LETTER FROM THE PRESIDENT & CEO

2009 was a very challenging year in the construction industry as our sales fell by 20 percent. We managed however to maintain organisational calm and work goal-consciously with improvement processes in all areas of operation. The Group delivered results I believe we can stand up for. We achieved an acceptable profit margin, had a positive cash flow and crossed into 2010 debt-free and with an increased order backlog. Equally important is that we managed to maintain organisational competence and capacity and took important steps forward in our continuous improvement efforts.

But in one area, we definitely did not deliver according to our goals: health, safety and environment (HSE). First and foremost, in 2009 we had two tragic accidents in which one of our colleagues and two employees of our subcontractors were killed. The number of injuries and serious incidents on our sites also went up, and sick leave rose in 2010. It is no consolation that we see the same trend in the industry as a whole. HSE is a priority focus area and is atop our agenda. We want to provide our employees and subcontractors safe and good working conditions, and we also see this as a prerequisite for good value creation over time. In future, we will intensify our efforts and continue to involve our employees and subcontractors in these efforts to reduce the number of injuries and reduce sickness absence.

The market's road to recovery

The financial crisis that struck in full force during the autumn of 2008 was of great consequence to the building and construction industry's activities. The Government's response, which included a comprehensive package of stimulus measures, gave great impetus to the market in 2009 helping to curb the decline in activity. The Scandinavian economies now seem to be on the way out of recession to a more stable economic downturn.

At the same time, it is too early to declare the crisis behind us. Stimulus measures will soon be phased out, the public deficit will necessitate cutbacks, and interest rates are expected to rise. The risk of further setbacks is definitely present.

We have increased our order reserves, but we have won the orders in a tough market, and it will require ever-improving operations in order to achieve good margins. Competition in the market is hard. We stand, in other words, still before considerable uncertainty and many challenges.

Reasons for optimism

We have yet many reasons, however, to look ahead with optimism. We have 74 years behind us without a loss. We have a stable, experienced management, low staff turnover and considerable experience in dealing with difficult times. We also have financial flexibility and significant competence and capacity, which are important for seizing new oppor­tunities as they arise.

We also see that our continuous improvement and internal interactive involvement, and external involvement with suppliers, partners and customers on projects, deliver results. The fact that we can offer quality, predictability and good solutions in terms of both processes and final products, is to us an advantage. We also place emphasis on exercising a clear social responsibility and are convinced that this will provide increased value creation and further competitive advantage over time.

Our employee co-ownership has been one of Veidekke's most important success criteria, and is the main driving force behind involving our people and creating genuine engagement in the organisation. Today, over 55 percent of Veidekke employees own a whopping 19 percent of their company. This is unique, and feedback from investors and financial analysts suggests that we are rewarded for this in the form of increased confidence in our shares.

The road ahead

The sum of all this is, with values that are alive and a distinct company culture, these are what make Veidekke, Veidekke, and what gives us the confidence to set ambitious goals for our development over the next five years. We are now in a comprehensive process to break these down into specific goals and activities for each unit in our Scandinavian organisation – where results are created daily.

We, like everyone else, need a helping hand from the market, making it exciting to follow its future development. The value we will create for our shareholders and other stakeholders in 2010 will be through our ability to deal with a market that continues to be difficult. Our focus ahead will be ongoing operational improvements, quality in processes and delivery, sharp focus on project profitability and to be on our toes when it comes to increased risk in the subcontracting market.