Revenues for the 1st quarter were NOK 6 607 million (5 214 million) and earnings before tax were NOK 206 million (226 million). This corresponds to a profit margin of 3.1 per cent (4.3 per cent). The group reported a historically high order backlog of NOK 32 492 million (23 679 million) at the end of the quarter. The outbreak of COVID-19 has had a limited effect on the earnings for the quarter, but it has resulted in challenging conditions in certain market segments. There is uncertainty related to the further consequences of the COVID-19 outbreak, which includes a weakened Norwegian krone, access to foreign labour, the level of investment in the private sector and start-up of new projects.
AF Gruppen is in a very strong financial position. Net operating cash flow was NOK 499 million (257 million) for the 1st quarter of 2020. As at 31 March 2020, AF Gruppen had net interest-bearing receivables of NOK 52 million (-189 million) and available liquidity of NOK 3 711 million. Earnings per share for the quarter were NOK 1.23 (NOK 1.41).
“Building and civil engineering are of enormous importance to the creation of value in Norway and have contributed in recent months to the visibility of Norway’s largest, land-based industry, since we have maintained production as an industry at a very challenging time,” says CEO Morten Grongstad of AF Gruppen.
AF imposes the same strict requirements on all its partners and suppliers as on its own employees. Figures from subcontractors are included in the injury statistics. The LTI-1 rate for the 1st quarter was 1.6 (1.9). For 2019, the LTI-1 rate was 1.2 (0.8).
“Health, safety and the environment are our number one priority, and our goal is that no one should get injured by working at or for AF. This quarter there was a powerful reminder of the importance of care, safety and responsible operations due to a fatal accident in one of our projects in Nordhordland. Such an accident affects us as an organisation, and it is our responsibility to learn as much as we can from the incident and implement clear measures. During this period, we have also been exposed to risk that is to some extent beyond our control, namely the COVID-19 outbreak. I am impressed by all our employees who have worked hard in a challenging situation to perform important societal duties, for which we are responsible, and exhibited good, practical infection control,” says Grongstad.
AF works in a systematic and goal-oriented manner to avoid work-related absence. Our goal is overall sickness absence of less than 3.0 per cent. Sickness absence was 4.9 per cent (3.7 per cent) for the 1st quarter, and 3.8 per cent (3.3 per cent) for 2019. Sickness absence was somewhat higher than normal in the last part of March due to the quarantine provisions and an increased proportion of employees who were at home in accordance with the authorities’ orders.
“Even though many units delivered good results for the quarter, the bottom line is not where we would like it to be. Our goal is clearly to improve our performance throughout the year. This mostly concerns ourselves and our ability to ensure good operational performance. Since its establishment, AF has had a culture, willingness and ability to find new and better ways to solve tasks. AF had a very solid financial and market position at the start of the COVID-19 outbreak, and our goal is to emerge stronger from this challenging situation, especially because we have the best people in the industry,” says Grongstad.
Selected highlights from the quarter:
- The civil engineering market in Norway is still characterised by a stable, high level of investment, from the public sector in particular. AF Anlegg has several projects in the final phase that contributed overall to the unit’s good earnings for the quarter. AF Anlegg has been awarded several major contracts that will start up this year, and increased its order backlog by 30 per cent, compared with the corresponding quarter in 2019.
- Revenue was stable in the Building business area, and the unit achieved a profit margin of 4.6 per cent for the quarter. Even with a high level of activity and good order backlog, there is greater uncertainty concerning the start-up of planned projects. This is particularly true in the residential property market, where the sale of new residential units has slowed down, which has entailed a more uncertain order situation for the intermediate future.
- Betonmast became a part of AF Gruppen on 31 October 2019. Betonmast reported revenues of NOK 1 823 million and earnings before tax of NOK 46 million for the quarter. There was variation in the results from the different units, and an active effort is being made to determine how Betonmast and AF Gruppen can best exploit each other’s expertise, improve safety work and increase the creation of value.
- Property sold 80 (162) residential units during the quarter, 28 (55) of which were AF’s share. Residential unit sales slowed down in March as a result of the spread of COVID-19 and the measures implemented by the authorities. The sales ratio for commenced projects was 86 per cent.
- Energy and Environment reported good environmental clean-up, demolition and recycling projects, and the environmental centres reported good profitability. Due to provisions for losses related to a pending dispute, the unit reported results for the quarter that were below expectations.
- The Sweden business area achieved revenue growth of 23 per cent for the quarter compared with the same quarter last year, and this was primarily attributed to revenue growth for HMB and Kanonaden. There was variation in the level of activity for the remaining Swedish operations.
- The Offshore business area saw very challenging market conditions as a result of the fall in oil prices and the outbreak of COVID-19 and reported weak results for the quarter.