Tomas Carlsson

President & CEO, NCC

NCC Q2 2026 Earnings Call | Disciplined Project Bidding Protects EPS Despite Monsoon Drag

🎥 Jul 16, 2026 📺 i101 ⏱ 33m 👁 4 views

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About Tomas Carlsson

Tomas Carlsson, President and CEO of NCC, discussed the company's second quarter 2026 results in an earnings call and an interview. He described the quarter as a good performance for the group, noting high order intake of 14.1 billion and record Q2 earnings in the Industry business area for stone and asphalt. Carlsson stated that the contracting business showed improved margins but lower sales, which he attributed to low order intake in late 2024 and early 2025. He also mentioned that the company has been maintaining a prudent approach to tendering while seeing strong demand in the market. Carlsson commented on market conditions, saying that while the construction market is generally strong in areas like public buildings, healthcare, prisons, defense, and industry, the residential and commercial real estate sectors remain weak. He noted that the company is seeing some signs of movement in the market. Regarding cost management, Carlsson said NCC is actively working to control costs and ensure it gets paid for them, and he described the company's goal as strengthening margins across all business areas by being more selective in project bidding and phasing out low-margin projects. He also remarked that price increases are manageable but that volatility is a more difficult challenge.

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Transcript (45 segments)

Tomas Carlsson0:03

Good morning, everybody. I'm Tomas Carlsson and with me here today I have Susanne La Tander, our CFO. And this is the last report from Susanne La Tander that you will hear as she is starting to phase in to her retirement. So from tomorrow we will have a new CFO for NCC. So I'd like to take this opportunity to say thank you, Susanne, for all these reports and also welcome to Katarina. And with that we move on to the summary of the quarter.

The way to think about the quarter is it's a good performance for the group. We have yet another quarter with high levels of orders received. 14.1 billion. We have industry business area industry, stone and asphalt, having record high Q2 earnings. I'll get back to that in a little while with 444 48 million. We have improved margin in the contracting business. And all together we have a stable group EBIT of 635 million. If we look at it a little bit on the underlying earnings, it looks like this. Contracting robust earnings and improved margins. However, lower sales as we've been talking about for some time now due to low orders received in the beginning of in 2025 and also in the end of 2024. We have really good orders received in recent quarters and we have higher quality in the order backlog. Industry record high Q2 earnings. Actually, I would say it's a very good high first half year earnings. And so, we've actually on a better level than we were last year, and last year was a really good year set 448 million. Property development 8 million earnings, no profit recognition in Q2. One property sold in the beginning of the third quarter. And then the underperforming part other than eliminations, it's lower quite significantly, and it's all explained due to high cost for legal disputes, and I'll get back to that in a little while. Altogether, stable for the group. Higher operating profit from operations was offset by the increased of the cost from legal disputes. This is the sort of that high-level summary of the group.

If we move on to earnings, stable earnings, and as you can see, this is the level where we've been at at the second quarter for some time now. I don't think it's worth commenting that more, but what's more interesting would be what's driving this. So, if we move on to the next waterfall chart, I think about it as fundamentally three parts. It's the contracting parts, the infrastructure building, building Sweden. Very stable, small changes driven by lower net sales in infrastructure buildings, and building Sweden managed to actually improve despite lower net sales. Very strong improvement from industry. Stable from property development and other. The big change here, the big difference here is the legal or the disputes of. And now we've always had a dispute costs in our business. But since the termination of the Korsvägen project lost fall our dispute cost has increased and we think it's appropriate to report that separately. And if you look at the report, it's on page 13. Now, how can you think about this going forward? We think that unfortunately this will probably continue for a couple for some years. It will have a high degree of variation from quarter to quarter, but it may have be significant numbers on individual quarters. And we think that going forward this year the second half will probably be pretty much the same as the first half of this year.

If we move on to orders received, you've heard me say frequently don't pay too much attention to an individual quarter or actually even two consecutive quarters. But now we have something different here. We have three consecutive quarters with high orders received on the back of five quarters with a little bit lower orders received. And this is first of all, it's the explanation of the lower net sales in the beginning of this year. And then it's I think it's the testament to the strong demand that we see in the market. And we have the strong orders received while still maintaining a very prudent approach to tendering.

Moving on to the order backlog, this has of course an implication for the order backlog. It's so we've increased the order backlog. We have on the first half, we have a book to bill of 1.2 and in the quarter, we have the book to bill on one. And I think it's well worth noting that we've increased the backlog with 5.2 billion over the last 6 months. And if you add to that and that we have phased out a number of zero margin profit recognition projects from the order backlog and also that we have a larger proportion of early collaboration projects that tend to have a better quality and better stability. I think it's fair to say that we have a higher quality in the order backlog. And if you would like to see some examples of projects that we have in the orders received and in the order backlog from the last quarter, we have for example a new sorting plant for LKAB in northern Sweden. We have a school and a sports hall in Ede. We will be investing in the national archives in Helsinki, Finland and refurbishment of residential homes in Uppsala province, Sweden as a few examples. But we're also winning early involvement projects. And these are some examples to give you some flavor. We won the new hospital in Kiruna, Sweden. We've won a center for social psychiatry in Trondheim in Norway. And then a couple of large defense buildings in Sweden and I think it goes without saying that we cannot communicate where and what they really are. It goes with the territory so to say.

Net sales and saving particularly considering that a large volume of bad non-performing projects are out. However, as I've said, we have somewhat lower sales in contracting due to the lower orders received in the end of 2024 and beginning of 2025. With that, our financial targets, we are at 3 13.2 at earnings per share on a rolling basis and as I've said, we expect contracting industry to contribute more to the earnings per share, but we need profit contribution from property development to reach the 16 stake target. Net debt on 2.2.05. I think it's well worth noting that we have seasonally low cash flow always in our seeing the second quarter. But this quarter, I think it's for particularly good reasons and it's largely driven the all the changes largely driven because of the strong performance from industry, i.e. accounts receivables have not yet been converted to cash. And then dividend policy is same as always.

With that, we move on to health and safety. We are on a trajectory going down. We are now at 3.3. We have seen improvements in many areas, but we still have some way to go to our target of 2.0. Well, worth noting this is a very low level. And then before I hand over to Susann, we have a continued positive market outlook, general good market demand, particularly where we are well positioned for infrastructure in a wider sense, including not only rails and roads, but also energy generation, water treatment, energy distribution, and water distribution, and things like that. Industrial construction and public buildings, strong demand. Strong demands for asphalt in all markets where we are active. And slightly higher market activity in commercial property. I'm not saying that because we sold a part of Bromma Blocks, but in the dialogues we have and in the statistics that we see from the market, seems to be a slightly higher market activity. And with that, I hand over to Susann.

Susanne La Tander11:08

Thank you, Tomas. And the first slide here is the summary of our contracting units. We have a green industry and a green industry transformation and Building Nordics had a strong order booking in the quarter. For example, as Tomas mentioned, we had the next phase in the sorting plant in Gällivare from LKAB. Building Sweden continued to improve and higher earnings and margin on lower sales. And the overall lower net sales and higher margins reflect our more selective approach to picking the right projects and improving the quality in our backlog and portfolio. This slide shows the backlog in dark blue and in lighter blue the net sales on rolling 12. And even though the sales volumes are a bit lower at the moment from lower intake in the past year, both building units have solid high-quality backlogs now. And in the picture here, we have also shaded the area of sales for the WestLink projects in the rolling 12 number for sales in infrastructure. And infrastructure has several large projects in early phases and not yet converted into order booking. An example is the Upplandsleden which is 1.4 billion that was registered in the order books right after the closing of the quarter in the first days of July. So, it looks fairly good also for infrastructure when it comes to a good backlog.

Continuing on with net sales and margin for the contracting units, net sales in infrastructure is down, which is primarily explained by the WestLink projects. The margin improved slightly due to improved quality in the project portfolio. In Building Nordics, net sales is lower mainly due to currency effects and lower volumes in Norway and Finland. The lower volumes there are somewhat compensated by growth in Denmark. Earnings and margin is lower due to the temporary lower volumes in Norway and Finland. Building Sweden continues to improve and they have lower sales due to the disciplined order intake, but the improved quality is clearly reflected in the higher margins now.

Moving on to industry, they continue their strong overall development and margins and earnings are on a record level for second quarter. Asphalt demand is strong and the volumes are really high. And stone material had really good development in prices and product mix. This slide shows the volumes in tons for both asphalt and stone material. Compared to the same quarter of last year, the asphalt volumes have increased, which is also what drives the earnings improvement in that division. Stone material business had lower volumes, but they still improved earnings due to better product mix and a good pricing. Earnings are at 448 million in the quarter and the margin on rolling 12 is now improving up to 7%. Capital employed increased due to increased working capital as always when operation starts up in the second quarter for industry. And it increased a little bit more than usual this year due to the high amount of receivables thanks to the increased sales. The return, however, is strong at 21%.

Moving on to property development, property development have a higher net operating income for the completed projects in the quarter. And we do see some signs of increased market activity, also when it comes to letting. End of the second quarter, we still had six unsold completed projects and three sold ongoing projects in the portfolio. To be noted, we did sell a part of one of the completed projects, Bromma Blocks, after the quarter ended. This will have a positive impact on sales and cash flow in Q3, but no impact on earnings. Letting was pretty much on the same level as Q2 of last year with four contracts and 3,600 square meters left. We also had a couple of letting contracts signed right after the closing of the quarter in the beginning of July. The completion ratio for our total portfolio was 72% and the letting ratio improved in Q2 to 84% for the total portfolio. And to that, we can add our own move, the headquarters move to Bromma Blocks, that will add 14% additionally in letting ratio.

EBIT was 8 million in the quarter, which is an improvement, and that's due to a better net operating income in Finland. And the capital employed has decreased. And that's due to the write-down of a couple of completed projects in Q4 of last year. Other and eliminations. And the second line here on this slide is the dispute-related costs. And in the first 6 months, there is approximately 100 million impact on EBIT from increased costs for disputes. And as Tomas has said, but needs to be repeated, we have since Q4 chosen to have these costs in other and elimination instead of in the BA infrastructure as they have increased substantially since Q4 and are anticipated to remain for some time. To comment on the other items, the HQ costs were slightly higher, but within normal variation between the quarters. Internal gains are negative as we continue to invest and build on our ongoing property projects and have no profit recognition of properties. And in other adjustment, the change relates to IAS 19 pension accounting adjustments.

And the income statement, the segments added up to an earning of 635 million. Our financial net was 24 million, which is lower than previous year primarily due to lower interest rates on our debt and also more capitalization of interest to our property projects. We also had higher pension assets and lower leasing debt that had a positive impact on our financial net. We have a high tax rate of 26% due to the limitation of interest deduction for primarily Finland and Norway. And our net profit was 452 and a EPS of 4.62 kroner. Our cash flow is seasonally negative as industry start up the business in the second quarter. And this year the change in working capital is more negative than last year primarily due to the increased sales in industry that generated a higher level of accounts receivable. We also have less advances from customers in customer advances from the infrastructure that have a negative impact on our working capital. And we also increased our investments in ongoing property projects. We have added Ursviken in Sundsvall that we are also building on. And finally, our net debt corporate net debt is 2.7 billion, 1.3 billion higher than last year due to the more negative cash flow and the increased investments in ongoing property development projects. And last year we also had cash in the beginning of the year from the sold properties in the end of December 24. And this we didn't have this year. So our net debt EBITDA target is to be below 2 and 1/2 times and we are below that at the ratio of 2.05 times after Q2. So with that, I hand back to you.

Tomas Carlsson21:10

I'll give a brief wrap-up and I will only wrap this up with the summary of the quarter. We think it's a good performance in the quarter and we think we have a positive outlook. We base this on high level of orders received not only in this quarter but in three consecutive quarters and we have record high earnings in industry and asphalt and stone, improved margins in the contracting business and a stable operating profit. And with that, operator, I open up for questions.

Operator21:45

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Listeners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Julia Sandwall from ABG. Please go ahead.

Julia Sandwall22:23

Hi and good morning. Just a couple of questions from my side starting with building Nordic. I hear you say the weak margin is due to the lower volumes and we see that order intake is up. Should we expect the margin to gradually come up or should it be a shift quite fast or how should we think going forward?

Tomas Carlsson22:47

I think the margin in building Nordic is generally on a good level. We expect it to gradually come up above that level in building Nordic.

Julia Sandwall23:01

Okay. Yeah, thank you. And you say Finland is strong in the water intake. I was just wondering, is it improving margin overall or is it just a bit and pieces of off the market that you have been able to win?

Tomas Carlsson23:16

Yeah, I think that the most important thing is that we've been able to eliminate the bad projects. The wins are generally on good call in good quality of good quality.

Julia Sandwall23:31

Yeah. Yeah, should you say that with the wins overall the overall new orders, can you say anything about the margin? Margin there.

Tomas Carlsson23:41

Yeah, in generally you have somewhat higher margin than the average in Denmark. And you have in generally slightly lower margin in Finland. Due to a less demand in Finland compared to Denmark.

Julia Sandwall24:00

Perfect. Thank you. And then moving on to the sale of the Bromma Blocks. I know this will be a hard question, but I have to ask you. Can you say anything about the margin on the project?

Tomas Carlsson24:15

No, and we have an evaluation of the entire project and we intend to do this report the result when we have sold all the three parts that this project consists of. So so far it will we will do zero profit recognition and we will only recognize the revenue and cash flow in Q3.

Julia Sandwall24:47

And how close are you to the sale of the rest? I hear you say that you see some light in the competitive developments in the market. And how close would you say you also sell a lot of products?

Tomas Carlsson25:00

Yeah, right now it's not imminent.

Julia Sandwall25:05

Okay. Thank you. That was all from my side.

Tomas Carlsson25:08

Thank you.

Operator25:11

The next question comes from the line of Erik Kant from DNB Carnegie. Please go ahead.

Erik Kant25:20

Thank you. And good morning. I would like to start with the industry segment. It seems like asphalt volumes are up about a percentage point or so in the first half of the year, but volumes and sales for industry is up something like 4%. So obviously prices seems to be driving this. Can you talk us through how you were able to push, I would assume, increasing input costs over to clients and should we expect this sort of profitability to continue for the second half of the year?

Tomas Carlsson26:00

We have no reason to assume that we should decrease profitability in general. But the overall profitability of industry depends a lot about what kind of weather we have in November. Remember, if you do an extension of the season into November, it has impacts on contribution to cover fixed costs. And going back to your first question, it's a mix of more efficient production both for stone and asphalt. For stone, it's then a combination of a better product mix, i.e. higher value products that we sold, but also higher prices. So you might see a variation depending on where exactly how the demand is where materializes during the fall. And for asphalt, it's a mix of better production cost and higher prices.

Erik Kant27:12

Okay. And with that sort of we could touch upon the fact that you mentioned in the report that there have been volatility within energy prices following the sort of geopolitical situation and that you're monitoring it. Could you say something about what the effect you have actually seen? And what effects you are monitoring? What are sort of the key areas you're focusing on going forward?

Tomas Carlsson27:41

For industry, we are closely monitoring the price and availability of bitumen, and we're confident that we will have bitumen available. And then we're monitoring the price because pricing for new in new tenders becomes really complicated with these type of volatile prices. What we've done is that we are updating prices at the very late stage when we are tendering. We are shortening the period when the tenders are when the price is actually applicable. We are using indexes to the extent we can. We are hedging as much as we can. And for all of the business, we're watching transportation prices quite closely because direct and indirect transportation cost is quite a large part of our cost base and that is impacted by the oil prices. And then for the contracting business we're looking at general price increases that we've seen some. And make sure that we have index clauses with our customers. And if we can't get that, we try to make a prudent approximation of where the prices will go and try to fix the cost base as early as possible. And also as I've said in a number of interviews this morning. Price increases are hard enough to handle. I think we're doing it quite good right now but you never know but the really difficult thing is volatility. Because then indexation may work not only in the way that you would like it to work.

Erik Kant29:48

Okay, fair enough. And then perhaps moving on to other and eliminations. The cost related to the dispute. Could you say are these running legal costs or are they also provisions to some extent?

Tomas Carlsson30:07

They are not provisions but they are running costs mainly legal costs but it's also other costs related to the dispute and that's why we use legal dispute. It could be experts that we need. It could be fact-based material that we need to compile. It's actually also cost for own staff that works with these. But it's not provisions.

Erik Kant30:33

Okay. And you mentioned that you believe that the cost will be about the same for the second half of the year as the first half of the year. But given these things tend to take time, should we expect this to some extent to run into 27 as well?

Tomas Carlsson30:52

I think you should expect it to continue for a few years. It will not be the same type of cost continuously because there's an initial cost in compiling all the material and then there's an extension of the time between negotiations and court proceedings. So, it will have a certain amount of variability and we will try to guide as well as we can, but our best estimates right now is it will be the same for the second half as the first half this year. But you can expect it to continue into next year to its yet unknown extent.

Erik Kant31:33

Okay. Fair enough. And then my final question is regarding the green industry transformation part, which is also reported within Central. Could you say is that business overall running currently at a loss given that it's in a startup or is it generating a profit and if not, when do you think it will start to actually contribute to the group?

Tomas Carlsson32:01

I would say right now we are really happy with the development of our green industry transformation. Right now we think that it's at the black zero.

Erik Kant32:15

Okay, so basically no contribution, but do you think that it will contribute by the end of this year or should we wait until sort of 27 28 for that to happen?

Tomas Carlsson32:27

Or major contributions in the next year.

Erik Kant32:31

Okay. Uh, thank you very much. Those were my questions.

Operator32:38

As a if you wish to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no more questions at this time from the phone. Back over to you.

Tomas Carlsson33:00

Thank you very much. And anybody else, do we have any questions from the web?

Operator33:02

And there are no questions from the web at right now.

Tomas Carlsson33:05

Very good. And with that I thank you all for listening in and again thank you Susan and welcome Katarina and see you in the coming months or if not see you for the third quarter report. Thank you very much. Have a good day.