asset management is core business in that part. And there are other learnings to leverage from investment properties, and I will be back on that to stay tuned for the final [indiscernible]. Investment properties, we actively manage a portfolio of

[Presentation]

So last chapter of our commercial direction for the four business streams investment properties. And as Andre said earlier, this is completing the value chain. So we are one of the unique actors in the market that actually have construction development and asset management, and that is a very, very big strength. .

So what is it all about? We are developing, designing, executing, leasing in the commercial property development part in the CDN in the Nordic part here. And then we can select to divest office products in the three biggest cities in Sweden to investment properties. That's a decision taken at the moment we go for divestment here. And you can see there are a couple of criteria that needs to be fulfilled in order to transfer them. We would like most of the leasing work and moving in tenants work to be done in the commercial property development. So 80% leased is a requirement, 60% occupied is another requirement. And we like to have a lot of talents in the building, increasing the tenant interfaces and get a lot of tenant insights for the future. And then geographical cluster, that's all about getting an efficient asset management and to become relevant in each submarket.

So for seven projects have passed the eye of the needle here. Foreign Malmo in Stockholm and in Gothenburg, and you might have picked it up on a move that the capital employed is quite equally distributed within markets. So different product sizes. Target is SEK 12 billion to SEK 18 billion. We are approaching the start of that range. And the idea is then to have a very efficient asset management in each city and that you can have if you reach these levels of capital employed.

Revenue is building up here, not a big surprise if you keep adding projects all the time or 4.7%. Anders talked about that earlier, is the rolling 12 current return on capital employed. And as Anders said, we needed to have market value increases because these are top quality assets value at a yield of maybe around high 4%, 5% currently. So if you're just picking up the NOI from fully leased buildings, you will never get to 6%, so the game plan here is that over time, also create additional value.

It's a very strong portfolio from a quality standpoint. Of course, we have an environmental certificate everywhere. It's completely inflation adjusted when it comes to rental levels. 110 tenants right now. They are the most satisfied tenants in the Swedish real estate market for medium-sized category, which was the sort of achievement we got last year from the biggest survey in the real estate industry in Sweden called [indiscernible]. And we thought that after 2.5 years in operation, yet these recognitions was really inspiring for us.

In economic occupancy rate could be higher. We're working really hard on that, obviously. And then a pretty new ratio for [ Manuvie ] surplus ratio. That's a pretty important one showing the net operating income divided by the revenue. So basically, how much leakage do you have on sort of the cost side. We think this is a pretty solid number as well.

And we attract tenants from all kinds of businesses, which is really encouraging as well. And if you see, I mean, then we also have a lot of IT in lease lengths. So when you see the expiration profile of when we need to renegotiate and keep our tenants, et cetera, make them shrink or grow or whatever, it's very even spread over time. So this will be part of the core business to constantly try to keep the tenants help and keep them in our building.

And the commercial direction here is to continue to build up the portside state here. Then one of the really big here, I would say, synergies and advantages with having this business in Skanska is that now we get a much longer-term relation with the tenants. We can see how they thrive in our building, hopefully, and constantly have a dialogue, how can we make you more successful in Skanska buildings. Maybe they would like to change their footprint. We have actually cases where we moved from one building in [ IP ] to another because they have some changed demand and we serve them helping with that. And we can also potentially know that they might need a new location somewhere we have a presence maybe in another country where commercial property development then can help this tenant to make them successful in the other Skanska project.

Leasing vacant premises, obviously a high priority. And then this clusters for long-term creation. This is something that we also pointed out as a big, I would say, advantage. Because we feel when we buy big pieces of land, we do the place making, we start the first product, we divested and then we have completed a full campus someone that bought the first phase here will get the big value increase because that building is now sitting in a much bigger and completed context. So everything equal, the market value will go up. Now we can keep that value potential for the future within Skanska. We have several big sort of land areas that might be potential candidates for investment properties in the future.

And then I talked earlier about a bit of the synergies like in management competence transfer between the units. We also have a lot of data that we will collect from all the properties under asset management phase data that we feed back, see what went wrong, potentially, what was right, how can we adjust and fine-tune for the future in order to become a much better developer and contractor. And with that, I would like to hand over to Lena Hök for drivers for sustainable investment.

At Skanska, we want to create buildings and infrastructure that stands the test of time. In both public and private sector, there is an increasing demand for solutions that deliver more efficient and more resilient performance. Today's customers face a growing pressure to increase their own operational efficiency, including infrastructure and buildings that are using less water, less energy, conserving water and also optimizing the use of materials. Additionally, there is an increasing concern when it comes to the extreme weather event and their impacts on the built environment and society, making it a top concern for decision-makers. Climate [ adaption ] is by that, moving up, becoming a strategic priority in order to safeguard people's lives, livelihood, but also the asset values.

You can see here some of the projects that we are doing that is significant for this. The ETEN road in the northern part of Norway that are pursuing the excellent -- the [indiscernible] infrastructure excellent certification. The Eight where we are now, significantly higher energy efficiency levels than market standards and also lead platinum level. And to the very right, you see [ Slussen ] in Sweden, the giant bill water gates that control the flow of water and protect the Lake [ Maeve ] from the Baltic Sea. This is safeguarding the water supply for 2 million people. That's the impact of our projects.

And the impact of our sustainability offering in our portfolio. We achieved 25% higher energy efficiency levels than market standards in our project development portfolio. That's both residential and commercial. Looking at the rolling 12 months. We have 100% certification certifications of offices in our commercial development. And in Construction, SEK 62 billion comes from projects that are pursuing certifications this at a rolling 12 months basis.

That's our offering. That's our impact. We do this by engaging early with our customers, helping them to get the ability to make smarter decisions and gain greater efficiencies. The use of data plays a critical role here, unlocking those insights, improving the sign, but also precision when it comes to planning, gaining greater operational efficiencies and long-term performance. We are well positioned, just like you could see from the numbers to make an advantage of our position here. We do this by using emerging technologies and digital tools applied in design and planning for efficiency of materials and energy. We are also increasing our capabilities of using low-carbon and circular solutions, including refurbishment and renovation of existing buildings, making sure that they are being updated for modern demands and needs and efficiencies as well as prolong their lifetime. Last year, refurbishment of buildings stood for 8% of our group total revenue. And also, of course, making sure we are increasing the efficiencies of the buildings by using building management systems, where you are able to monitor, control and optimize the use of a building. All of this with a focus for us to save carbon and save costs both for us and our customers.

For us, being present throughout the value chain also means that we can gain the understanding where these savings best can be made. We are gaining the expertise and also transferring the knowledge how to design, build and manage for more efficiencies, smarter solutions, resilient and also sustainable performance. This is our competitive advantage. How to turn knowledge into the performance and performance into long-term value for our customers and our shareholders.

By that, I leave over to Antonia.

Thank you, Lena, and everyone that has been on stage thus far. We are now ready for our first break. We've gone through the commercial direction and our strategies and our priorities going forward. So now it's time for some well-deserved coffee. You will find coffee and other refreshments at the back of the room and just outside through the doors here. And we'll gather back here at 9:45 in 15 minutes for some further insights into our group financials. See you at bit.

[Break]

Welcome back. I hope that you had a chance to grab some nice coffee. We're now going to continue with the group financials. And right after that, we're going to open up for questions. So we'd just like to turn to you that are following us from a distance. There will be here be an opportunity for you to engage with us here than just use the telephone conference number that is provided on our global web page under the Capital Markets Day event, and you will get put through to us here at the stage.

So moving over to group financials. Now we will take a closer look at our operational performance, our cash flow and our capital allocation strategies. And to take you through this, I give you our EVP and CFO, Jonas Rickberg.

Thank you, Antonia. Yes. Today, I will take you first through the business streams here from the financial perspective, and then I will go into the different parameters of the group financials and so on. And now I need a clicker, I realize. Thank you. It's easier. So I will start then with the construction business stream. If it works well. Yes, here we have. And as you have heard here today, we have a lot of big ambitions here in order to sharpen our performance within this stream right now. We have increased the target to 4%. And of course, a little bit we have heard about the in order to be delivering that. And from a financial perspective, you know that it's only the gross margin and the SG&A that build up the EBIT. And over the years, we have been very stable here of 7.5%, 8% of the gross margin. And then on the S&A level, we have been on 4%, as you can see here, hovering around. .

As a company, it's very important then when it comes to S&A to focus that we are very working with active management when it comes to if volume goes down, of course, we need to readjust and focus on the cost side and take that down as well. And as you can see here, it has been very -- we have been very successful of doing that lately here. Also, you can see that on the left-hand side, there is a little bit on the dip there close to 2025 here. And that is actually our ability right now we have managed to increase revenue by keeping the same cost and actually get the leverage of the situation we are into.

Long term, we think that 4% of S&A will be the standing point, and that is very much driven by the fact that we are a big company with a big footprint, and we, of course, need to reinvest in the new areas that we believe in strongly here. What we have set up the company for her latest years is to set up a company with a very effective system. And when I say that, I mean very much connected then to the bidding strategy as well as execution way of how we have executed the project and so on. And our focus when it comes to that is very much on the gross margin. And I will just now open up a little bit, so you can see how we are internally then looking into some of the parameters that we are judging here.

Here, you see the bid margin as well as the most likely margin as an average here. And that is actually then corresponding then to 450 biggest project that we have in Skanska more like 70% of the total value. Most likely is all of these, we are seeing all the products here. They are actually in the beginning of the phase and the mid and the end of the project phase. Also here, the most likely margin is actually what we think will be the most likely outcome of the project that we are reviewing quarterly until it's completed. Also, when we are -- you can see here the bid margin, that is actually the margin that we are entering to project with as well as when we are reporting margin, we have a little bit more of a precautious view, and that is actually that we are keeping contingencies for risk or unforeseen event that could happen during out during the project. And that's the never we'll talk about later on even more.

Look at the graph here, I would like you to pay attention a little bit to the blue line here. You can see that the bid margin has increased from with more or less 1% up to 9% there. And that is actually our ability to look for the risk and make sure that we get paid for them in the bidding phase. And also the strong development here of the most likely margin that has increased by almost 2.5%. And that is actually our ability not only to foresee the risks when we are bidding, but also making sure that we are executing on them. And that is a very good strength, of course, of the Skanska, how we have been developing then. And as you remember, maybe the graph that targeting then to the 4% that we are into. So this is the fundamentals that we are working with, within Skanska if you open up some [indiscernible].

If we move on then to continue then to look into construction, but also for the future, if we open up and look into the order book, here, we have divided the order book into different margin categories. And with a different time period, as you can see there, focusing and starting on the bottom there, you can see that it has been shrinking from 6% right now to 1% to where we are right now. And that is the project that we -- that are below 0 or 0, so to say. And that has, over the years, come down to a very good level, I would say, right now. And that is one of the reasons, of course, that it's getting better profitability here.

Other thing that is important to look into here actually the gray bar, that is the strong development that we can see in the good projects that we have, that is a margin that is more or less 8.5% or more. So you can see how that has increase that share. And of course, that is the strength, of course, also here within our order book and the potential we have here. Worth mentioning is also the mid space here. That is actually according to plan, I would say, due to the fact that there is, as we were into earlier, different types of contracts as well as customer mix but also a different level of S&A connected to it. So that are actually playing according to what we would like it to be. All in all, it's very much that we are working then with a portfolio and working very hard when it comes to the risk and reward balance within this area, of course. So this is very much what we can see in the future.

Also moving on then to the top line of Skanska you can see had been a very good trajectory. And if you remember what we talked about in Capital Markets Day in 2023, when we said that there was a funding boost into U.S. and then maybe mostly into the civil and civil work and so on. And that has also then been translated into this revenue streams, as you can see here. also mentioned today, we were very much into how to position ourselves for new growth. And that is very important for us. Even if you're focusing extremely much on stable performance within the construction stream. We are looking at them for the growth opportunities that we can see here and mentioned in the tech and digital infrastructure and then the demographic and economic growth, as we talked about earlier as well. and then the resilient society. All in all, these will build up to new possibilities for Skanska.

Opening up a little bit. You can see there in the light blue, that is a snapshot for next year. And you can see that order right now, we have a revenue in hand that is corresponding then to 68% versus -- rolling 12 compared then to Q3 and so on. And that is good number, I would say. If you compare to the latest 5 years, it actually has been in 60 to 65. So we are in the higher end here, preparing them for the future.

Leaving construction business stream and moving in then to a residential area. We can see that this is an area that we talked about earlier. We are targeting a 10% return on capital employed. Right now, it will take a little bit time. You can see here in the graph that from the top to the bottom, we have lost a lot of revenue, of course, and that is mainly connected then to Nordic that has -- that we had challenges with. And of course, we really need this to come back going forward.

Also paid a little bit attention then to the green line there. [indiscernible] was into it. We have reduced the cost with more than 50% here in this area. And you have seen that it has taken us to a level that it's a little bit higher than the mean in average there, and that is actually a situation that we are quite clear right now that we are having an organization that are prepared for more revenue to come, so to say. So we have reset the structure, but we are ready for more to come going forward.

And of course, it's very much that we need to see that the central market -- Central Europe that has increased in the volumes. And of course, we need to refill the land bank there even more because that is what we are looking for, the profitability areas. Revenue and cost is not, of course, everything when it comes to the profitability. So if you open up a little bit and look into the -- what we can see in the stock for -- on the margin side here. We have actually then within the residential development looked into the different time parameters here, you can see in the bottom and the margins. And we can see that 2020 then was very profitable situation. And 2023, it was a very challenging situation for the residential and right now we then are in Q3 2025. Also, you can see the color there and starting then from the below, you can see that margins that are below 10% or below has actually then come down a bit from 2023. But still, it's a fact that we have some assets that are a little bit diluting the margin that we have right now.

On the other hand, you can see that going down from 2023 to -- on the gray bars, you can see that we actually then coming to a better situation with most likely margin that is coming out in a better place, and that is mainly driven by the fact that we have started many new projects.

Going ahead, we are focusing very much on the capital turnover and make sure that we also then taking out as much as possible when it comes to the project that is not supporting the margin, of course, as well as we are continuing to developing the pipeline with new solid and good business cases.

So with this, I leave the residential stream and moving then to commercial development. And here, we can see the unrealized gains over a time period and our unrealized gains is of course, the difference between what we see is the market value as well as the total investment at the end date that is needed. And you can see that has been over the year, coming down to a situation we have right now of 10% in Q3. And of course, comparing them to what we had when we were in the super good days on 20%, it has been then a little bit of a challenging situation. Of course, we need to start more project here. And it was very much connected then to the interest rate, of course.

If we take the situation we have right now in Q3 and look into what we have there, let's see, here is actually the situation with -- that we have divided things ongoing and completed and it's 10%, as I said. There is a difference there, as you can see. But if we play a little bit with the numbers and you will see pure mathematically here right now what the potential is if we see a yield change. And this is very important for us that will explain things going forward. So let's take a look here at what we have. And if we then increase -- if we have a yield compression of 50 basis points, you can see that we are actually then increasing the value to billion. Most important also that you're coming back then to a situation of almost 20% when we had on a very good market situation.

So only with these few basis points change, we can see good values on -- in the returns, I'd say. And this is giving us, of course, a little bit of a situation that we are having a patient strategy for these assets. These are -- as Claes was into a very key, good assets for commercial development. And they are so good. And of course, we would not like to fire sale here in a way. And you can see just the fact that it's increasing quite good there. And also, we have, of course, the opportunity then to take advantage of the fact that we can increase the leasing here into the situation. We are not 100% leased on all the assets right now, but we could also take that time advantage into our play here.

Closing the chapter of the business streams and moving in then to the financials even more, then we look into the cash flow and the capital allocation. I will then start with the cash flow. And you can see here on the dark blue that has very much contributed very good to the case cash flow as we were into because that is free working capital. And our way of working with advanced payments here. It has been very successful over the year. Right now, we are on 18% in relation to revenue. And we as I mentioned here earlier, we had a good portfolio of almost then the SEK 264 billion. That has a very good and healthy business mix to generate this good cash flow here.

Also, you can see in the light blue, and that is a different dynamics around that because that is connected then to the project development that is connected, of course, to we are in the cycle of divestment or investing things here in the area of the project development. So that is more of a sluggish movement there.

Lastly, but not less important, I would say, that is actually then the going forward when we have built up that it will be revenue or cash flow generation into our business, equally important, but not in a magnitude of course, to the construction that we can have and using this capital into other things within Skanska.

Moving forward to what we have here in capital allocation. You can see that we have had the growth trend over the years. And then we had it on hold for a bit. And right now, you can see that we have a situation that we are on SEK 54 billion. And the gray bar there, connected 10 to RD residential development has come down a bit. Going forward, of course, we would like to start new projects where we have seen -- there we see good transaction opportunities, of course, but also that we are focusing on regaining the profitability in line with the targets that we have here. we don't really see a growth agenda here for this area when it comes to the capital employed. We have an appropriate level of capital employed already right now for the project development going forward.

Moving into the strong net cash position that we have, we are very happy with that, of course. You can see that we are in the Q3 here, SEK 9 billion. And that gives us then a headroom then to the limit of minus SEK 10 million in debt of SEK 90 billion that we can use, so to say. Going forward, we have very much a strong focus here on maintaining the good working capital ratio, of course. But also, we would like to make sure we need to have enough cash to navigate the uncertainties that can happen in our industry, of course. But also taking a good advantage of if we see good opportunities here and so on. Also important is that we are keeping the credit ratio equivalent then to investment grade going forward. But that is very important for us as well.

Moving on then to the equity position. Anders [indiscernible] to it. We have a great development here over the years. And right now, we are on the level of SEK 61 billion, then a corresponding and to 38% equity ratio. And this is very much depending on the strategy that we have had here over the years, how we have worked with construction, how we have worked with also the PD business and so on in order to generate all this. Of course, when we set up the need here. We look into internally here what we see is, of course, important when it comes to the underlying requirements, but also looking into a risk buffer, what do we actually need there. And we see that we are very happy with the situation that we have right now here.

Also, looking into return on equity, you can see that we are right now on 10%, but we have the target then of 18%, and it will take time to get there. the most important thing is that in order to get there, it's very important that all the business streams are delivering according to the targets. And I just want to reiterate that we are focusing on this return on equity here.

Moving on then here to the dividend and the good track record that we have here. We're focusing on the dividend in a way that we have a very stable and predictable, and that is very important for us. And one example of that is actually then if you look into the following the pandemic there that we cut the dividend, that was then connected and that we took it back then later on. And of course, over the years, we can see that we have a dividend around SEK 17 billion over the last 5 years. And of course, you can see here also when it comes to the gray ones that we are working with extra dividends and it has been utilized early and, of course, to distribute excess capital and so on.

Finalizing here, as we were into, Anders showed this in the beginning. It's very much connected into the way we are working. We are focusing here on the EBIT generation. It's very much profit that we are focusing on. We're also looking into the revenue opportunities that we have going forward with our where you're working here with the different areas that we touched that was important for us. But also when it comes to the capital efficient to really make sure that we internally distribute the money to the most profitable areas that we can see here. All in all, of course, it's very important that we continue then to have a total shareholder return and focusing on that and the different aspects around that, I would say.

With this, I hand over to Antonia again.

Thank you, Jonas. So now we're opening up for questions, and I will invite the entire group leadership team up on stage. .

And I will take the opportunity to remind those of you that are watching from a distance. If you have a question for us here, then please use the telephone conference number provided and follow the instructions by the operator, and you will get put through us here on stage.

And for everyone here in the room, if you have a question, please just raise your hand, and we will bring a microphone to you. And I will ask you to start by stating your name and organization. And we will start with a question over here.

Keivan Shirvanpour, SEB. First of all, a question on the new margin target, 4% EBIT. Could you maybe elaborate what's the upside potential to this market? How much could you potentially have above that 4%?

It's a target is 4% or above. And you can definitely see some more opportunity to increase both to go for segment where we have seen high profitability growth in the past here, but also by being more efficient internally. But I won't be able to quantify what's the potential. But it's a relevant target. I'm confident that the strong backlog we have, high-quality backlog support that.

And could you maybe say something about the different markets, how the margins will develop there?

Yes. If I look at last quarters, we have been performing well in all geographies. And that's also important to be able to reach a very high target, ambitious target. We need to perform in all geographies, and we have done so. In Q3, if you look at the performance, it's quite even distributed. So I would say all geographies needs to contribute.

And also, I have a question on the commercial property development. Because as you mentioned, you have a quite low activity in the U.S. market. And you have quite a lot of projects that are completed but not yet sold. And some of these, you have consistently written down the surplus values in these projects, which is now 5% for the completed project and then it's 20% for the ongoing projects. Could you maybe elaborate first of all, of the difference between the ongoing projects and the completed projects? And yes, we could stop there.

Yes, I can take that one. I mean the last 3 couple of years here. So that's why you see a much higher margin than that. And when it comes to the completed, I mean, we took quite a bit of value adjustment in the fourth quarter of 2023. So you can see a range from -- I mean, the ones we wrote down, then the book value is equal to the market value and the surplus value everything equal would be 0%. And then you, of course, have stuff in there that is more than 5% and an average is 5%. But the key thing is that the difference here is that we start healthy project, and we still have a backlog of projects that were subject to the write-downs and decrease of surplus value in end of 2023.

But some of these projects, would you say that there are potential projects that are loss-making or have a 0 margin, given that this sequence remark there at that point of time, right? .

So yes, there could be any range from the surplus value to higher surplus well than 5% in that, but we don't comment on individual projects.

Very good. We have got another question of here.

Graham Hunt from Jefferies. I've just got two questions. I'll start with construction. So you talked a little bit about the strong demand you're seeing in data centers in Georgia and Arizona. But it's something we haven't seen come through into the order book in the last few quarters. So just wondering if you could comment on that and when we could see that demand come through into your orders?

So if you look back to last year, we had very strong order bookings in building for data centers. It slowed down a little bit this year. We had a new administration come in. There was some volatility in the market. We're also working with our clients, so they were changing some of the technology, cooling technology, how we cool these data centers, these hyperscalers. So -- but we're in constant conversations with them now, good opportunities on the board, so we expect our orders to pick up. But they have been staffed off in a little this year after a very strong 2024.

Understood. And then just coming back to capital allocation and returns to shareholders. To me, it sounds like you're not looking to invest more in the property development business, just rather recycling capital, but you're generating a lot of cash in your construction business, and you're at a very strong net cash position on the balance sheet. Could we see you reiterated your payout ratio targets today, but could we see additional top-up with specials going forward or move to the top end of that range closer to 70% going forward?

Well, we always continuously look at the capital structure in the company. And we are in a very good position around as we have shown here today. And we will -- and we're doing that together with the Board all the time. So I won't be able to guide you right now. We will come back on that after Q4.

Very good. We've got another question up okay, up there.

Stefan from Danske Bank. Two questions from me. First, on the U.S. business, construction business. It's been -- looking back the last few years, it's been a phenomenal market with high demand? And if I understood it correctly, maybe not even supply enough to supply that demand. And of course, that drives margins. Could you maybe elaborate on the situation right now? Is there a risk for normalization of the market where there's more competition and where margins are therefore hampered? And how would you tackle that?

Yes. So Andy said earlier, we have a strong outlook on the civil market in the U.S., stable outlook for building. It has been a strong market. Our book-to-bill last year in the U.S. was 156%, I think. So very strong opportunities. Right now, it's softened a bit, but it's still very stable. And that's driven our margin. We've taken advantage of the opportunities available to us. I mean as I stand here today, I feel we have a very strong backlog. We have good opportunities in the market on both the civil and the building side, and we're just going to continue to seize those opportunities as they come to us. So we feel strongly positive about where we are today.

And then back to capital allocation question. I mean we've heard here now that you're happy with the allocation to the Peter streams. And of course, if the market recovers, those streams will actually contribute with some divestments. And you have SEK 19 billion above your limit net debt target. And you're commenting that it's nice to have yes, sure. And if something bad happens, it could be good to have. So I'm just curious if you have minus 10 as a debt target, what would be your what target would you -- where would you like to be over time to always be secure? That's a different -- I mean, the limit is one question, but where are you happy? Are you happy at 10 plus or 0 or somewhere else?

I can start -- it depends on the market situation. Now we have been a few years where the transaction market has not really worked as it used to. Both when it comes to commercial property development and residential. So in that case, you need to be more cautious. You need to have a strong cash position, in my view. But then when we say we don't need more capital in the project development as we have now, we want to start more projects. We have been through this in the commercial direction. We want to start more projects, both in urgency because that is where we create a lot of value for shareholders. So that's -- yes, that's a message and that's a direction for us.

Last question then. On -- you can use the cash in different ways, I guess. So you could distribute it as we had a question before here, but Historically, you've also done some acquisitions. Could that actually come up on your agenda again?

I would -- I don't rule anything out, but we don't have very high priority to go for large acquisitions, but I won't rule out to complement the operation that we have today.

Thank you very much. So we've got another question up here.

Erik Granstrom with D&B Carnegie. I have two questions as well. Starting off with the gross margin that you mentioned in your order backlog, you highlighted that you have a larger proportion now that have a rather healthy gross margin. Is this impacted at all by the fact that the order backlog has also increased versus civil work compared to building. And does that impact that at all in terms of business mix or is it just simply organic. We can start there.

I think if you look on the civil operation versus the building operation, yes, the civil operation normally applies, say, a higher risk level but managing that well, we convert in a way the contingencies for the risk into profit. And you say that has been a very good recipe for us and in a way, say, contributing to the margin development over time. You see that from the Nordic market where we're strong in Civil, and we also see that from the U.S. market.

Okay. And then my final -- my last question is regarding R&D, you mentioned that you would like to adjust the land bank towards where you see growth. And right now, it seems like you're growing more in Eastern Europe. Does that mean that you're looking into divesting land in the Nordics in order to acquire land in Eastern Europe and adjust the land bank that way? Or do you simply see the opportunity to acquire more in Eastern Europe?

We -- you can say, buying and selling land is part of the business. We do that all the time. And when we are in a way, looking at land back opportunities versus in a way what we have today in terms of selling, that's always a balance in terms of where can we get more profit. And how fast can we in a way, turn or return the capital. So we are, say, looking at opportunities in the market, as Richard just said as well, Central European market has been very good for us. We would like in a way in a way to take a larger portion in that market. At the same time, we have a good land bank in Nordic as well. So it will be a balance.

Just maybe add to that point. I mean, you also decrease the land bank every time you start a project and then you need to replenish. So that's another way of redistributing between geographies.

Very good. So I will -- I see that we've got a question here at the back end of the room.

Nicolas Mora from Morgan Stanley. I had three actually. Just if we can come back on the excellent chart where you show the gross margin of your largest projects, so nearing 10% said that's around 70% of revenues. On S&A 4, means you're doing 6% EBIT margin on 70% of your revenues Am I correct? Or that's how we read the chart. I mean, it looks extremely high. It also implies there's still a tail of projects with very low margins, how can you deal with that tail if need be?

And then I wanted to come back to the point on the mix, especially in the U.S. between civil and building. We're seeing most of your peers do 2% EBIT margin on building. So you must be doing on civil, something between 6% plus. I mean, the mix is key in driving the overall margin, do you see continued efforts internally to skew the business to civil.

And then last one on data centers. Is it needed to pursue this in terms of higher margin? Is that going to help you continue to derive more than 4% margin construction?

I can take the first one. Yes, as we have been saying here on stage, we have a very high quality in the backlog. And the opportunities in the backlog is definitely supporting the new target that we have 4% or above. But it also when we're talking about the most likely margin, it's not in the book. So we need to execute the project in the right way, mitigate the risk that remains, and that's the biggest challenge. And also the biggest opportunity. But you're correct. We are in a very good position if you look at the history as well. So Richard, can you take the other two?

Yes. So just a question about civil and building and the mix there. And we have a fantastic stand-alone civil business. We have a fantastic stand-alone Skanska SA Building business. They each thrive in their respective markets. I've learned humility over the years being with a Swedish company, but we're better than our competition. We bring that together. We're doing very well in both streams, and we look for these opportunities. I showed them on the screen, Moynihan train, L300, other projects that we can bring together our respective competencies, and that's where we can outperform the market. That's the power of One Skanska in terms of construction.

When it comes to data centers, and it's a burgeoning area for us. We have lots of work there now. We're talking with customers, as I mentioned, about additional opportunities right now. we think we can continue to outperform there in terms of a margin perspective from -- in that sector as well. So hopefully, that answers your question.

I can just add there when it comes to the margin side of Anders there. of course, we -- when we look into the gross margin there, it looks like it's good. But as I mentioned also, we -- when we're taking forward with the margin, we are really looking -- taking care of the we have some contingencies also until we have completed the project, and that is also in the play here. So as we would say, we need to execute them first, then we can see how good things will be. And that is also an important pyramid that we will come back to her later on. .

So I will now turn to our operator and check if there are anyone in the queue wanting to join us here from our online audience.

For now there are no questions from the phone.

Okay. Very well. Have we got any more questions from the audience here in the room? Very well. Then we've answered -- sorry, one more. Okay. Yes. Nicolas.

If I may, yes. You've talked a lot about margins coming back on construction, not too much on top line. We've seen the top line development it's been relatively healthy, so around 3.5%, 4%. Are you seeing enough are you comfortable enough to think you can over deliver on that on what you've achieved over the past 3 years on that front? Can you do more than that, say, met high single digits considering the markets you're in? So Nordics, not great, but not from a low level. Central and Eastern Europe, the U.S. is pretty healthy. Do you think you -- yes, you -- internally, nobody likes to incentivize on volume? That puts margin at risk, but it's there, let's say, a hidden agenda to do more than basically the 3.5 to 4.

I can start. Yes, we have been very clear here on stage, in my view, that we see potential growth in market where we perform well. We have a good track record, and we also see that the market support that. And we are looking into new geographies. We can see potential growth in segments and also in other products. But it's not something we will guide on the potential here, but I'm confident that we have -- we are in a position where we can benefit from that opportunities.

Very good. then it looks like we've answered all questions that you had for us here today. And of course, our launch mingle and our dinner mingle and our afternoon program will offer you more opportunities to ask questions. But now I would like to say thank you for the questions, and thank you to the team for providing good answers.

We are now wrapping up the broadcasted part of the day. So I would like to say thank you for watching us online. And we're now going to conclude with some final remarks.

And for those of you that are here in the room with us, after those final remarks, we will have another coffee break and then we will gather back in here at 10 to 11.

So now you heard about our solid position that we're standing on currently. And you've heard how we are sharpening our commercial direction going forward for continued value creation. Let's listen to our President and CEO as he concludes our ambitions, actions and strategies going forward.

Of course. So we have been through the ambitions we have with the company. We have looked into the track record and performance, as you have seen for each and every stream. And also, we have been addressing the actions and priorities going forward, both when it comes to strategic choices, but also when it comes to commercial direction.

And on the commercial direction, if it just briefly go through the streams in construction. We have seen a tremendous journey to restore the profitability, and we are delivering on a very high level right now. And that's also encouraging to see that we see some potential future growth in different segments, different geographies. So that's really encouraging. Residential development, it's all about taking care of the position we have today. And as we have seen here on stage, we have a good land bank position. But we do need to address and get rid of the answer completed because we don't get any income from those. So that's a big priority. And we need to have a proportionate higher bar when it comes to ongoing projects. That's where we create value. So we need to start where the market allows us because the project we start needs to support the target of 10% return on the capital employed. And that's where we are today when we start projects.

Commercial property development, maximizing the value creation in a slowly recovering market. Also here, we need to start more projects, and we will do so where the market allows us. We see signs of improvement in especially Central Europe but also in the Nordics. So that will be a big priority going forward.

And investment properties already today creating value for the shareholders. We're creating positive cash flow and also the profit contribution. So I remind you of the target, we have been able to increase the targets in construction. I'm very confident that the backlog and the strong performance supports that. We are already today at 3.9% on a rolling 12-month basis.

And the other one, restore the profitability in the project development, we're not satisfied with 1.4%. And we have been addressing here what's our plan is to get back to the level we want to be. Investment profit is a decent level today. And return on equity, we keep our 18% target. I think that's a relevant target, and we have been there and our ambition is to get back there as soon as possible.

We are talking about the cash position on many times during these days. And we have a payout ratio of 40% to 70%.

So all in all, I'm very confident that we will continue to create shareholder value in the future as well.

So with that, I close this part of the Capital Market Day, and thank you all for listening. Thank you.

Good morning, and a warm welcome to the presentation of Skanska's Third Quarter Report for 2025. For those of you that don't know me, I'm Antonia Junelind. I'm the Senior Vice President for Skanska's Investor Relations. And here on stage in our studio today, I've got President and CEO, Anders Danielsson; and CFO, Jonas Rickberg.

We're going to follow the typical structure of these press conferences. We will start by walking through the past quarter to provide you with a business, financial and market development update. And after that initial presentation, we will move over to questions. [Operator Instructions]

If you are here in the room with us, then you can, of course, just ask questions by raising your hand. We will bring a microphone to you, and we will take it from there. So yes, I will no longer hold you off. We'll take you through the third quarter. Anders, let's do this.

Thank you, Antonia. Good to see everyone. Before we jump into the figures, I want you to look at the picture here on the slide. And that's called The Eight, one of our project development office building in Bellevue, part of Greater Seattle area in the United States. And it's actually a Class A building, one of the biggest or the biggest commercial investment we have had. We're also proud to be able to announce in a couple of years back that we have the greatest, the biggest lease here as well. And this -- today, the office building is leased more than 80%. So it's a great, great building.

I'm happy to say that we're going to host the Capital Market Day in a few weeks in the same building. So I look forward to see everyone who will show up there. And we will also have a deep dive, of course, of the U.S. operation at the time, together with the commercial direction forward for the group.

But now the third quarter. It's a solid quarter, solid third quarter. The construction is performing very well in all geographies, and we have strong market generated by a solid project portfolio. In Residential Development, we have very strong sales and margin in our Central European business, so a very high performance there. The Nordic market remains weak, which impacts both the sales and the profitability level.

Commercial Property Development. We have 2 large lease contracts signed in the quarter, and I will come back to the profitability level here. Investment Properties, stable performance, stable cash flow and stable leasing ratio.

Operating margin in Construction is 4.2%, very high level, very high compared to last year, 3.6%, and well above our target, as you know.

Return on capital employed in Project Development, 1.4%, and that's on the low level below our target but it's driven by a slow market in different parts of our operation. Return on capital employed in Investment Properties is 4.7%, stable performance there on a rolling 12. Return on equity, 10% on a rolling 12-month basis. And we continue to have a solid performance on the financial position, and that's very important for us, of course, and a competitive advantage going forward. And we also managed to continue to reduce the carbon emission. And now we are at 64% reduction compared to our baseline year in 2015.

So I will go into each and every stream, starting with Construction. Revenue increase in local currencies, 7%, which is good. Order bookings is around SEK 40 billion. And we do have a book-to-build ratio over 100% on a rolling 12-month basis. So we have a very good position when it comes to order backlog. I will come back to that. But it is on historically high levels. And operating income close to SEK 1.8 billion, increased from last year, SEK 1.5 billion. And again, the operating margin is very strong here, 4.2%.

So strong result and high margin across all geographies, and that's very encouraging and also prove that we have kept our discipline and we have been successful in the strategic direction here. And we have a rolling 12 months group operating margin of 3.9%. Solid order intake for the group and a strong backlog.

Moving on to the Residential Development. Revenue is pretty much in line with last year. We have sold 383 homes, and we have increased the started homes mainly driven by the Central European operation, 572 started homes. And we have an operating income of SEK 131 million, representing a return on capital employed 5.9% on a rolling 12. Very strong sales and result in Central Europe. We have started 2 new projects, and we have -- with a very good presale level, which drives, of course, the sales in the quarter.

The Nordic housing market remains weaker and Nordic businesses recorded a very small loss there. But overall, it's driven by a weak market. We can see some signs of improvement in the Norwegian operation here, but overall, quite slow.

Commercial Property Development. Operating income is minus SEK 397 million, which is driven by write-downs in impairments, write-downs in few projects in the U.S. properties. We'll come back to that. But that gives -- we also have a gain on sale of SEK 377 million in the quarter. Return on capital employed is 0, rolling 12.

We do have 15 ongoing projects representing SEK 15 billion in investment upon completion of those projects. And we have 22 completed projects representing SEK 18 billion in total investment. The leasing ratio in those completed projects is fairly good. We are at 77% leased. So we have a good position there, giving us a cash flow -- positive cash flow. Three project divestment and one internal land transfer in the quarter. Result includes these impairment charges, of course, in U.S. And we have 2 large lease contracts signed in the same quarter.

Investment Properties, operating income stable, SEK 143 million, and we do have a stable occupancy rate of 83%, it was the same as last quarter. The total property values continue to be on the same level, SEK 8.2 billion.

If I go back to the Construction stream now and look at the order bookings. And here, you can see over time for last 5 years, the order backlog, the bars, the blue bars here. You can also see the rolling 12 order bookings, the light gray line and the order bookings per quarter, the orange. And also the revenue, the green, rolling 12, which you can see has had a slow increasing trend the last few years. And that's thanks, of course, that we have been successful in increasing the order backlog, which again is on historically high level. And you can see the yellow line, the book-to-build rates over 12 months.

So I think it's important here to look at over the rolling 12 months' trend, because when it comes to order bookings, it can fluctuate quite a lot between a single quarter. And that you can see also when you look at the order intake in the quarter, which is down from SEK 50 billion to around SEK 40 billion. We'll come back to each and every geography here. But we are in a very good position.

And if I look at the order bookings per geographies, you can see here that overall, we have a book-to-build ratio of 106%, and we have over well above in the Nordic and European operation slightly below in the U.S. operation on a rolling 12-month basis. But look at the months of production, 19 months in overall, and I'm very confident that we have a very good position. So we can continue to be selective going for projects that we see we have competitive advantage and that we have a good track record as well for the future.

So with that, I hand over to Jonas to go through the financials.

Thank you, Anders. And we'll continue here with the Construction side. And as you can see, the revenue is fairly flat here in SEK, but it's actually up then with 7% in local currency. The green line, we're actually then having a gross margin that has increased to 8% in the quarter, which really emphasizes the great quality that we have in the order book. We continue to have a strong and good cost control within the stream, and that is then generating that you can see over the line there, but that is also then showing here with a good result in the operating margin of 4.2%.

Operating income of SEK 1.8 billion, an increase with 22% versus last year. Worth mentioning again, I would say, is the rolling 12 of 3.9% in operating margin.

Looking here on the geographies, we still see that we have a solid delivery for all the areas, Nordic, Europe and U.S. That sticks out a little bit on the positive side here, it's actually Sweden with 4.9. That is building up from a strong portfolio right now, and it's very clear natural trends within the quarter and so on.

So if we summarize the Construction line here, the Construction stream, we can see that we have a strong performance in all geographies right now. We have actually a 5-year track record here on margins that are on or above our target of 3.5%, which is strong. And of course, as you said, Anders, we had SEK 264 billion here in our order book that we can harvest from, and that is a real strength going forward.

Moving on then to residential development. Here, we can see the income statement. And of course, you can see that half of the revenue actually come from Central Europe, which is really strength from that delivery point of view. We started 2 new projects in Central Europe in Prague and Kraków, and that had a really good presales level as well.

We have reduced S&A significantly over the years. And right now, we have an organization that is set for higher volumes going forward to really get the leverage here on the S&A going forward. Also, please note that we have an upward trend on the rolling 12 operating margin at 8% here, which is strong.

Looking at the operating income or income statement by geographies, you can see here very clear that Europe of SEK 159 million, that is really lifting or keeping up the strong -- the performance here in the stream on a margin of 17.5%.

Secondly, here, you can see that Nordic is a little bit on the weaker side, and that is mainly driven by low revenue, actually low sales, few units sold. And also it confirms the trend here that we have said before that buyers really would like to buy close to completion and that we are selling mostly from projects that were a little bit weak in margin that is reflected here.

Moving on to home started. You can see that we have out of the 572 units, we have 430 that is coming then from Central Europe and then 142 in Nordic here, and that is actually that we have started places here in Oslo and Uppsala and [ Östersund ]. And looking at the homes sold of the 383, you can see that 240 is actually then coming from presales started in Central Europe and 141 from the Nordic areas here. Rolling 12 months, you can see that we are very balanced when it comes to the sold and started homes, I would say.

If we turn into our stock situation, you can see that we have -- the homes in production is actually then ticking up to a level of almost 2,900 homes in production, and that is up since Q2. Unsold completed homes is also coming down from Q2 level of 486, which is good as well.

If you summarize the Residential Development area, we can see that we have a good performance despite we have a challenging situation in the Nordic, but it's really lifted up from the Central European unit here. And also that we are preparing here good projects within pipeline for start when the market condition is in a better place as well.

If we move to Commercial Development, you can see here that revenue side, there are 3 divestments, 1 in Poland and 2 in Sweden. And also, we have the internal sales of land from -- in Europe here. Impacting the operating income is actually the gain from sales mostly related then to -- from a situation of SEK 234 million here in the gain of sales. Also, as we were into, we had an asset impairment in U.S. of SEK 658 million. And as we have mentioned earlier, it's low transaction volume in U.S. and it's very slow there. So it's -- the visibility is hard to compare there. So it's a few units only.

The impairment has done, of course, to really ensure that we are having the right balance, the asset value in the balance sheet, and we are doing this continuously over quarters. And it's very clear that it has no cash flow impact, and it's then representing a little bit more than 3% of the book value of total U.S. portfolio.

Moving on to unrealized and realized gains. Here, we can see that we had SEK 5 billion in the quarter, and it's an upward trend, which is good. And that is then sign actually of the starting -- of the fact that we are starting to see the positive impact of slowly starting new projects here with profitable and solid business cases. We have a situation. We have a good land bank in attractive locations that we really would like to build and harvest from going forward and actually making sure that we have solid business case for this going forward.

In the portfolio, we have unrealized gains of 10% here in Q3. And as we have said many times before, it's very, very quite much in the portfolio between the different regions of started and older -- more new project versus older projects and so on.

If we move on here to the completion profile of all the Commercial Development properties that we have, we have SEK 18 billion of already completed and 22 projects. And as we can see here, it's on the purple line, it's up -- it's 77% in leasing, and that is up from 74% last year. So it's a good trend there.

Also, if you look into the green dots, and if you are very particular comparing them to the last quarter, they all have moved up, and that is a real strength here that we are leasing more with ongoing projects.

And in Q3, we also made sure that we are having a better outlook here for Central Europe and Nordics when it comes to the commercial property. And it's very much based on the fact that we can see that we have -- there's better access to debt as well as the pricing on debt and so on, and that is driving a little bit the market here. And that is, of course, very encouraging to see.

Focus even more here when it comes to the leasing part of commercial operation. We can see that we have in the bar there to the blue, last right, you can see 77,000 square meters let, and that is actually then coming from 2 big leases, H2Offices in Budapest as well as Solna Link that we have started there.

Also, we can see, I'm very glad also that we have a trend shift here. Average leasing ratio of the ongoing projects is 64% versus then the compared to completion of 55%. And that is a strength, of course, that we are increasing the leasing versus then the completion that we have.

To sum up, we have a strong leasing activity in the quarter. And of course, we see the importance here to turning the -- all the completed assets that we have and translate them going forward and also be able to make sure that we have solid business case to start with when the market is ready and so on.

We have a lot of things to sell, but we are also very cautious about how -- and we have a very patient and good value for the -- we really would like to capture the good value that we have created over the years. So very good patience here to sell the good things that we have, I would say.

When it comes to the Investment Properties, it's stable operational and financial performance within the stream. Operation income is positively impacted by a reassessment of the property value of some units here, and it's actually then SEK 53 million up. And that is also a sign that we can see that we have better outlook here for the Nordic markets real estate as well.

Moving into the income statement. We can -- here, I would like to take the focus a little bit on the central items that is SEK 58 million, and that is actually then coming from a positive effect from release of provision on the asset management business related to some milestones in projects there. Also, we can see that cost varies between quarters and so on. And as I said last quarter 2, we are on the level that we are representing more or less the first half year of this year for the full year. And we are seeing a little bit higher cost here due to the fact that we have outsourced IT infrastructure that is impacting this year, but of course, it will be better here going forward once we can see these synergies.

Also, looking at the elimination line there, you can see that, that is then connected to the internal transfer, that of SEK 234 million recognized in the commercial development area. And no swings really in the financial net, and we actually then recorded a profit of SEK 1.3 billion and an earnings per share increased by 36% versus last quarter.

Moving into group cash flow. We can see that we had a 0 cash flow for the quarter, and that was a result of that we are in a net investment for Residential and Construction stream right now. If we lift ourselves a little bit more and look into the bigger trend of rolling 12, we can see that we have a really good underlying cash flow from the business operation, and we can see good -- and continue to have good level of negative working capital as we will come into soon as well. And also, we can see that we continue being a net divestment cycle that we really would like to be and releasing more cash and so on.

Focusing on the construction and the free working capital, you can see it's fairly flat there between the Q2 and Q3. And we are quite comfortable with these levels as we have right now and so on.

Also worth mentioning here is that the higher bars here last year, quarter 3 and quarter 4, are not representing really because it was very much connected then to mobilization of some milestones in big projects that we have an advantage of. And of course, we have 18.2% here in relation to revenue, which is strong.

Moving on to the investment side. As mentioned, the quarter, we had net investment for the group. But rolling 12 period, we remain on the net divestment territory here. This means that we are taking down the capital employed level within Residential and Commercial Development here, as you can see in the bottom from SEK 64 billion then to SEK 62 billion and so on.

Looking ahead, of course, as I said, we have a few assets on the balance sheet that we really would like to transfer and making ready for divestments. We are starting and preparing new products with really good solid business case as well. But the timing of these flows are of essential that the market and the demand and supply are meeting, then, of course, we will shoot off these. For sure, once we see that we are succeeding here with the divestments, we're making sure that we will then invest more going forward.

If we look into the liquidity point here, we can see that we have a good liquidity situation of SEK 28.1 billion here. And that is then a super strong position, and we have a loan portfolio that have a balanced maturity profile as well.

Finishing off here with the financial position, which is very, very strong, as you know, who has followed us. We have an equity of SEK 60 billion, and that is almost a level of 38% and equity ratio.

We have an adjusted net cash of SEK 9.3 billion. And as you were into Anders, it's a good situation to be in and also good for all our customers that are really relying on us and making sure -- and trusting us in the fact that we are here to complete the projects no matter what. So we have the financial strength to do that, I would say.

And by that, handing over to you, Anders.

Sure. I will go through the market outlook before we summarize and start the Q&A. Market outlook for Construction is pretty much unchanged from the last quarter. We have a strong civil market in the U.S., and we can see we are in a more traditional infrastructure operation in U.S. So we can see a strong pipeline, and we don't see any slowdown here. And there's still existing federal funding programs as running over time here.

The civil market in Europe is more stable. It's strong in Sweden due to -- we can see that there's a lot of investments in infrastructure. We can see defense and also wastewater and that kind of facility coming out. So that's a good opportunity for us.

And the building market is stable in the U.S., continue to be stable and more weaker, especially in the Nordic due to the slower residential and commercial construction market. But in Central Europe, it's more stable, both on civil and building.

Residential Development, good activity, as we've been talking about in Central Europe, great market and driven by a lot of people moving into the capital cities and the largest university cities. And the lower-than-normal market in the Nordic housing market, even though we can see some signs, the underlying need for residential is there in the market we are operating in. The lower interest rates helps, of course, but I think we need to see some economic growth, GDP growth in the different market in the Nordics to really see that people are getting back the confidence and buying homes. But we do have an underlying need.

Commercial Property Development, we're increasing the outlook in Central Europe and in the Nordics. We can see higher leasing activity in both Central Europe and Nordic, we can also see that the investor market and transaction market, they are more active, especially in Central Europe, but we can see signs of improvement also in the Nordics. So we are increasing it to a stable market in those geographies.

Investment Properties. Here, we can see continue to be stable market outlook. There's a strong demand for high-quality buildings, office building in the right location with good train connection and so on. We can offer that. So we can see it's a polarized market, definitely, but we are in the right location there, and we expect rents to be mostly stable here.

So if I summarize the third quarter. Construction, strong margin generated by the solid project portfolio. We had a great performance in Residential Development in Central Europe, weaker in Nordic. Commercial Property Development, 2 large lease contracts signed here in the Nordic and Central Europe. And again, the Investment Property is very stable. And very important, we are maintaining a solid financial position, which is a competitive advantage.

So with that, I hand over to Antonia to open up the Q&A.

Very good. So yes, now we will open up for your questions. [Operator Instructions] But I will actually start by turning to the room to see if we have any questions here. If you have a question, then just please raise your hand. We will bring a microphone and we'll ask you to please start by stating your name and organization.

We have a question here in the front.

Stefan from Danske Bank. A couple of quick ones. First, the margins in the Construction division. It's a major jump year-on-year. It looks good quarter-on-quarter as well. We're not really used to that kind of jump up. We can see the drop sometimes, but rarely such jumps up. Could you maybe elaborate on -- 2 questions. What's behind that? Are you getting rid of problem projects, and therefore, the good ones are seen? And second question on that, is this a new level that we could be comfortable calculating also for the future?

I can take that question, Stefan. Yes, we have a very strong performance in the Construction stream. And I can say that we have been able to, by this good discipline, avoiding loss-making project. And that's a real key to be successful here. And also, we should not look at the single quarter, I said it before. So you should look more on the rolling 12 months. We don't have any positive one-offs in the quarter. It's a very good performance. And the key here is all geographies performing, and that's also quite unusual even though we have been on a good level for some years now.

So right now, everyone is performing. And of course, that boosts up the underlying margin. And I also see that in a single quarter, it can fluctuate because we -- sometimes, we are completing large project, profitable project. And then since we have a conservative profit to take in -- during the construction, we can have a boost in the -- when we complete the project. So look more over time.

What we expect of the future? I always expect to reach our targets and be above our targets, which we have been for some time now, and I have no other view on the future, definitely.

That's good. That's enough. And then on orders, when listening to you, you're talking a lot about the rolling 12 months and don't look at the quarter above and all that. But 2024 was extremely good in -- with large orders. Should I interpret you as the level in 2024 to be a normal year? Or should I continue to believe that it was a very, very good year, unusually good year?

It was an unusually good year. If you look at the third quarter now in U.S. because you can see the Nordic and European is actually increasing the order intake. But the U.S., if you look at the current year, we are on a 5-year, 10 years average. And again, we have a rolling book-to-build of rolling 12, but it's very close to 100% in U.S. So I'm -- so that's how we should look at it.

And then the final question on IP. You talked about the stable situation with the occupancy there, 83%. It's 80% in Stockholm, Gothenburg. To me, if you're not [ Kista ] with new stuff, it's actually a low level and it's not improving. So just wondering a little bit, is the specific properties that is a problem? Or is it just a general spread out issue?

I would say the leasing market is somewhat impacted by a slow economic growth. So there is -- we see some, as I said, increase in some signs of improvement, but it takes time, and it's a very polarized market. So if you have a Class A building and right location, it's much more attractive. So that's -- but it's -- you're right, it's on the same level for over a couple of quarters.

Is there specific properties that are really...

No, I wouldn't say so. It's quite even spread.

So we're going to continue with a question here in the room.

Yes. Albin Sandberg, SB1 Markets. I had a question on the financial position, and you made a comment about a level where the customers are happy and they can trust you. At the same time, you have the financial targets that would allow you for substantially more debt, which I guess also is tied back to the commercial property activities and so forth. But what kind of levels do you need to be in order to have the customers to be sort of happy with you? And is there anything to read into where we are in the cycle now that makes you want to operate with a higher net cash maybe than what you theoretically could?

Albin, of course, I mean, we are in a business that is very cyclical. And of course, we really would like to be able to take advantage of things and be opportunistic when things are possible to do that. So we are not really guiding how much we need and so going forward. But we are comfortable with the situation we are right now, definitely.

And my second and final question is, when it comes to your investment, the plans and so forth because obviously, your invested capital has come down a bit now year-to-date. Given what's happening on the office side and so on recently, what would take you to get the investments up now, let's say, over the next 12 months?

No. But as we said, we can see that we have a good leasing traction and so on and also that the market is here in Central Europe as well as in Nordic, it starts to meet and so on. And of course, if we are successful here with the SEK 18 billion that we have in the balance sheet of [ 22 ] ready projects, and if we can make them fly here. And of course, then we are a little bit more appetite for the things that we have prepared, of course. So really looking forward to things to move here.

I can add to that, that we will start project and our starting project in geographies that we see that there's more -- better activity, we announced starting in Poland the other day as one example.

Very good. So we will then move over to the online audience. And I will ask you, please, operator, can you put through the first caller.

[Operator Instructions] Our first question comes from Graham Hunt with Jefferies.

I've just got 2 questions, please. First one is on the U.S. commercial impairment. So you only have a handful of assets in the U.S. So I just wondered if you could give any more color on where that impairment has been taken or what kind of assets it's been taken on region-wise, type of building wise. Just any more color on the breakdown of that impairment would be helpful.

And then second question also on the U.S. construction business. Last year, you had quite a lot of order intake related to data centers, but that seems to have dropped off quite significantly in 2025. Is there anything that we should read into that as to your offering in data centers? Or is that just typical lumpiness in the market? Any comments around that would be helpful.

Sure, Graham. Thank you for the question. If I start with the U.S., we have an operation in 4 cities in U.S., as you know, and we haven't announced where. We have said now it's a few projects. And again, to Jonas' point, the value of this write-down represent just about 3% of the total value. So I don't see any drama in that.

And if you look at the U.S. portfolio overall, we have mainly -- the main part is office building in those 4 cities. And we also -- but we also have high-end rental residential in the different cities as well. And we also have some small life science. But the main part is office building. And again, we have a good leasing ratio here. So we do get a good cash flow from them. But we have looked into this internally, external help, and we see due to the slow market, very few transactions. So we have to take this write-down in the single quarter.

On the construction data centers, I don't think you should look in a single quarter. It can be quite lumpy. We do -- we have a healthy backlog with data centers, a lot of international -- strong international players, who invest in data centers, and we can see they continue. So we haven't seen any cancellation. And we can see that the strong pipeline will -- our expectation, it will materialize going forward.

Our next question comes from Arnaud Lehmann with Bank of America.

A couple of questions on my side. Firstly, just following up on U.S. construction. Have you seen any implication from the recent government shutdown? We hear in the press about some projects being potentially canceled. So either in terms of order intakes or delays in payments or anything happening there in U.S. construction, please? That would be helpful.

And secondly, I appreciate it's a small part of your business, but coming back on Residential in the Nordics, you mentioned the weakness. Can you give us a bit of color on why that is the case when rates have been coming down a little bit? And do you see at one point potential improvement into 2026?

Thank you, Arnaud. If I start with the U.S. civil and the -- U.S. construction operation and the government shut, we haven't seen any impact on our project, and we haven't seen any cancellation either or late payment. The most of our client in U.S. operation are states, cities, institution, large -- as I said, large player on the data center side. So we are having a close look at it, of course. But so far, we haven't seen any impact.

And on the Nordics, yes, as I said earlier, the underlying need for homes in the Nordics are there, definitely. And we are on a very low level if you look at the whole market and new units coming out. But -- and the rates helps, of course, interest rates cut, it helps. But we need to see consumer confidence coming back. We saw it dropped quite a lot in the first quarter this year, and we also saw the impact on the sales. So I think we need to see some economic growth in the different geographies.

There's a lot of now initiative, Sweden as one example from the government to boost the growth, economic growth. And if that materialize, I'm sure we will see a different outlook in the future. But right now, we think it will take sometime.

[Operator Instructions] Our next question comes from Keivan Shirvanpour with SEB.

I have 2 questions on CD. The first is that you lifted your outlook for the Nordics and Europe in Q3. What's your expectations on divestments going forward? Are you maybe optimistic for making some transactions before the end of the year?

Okay. And as you all know, we don't guide here going forward. And right now, of course, we can see signs that, as I said earlier, when it comes to the leasing activities that is coming up and also that the transaction market is a little bit better with international players as well like this coming in and interesting to use the capital, so to say. So that was the main things why we are actually then increasing the outlook for the CD business here in Europe as well as in Nordic, I would say.

Okay. And then my second question is related to the unrealized gains. First of all, the complete project that you have, you have unrealized gain, which is at 5%. And then for the ongoing projects, you have unrealized gains, which is up 20%. Could you maybe elaborate the difference?

Sorry, once again, if you said that the unrealized in?

Yes. Unrealized gains for the completed project is equivalent to 5%, but the unrealized gains for completed projects or ongoing projects is at 20%. Why is there such a difference?

And that's, as I said, I mean, we had here the average of 10%, and that is then correlated to the fact that you are pointing out that we have a little bit older properties with lower, and then more new ones that is stable when it comes to the business cases and so on that is then generated the higher portfolio value there.

Okay. So just -- maybe I'll follow up. So I assume that divestments that may occur from completed projects will potentially have quite low margins, potentially single digits, if I interpret that correctly based on that valuation.

No. And as I said, I mean, we have the average here of 10%, and that is where we are communicating at the level right now.

Our last question over the phone comes from Nicolas Mora with Morgan Stanley.

Just a couple of questions coming back on the U.S. First one on the order intake. You still seem to be struggling a little bit with the smaller projects, the one you account for below SEK 300 million. Is the market still soft there? There's just no real pickup in these small projects from either on the private side or the public side? That would be the first question.

Second, on margins. So another very strong performance. All your peers are also doing better, especially, for example, in the U.S. civil works, but the Nordics peers as well have reported very strong results. Since everybody is being more disciplined, why not think about increasing the medium-term margin trend? You're getting very close to 4% now.

Yes. Thank you for that question. If I start with the U.S. order intake, the average size in the U.S. are larger than compared to Europe. So we would more proportionate more -- communicate more orders there compared to Europe. But I would not -- again, I would not look at a single quarter and compare it to -- last year was significantly higher -- unusually higher. And you should look more over time. And also, we are still on a 5 years average. And I think that's -- we have a very strong order backlog in U.S. as well.

So I'm confident in that, and I can also see a strong pipeline. So I'm not worried about the situation. We can continue to be selective and go for projects where we can see a competitive advantage and we can go for higher margin. That's what we've been doing for several years now, and that's paying off, obviously.

So that -- and if I look at the margin then, yes, we can see that it's increasing not only in U.S., we can see good margins in Europe as well. And we definitely -- we have been on the target level or above for some time now. And -- but the target is, as you know, 3.5% or above. And of course, I have no other view on it that we should maximize the profit from the operation. So -- but the target is still relevant.

Okay. And if I may, just following up on the question on data centers. I mean you -- obviously you said, I mean, these orders are lumpy. We should look at it over at least a 12-month basis. But if we -- indeed, if we look on a 12-month basis, it's been -- it's really been a dearth of projects in the U.S. in your sweet spot regionally and in terms of size, do you have an issue with your main customer? Or it's just basically bad luck on timing and things will pick up? I mean you say strong pipeline, but it's been now 5, 6 quarters with not much in terms of strong order intake.

Yes. But we have also communicated the last few quarters that some -- it's coming in new -- this data centers that needs to be cool and require more cooling. So sometimes we need to -- or the client needs to design the facilities to water cooling instead of air cooling and of course, that delays some of the projects. So I don't see any -- I haven't seen any cancellation. I have seen that some clients are postponing some projects due to the need for redesign. So I still -- I'm confident in that.

Very good. Then as far as I can see, there are no more questions from our online audience. Can you confirm that, George?

That's correct. We have no more questions.

Perfect. And no more raised hands in the audience, or Stefan, you have one more question? Yes, sure.

Just a follow-up there on the earlier question from SEB about the margin in the completed. When it comes to the projects that you -- over the last 2 years in the U.S. have written down the value on, I would imagine if you sell them to what you think is the market value, you wouldn't have any margin on those or -- so that's part of the explanation of the low margin or do I misinterpret that?

No. But as I said earlier, sorry to repeat myself, I mean it's a full portfolio view we are looking into here and there is differences here between the older project and the new ones that we started and so on, and we don't give any guidance really for specific markets where we have the profitability, so to say.

I fully understand that, but put it this way, when you write down the property value, you write it down, so you don't have any margin if you sell it, what you think you could get for it? I mean you don't write down and get the margin...

Yes, correct. Correct.

Very good. So that was then the final question. Thank you, Anders, Jonas, for your presentations and answers here today. And thank you, everyone. Big audience in the room today. Thank you for coming here and joining us here today. And for those of you that have been watching, thank you so much for tuning in for this webcast and press conference. We will naturally be back with a new report in the fourth quarter.

And even before then, as Anders mentioned here earlier, we are hosting our Capital Markets Day on November 18. So it will take place in Seattle. And if you can't join us there, we will also live stream part of the day on our web page. So turn into our IR pages there, and you will find the link, or reach out to myself or anyone else in the IR team.

Thank you so much for watching. Have a lovely day.