Peab is one of the largest construction companies in the Nordics, with approximately 13,000 employees and an annual turnover of nearly 60 billion SEK. While the majority of its revenue comes from Sweden, it also operates in Norway and Finland.
The company’s primary projects include residential construction, asphalt work, street and ground operations, as well as infrastructure development. However, the increase in interest rates has led to a slowdown in housing construction, impacting both profitability in the construction business and internal project development. The operating margin seems to have bottomed out at 2.5% in 2023 but is expected to rise to around 4.0% in 2024.
The largest shareholder, with 21% of the capital and 48% of the votes, is Ekhaga Utveckling AB, owned by Peab’s co-founder Mats Paulsson and his son Fredrik Paulsson. The CEO since 2013 is Jesper Göransson, who owns shares worth over 100 million SEK. Other executives in the company also own shares worth nearly 100 million SEK.
Peab’s future projections indicate an increase in revenue and profitability, with a focus on improving the operating margin. Despite challenges in the housing market, the company is taking steps to adapt to the changing landscape and optimize its operations for better performance.
In the construction sector, Peab faces challenges due to the decline in demand for residential projects. However, the company is implementing restructuring measures to align its operations with the reduced volume and improve profitability. By adjusting its workforce and making provisions for cost overruns in projects, Peab aims to navigate through the tough market conditions.
In contrast, the company’s infrastructure division is experiencing a record-high order backlog, driven by significant projects like the construction of a new airport in Bodø, Norway, and road developments in Sweden. This segment is expected to contribute to Peab’s overall growth and stability in the coming years.
The industrial sector, focusing on material extraction for asphalt and concrete production, has shown improved profitability in recent years. With a projected operating margin of over 6% in 2024, this division is playing a crucial role in Peab’s financial performance.
Looking ahead, Peab’s success hinges on the recovery of the housing market. Positive indicators, such as lower interest rates and increasing property prices, suggest a potential turnaround in the sector. While the road to full recovery may take time, Peab remains poised to benefit from a stronger housing market in the future.
In conclusion, Peab’s stock valuation reflects its current performance and potential for growth. With a focus on achieving a higher operating margin and capitalizing on market opportunities, the company is positioning itself for long-term success. Investors with a keen eye on the construction sector may find Peab an attractive investment option, especially as the housing market shows signs of improvement.