The housing market remained strong with healthy demand for newly produced homes.
Together with more projects started, this lays the foundation for growth. A favourable project and market mix had a positive impact on the gross margin for the quarter, which is why earnings strengthened significantly despite lower net sales. The wind down of the Danish operations was a first step in the ongoing strategic review aimed at achieving increased profitability in the Group.
More production starts in a strong market
Demand for newly produced housing units remained high in all of Bonava's markets. Favourable market conditions with healthy economic growth, low unemployment and low interest rate levels have laid the foundation for a positive view of the future among consumers and companies. The trend of prioritising personal housing situations is holding fast. Combined, these drivers are strong, which also affected the sales performance of our consumer business while interest from investors was significant, with several new transactions.
It is gratifying to have been able to start production on more new housing units during the quarter in order to offer a greater supply in our markets. Our ambition to increase the number of starts for full- year 2021 by approximately five per cent compared with 2020, adjusted for Denmark, stands firm. These starts assume that the procedures for granting permits run normally, where we are primarily dependent on being able to start projects in Germany.
Gradually improved profitability
Operating profit improved considerably, even including the provision of SEK 117 M for the wind down of the Danish operations and despite fewer housing units delivered. The comparison period was heavily influenced by the effects of the pandemic and a number of low-margin projects in Germany. The gross margin for the quarter strengthened as a result of a more favourable project and market mix, of which there was a greater share of consumer projects. Our objective is to improve profitability through cost control and more efficient governance and production, which is gradually being reflected in our figures.
Rising prices for construction materials and a shortage of input goods has had a limited impact on our projects to date. We are working actively to optimise orders and the flows to our construction sites, both through strategic purchases centrally for more markets and through close dialogue with local suppliers. The margin requirements for new projects were achievable since cost increases were offset by higher sales prices. We are focused fully on the developments, since a sustained shortage of materials and price increases could impact project margins, and result in delays in deliveries and production starts.
Doubling of starts, and strengthened gross margin in Germany In Germany, consumer demand was high with continued price increases even though the rate of increase has slowed somewhat. Interest in housing outside the cities increased. Compared with the year-earlier period, both project and regional mixes were more favourable and the gross margin for the quarter strengthened considerably. With the projects in our pipeline, healthy geographic exposure and a stable organisation, the conditions for profitable growth in our largest market are good. Our success in starting twice as many housing units is also gratifying.
More deliveries to consumers and new building rights in Sweden Strong demand and rising prices also characterised the Swedish mar- ket, where we are now seeing signals of a slowed rate of increase but still at a high level. Earnings were strengthened primarily as a result of an improved gross margin and an increase in the share of housing units delivered to consumers. We noted healthy interest from both Swedish and international investors, with two conditional transactions in Umeå and Sollentuna, and a transaction in central Västerås after the end of the quarter. We have also replenished our building rights portfolio in attractive locations close to Stockholm and relatively short lead times to production start, including over 100 building rights for single-family homes, a market segment where demand greatly exceeds supply. The situation that has arisen, involving a potential halt to production of cement on Gotland, could have major implications for the entire Swed- ish construction industry.
Wind down in Denmark and more projects in Finland and Norway The housing markets in Finland and Norway were strong, displaying a healthy sales performance with rising prices. In May, the decision was made to wind down Bonava's operations in Denmark. This was an initial step in our strategic review aimed at achieving increased
"There is a great deal of activity across the organisation to ensure deliveries and starts according to plan, while we are working purposefully to achieve more efficient and profitable operations."
profitability and balanced growth in the Group. The process of divesting the remaining land bank in Copenhagen has been initiated, and interest is significant.
In Finland, the work on streamlining our organisation, project governance and production continued. These activities will continue for several years. We began several new projects for consumers, where we also sold and began production on a rental housing project in Turku.
Several highly profitable deliveries in St Petersburg-Baltics
The trend in the markets in St. Petersburg and the Baltic region was strong, with high demand and rising prices. Our operations have a strong market position, and conditions remain positive. A larger number of housing unit deliveries in the Baltics, and more projects with strong margins, made a positive contribution to net sales and earnings. We have also expanded our project portfolio with new building rights in the Baltics.
High level of ambition for creating long-term profitability
The second quarter showed that we have gained a firmer grasp on our business. Even if there is uncertainty concerning the continued pan- demic, the underlying drivers for the housing market are strong. We have refinanced and increased our Green Financing Framework by SEK 500 M, which provides us with greater scope for action and a more balanced capital structure. This is further proof of the integrated approach and long-term perspective in our work on developing and financing sustainable homes for our customers. We have also refined our project portfolio for the future.
There is a great deal of activity across the organisation to ensure deliveries and starts according to plan, while we are working purposefully to achieve more efficient and profitable operations. Bonava celebrated five years in June, and we are now continuing with the next stage in the company's development. All with the ambition of creating more happy neighbourhoods and long-term value. Though there is much work to do, Bonava has a strong foundation for building further and I look forward with confidence to the continuing journey.
President and CEO
Outlook: Production starts 2021
For full-year 2021, it is estimated that the number of production starts will increase approximately 5 per cent compared with 5,364 housing starts in 2020, adjusted for starts in Denmark.
Interim report January-June 2021
From 1 April 2021, Bonava has reintroduced the line item "items affecting comparability" to the Income Statement, refer to Note 1 and to Significant events during the quarter.
Net sales amounted to SEK 3,379 M (3,537). The lower net sales were attributable to fewer housing units for investors being recognised in profit.
In the quarter, 903 (767) housing units for consumers were recognised in profit, generating net sales of SEK 2,956 M (2,346). The average price per housing unit recognised in profit was slightly higher than in the year-earlier period, totalling SEK 3.3 M (3.1).
Net sales to investors totalled SEK 294 M (1,122), and the number of housing units delivered was 140 (549).
Exchange rate fluctuations had a negative effect of SEK -148 M on consolidated net sales compared with the year-earlier period.
Operating profit for the quarter before items affecting comparability was SEK 257 M (56) and the operating margin was 7.6 per cent (1.6).
Operating profit after items affecting comparability amounted to SEK 140 M (56). The item affecting comparability pertains to costs of SEK 117 M related to the wind down of Bonava's Danish opera- tions. For more information, refer to Significant events during the quarter.
Excluding land sales and before items affecting comparability, operating profit totalled SEK 225 M (58) and the operating margin was
6.9 per cent (1.7). The higher operating margin is attributable to a greater share of housing units for consumers recognised in profit in combination with strengthened gross margins in all segments.
Exchange rate fluctuations had a negative impact of SEK -13 M on operating profit compared with the year-earlier quarter.
Net financial items, tax and profit for the quarter
Net financial items were SEK -39 M (-30). Costs were higher due to the raising of new long-term financing in September 2020 and as a result of SEK 3 M pertaining to remuneration to NCC (refer to Legal structure on page 13) being charged to net financial items by quarter as of 2021.
Profit after financial items amounted to SEK 101 M (25) for the quarter. Tax on profit for the quarter was SEK 25 M (7), corresponding to a tax rate of 26 per cent (28).
Operating profit and operating margin
Net sales, rolling 12 months
Operating proﬁt per quarter1)
Operating proﬁt, rolling 12 months1)
1) Excluding items affecting comparability in Q3 and Q4 2019 and Q2 2021.
Interim report January-June 2021
Net sales amounted to SEK 5,224 M (6,486). The lower level of net sales is attributable to the fewer housing units for consumers and investors being recognised in profit.
During the period, 1,568 (1,599) housing units for consumers were recognised in profit, with net sales of SEK 4,713 M (4,968). The average price per housing unit recognised in profit was in line with the preceding year, totalling SEK 3.0 M (3.1).
Net sales to investors totalled SEK 294 M (1,415), and the number of housing units delivered was 140 (664).
Exchange rate fluctuations had a negative effect of SEK -269 M on consolidated net sales compared with the year-earlier period.
Operating profit for the period before items affecting comparability was SEK 282 M (87) and the operating margin was 5.4 per cent (1.3). Operating profit after items affecting comparability amounted to
SEK 165 M (87) and the margin was 3.2 per cent (1.3). The item affecting comparability pertains to costs of SEK 117 M related to the wind down of Bonava's Danish operations in the second quarter. For more information, refer to Significant events during the quarter.
Excluding land sales and before items affecting comparability, operating profit totalled SEK 235 M (87) and the operating margin was 4.7 per cent (1.4). The higher operating margin is attributable
to the project mix, a greater share of housing units for consumers recognised in profit, and strengthened gross margins in all segments.
Exchange rate fluctuations had a negative impact of SEK -28 M on operating profit compared with the year-earlier period.
Net financial items, tax and profit for the quarter
Net financial items were SEK -72 M (-59). Costs were higher due to the raising of new long-term financing in September 2020 and as a result of SEK 6 M pertaining to remuneration to NCC (refer to Legal structure on page 13) being charged to net financial items as of 2021.
Profit after financial items for the period totalled SEK 93 M (27). Tax on profit for the period was SEK 24 M (7), corresponding to a tax rate of 26 per cent (28).
Operating profit before items affecting comparability1)
Parent Company and adjustments
Costs of SEK 117 M related to the wind down of operations in Denmark were reported as an item affecting comparability.
Interim report January-June 2021
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