Veidekke’s combined operations in Norway (construction, property development, and industry) had operating revenues for the third quarter MNOK 3 739.7

Construction operations

From Hvaltorvet shopping center, Sandefjord, Norway

Veidekke’s building and construction operations achieved a turnover for the third quarter of NOK 2,530 million (NOK 2,382 million). These nationwide operations showed a pre-tax profit of NOK 169.3 million (NOK 135.0 million), and a profit margin of 6.7 per cent (5.7 per cent).

This means that the operations have continued to show a considerable growth in profit in this period. This can mainly be ascribed to a high level of activity and successful utilisation of the production resources in most units, as well as the company’s ongoing improvement.

The market situation has recently become considerably more hesitant, with increasing regional and market related variations. The uncertainty attached to the future market development is particularly great within the private sector, while the prospects within the public sector are positive for both building and construction projects.

At the end of the quarter, Veidekke Entreprenør’s order books showed a total of NOK 7,264 million as against NOK 9,030 million at the beginning of the year, and NOK 9,226 million at the same time in 2007.

New contracts signed in the third quarter, include a contract with the Public Roads Administration for building a new junction for public transport at Økern in Oslo, with a contract sum of NOK 231 million, building a new housing project with a grocery shop on the ground floor for Coop Klepp BA at NOK 50 million, and a conversion and extension of Kykkelsrud power plant for Hafslund Produksjon AS at NOK 124 million.

Property development

From Sjølyststranda in Oslo, Norway

The Property Division is engaged in the development of dwellings for Veidekke’s own account, as well as non-residential buildings for private and public enterprises. These operations are concentrated around the largest towns in Norway.

In the third quarter, the Property Division achieved a turnover of NOK 148 million (NOK 379 million). This gave a pre-tax profit of NOK -68.2 million (NOK 59.0 million). The result reflects a difficult housing market and the write-down of the company’s shareholding in Hansa Property Group ASA.

Following several years of high activity, the housing market declined in autumn 2007, and the demand for new dwellings has been low throughout 2008. This applies particularly to flats in apartment buildings, which is Veidekke’s most important product in the housing sector. The decline affects both sales in ongoing projects and the start-up of new housing projects. Veidekke has not started any new projects of significance in 2008. The market for town houses and small dwellings has shown slightly better results, and all the housing projects that have been started up this year, are within this market segment.

At the end of the quarter, the division had 454 (954) dwellings under construction in 11 (24) projects. 88 (158) dwellings under construction remain unsold. In addition, 96 (3) completed dwellings remained unsold at the end of the quarter spread over 8 projects. Of these, 56 dwellings are leased at present. Debt exposure is regarded as low, and is expected to be reduced by sales in the coming year.

In the non-residential market, two projects were started up earlier this year for Veidekke’s own account, covering a total of 13 000 m². These projects are located in Skien and Porsgrunn, and have been leased to public enterprises.

In Norway, the portfolio of development sites constitutes 3,600 dwelling units at the end of the quarter. Priority has been assigned to developing this portfolio so that the projects are ready for sale and construction when demand picks up in the future.

Industry

Asphalt works, Alta airport, Norway

The Industry Division’s operations are spread throughout Norway and its business areas are asphalt, crushed stone and gravel, road maintenance, demolition and plant contracting, as well as recycling of industrial waste.

The division’s total turnover for the third quarter amounted to NOK 1,204 million (NOK 988 million), which gave a pre-tax profit of NOK 147.4 million (NOK 130.0 million). The increase in turnover in the third quarter compared with 2007, can be mainly attributed to asphalt operations, but the other business areas are also enjoying a boost in demand and a generally high level of activity.

In the third quarter, the volume for asphalt is approx. 5 per cent higher than in the same period last year, but the volume for the year as a whole, is anticipated to be at the same level as 2007. Changes in oil prices, and with that the cost of production, may affect the overall demand, particularly from public customers.

Underestimated costs on certain contracts within road maintenance, give a negative profitability within this area, while the activities within crushed stone still return good profits.