During the first half of the year, Scandinavia was characterised by a weakened market for building housing and private non-residential building, and subsequently, a reduced level of activity. Increased investment in building and developing public infrastructure contributed to increased activity within the construction area. The housing market in Norway and Sweden also picked up during the first half of the year, with a rise in prices and increased sales of dwellings.

There is still a degree of uncertainty attached to the future development of the building and construction market, even though we are seeing signs indicating that the economic downturn may have reached a bottom. Risk attached to the market development in the near future, applies primarily to bank financing of new private projects. This may lead to increased credit risk in the private customer segment. Moreover, there is uncertainty as to how the markets will react if the fiscal measures are cut back to improve state finances.

Risk and uncertainty factors

Veidekke’s operations consist of the execution of individual projects. The orders received represent a great variety in terms of project complexity, size and risk. It is essential for Veidekke’s results that project risk is handled systematically, and that all projects are manned with the right people.

The level of incoming orders has shown a positive development in the second quarter. Along with several other factors, this gives us a somewhat more optimistic view of the situation as regards the financial unrest, compared with the previous quarter.

The building and construction industry has been strongly represented among company bankruptcies in the last year. Therefore, Veidekke attaches great importance to following up on our subcontractors’ ability to deliver, both in ongoing and new projects. Should one of our subcontractors go bankrupt, this may involve a risk of overspending, and can cause delays in progress.

The number of unsold, completed dwellings has gone down during the last quarter. The sales prices obtained and market statistics showing a moderate price rise during the last quarter, indicate that Veidekke’s exposure in this area is low. Future earnings in the property segment will depend on the start-up of new projects. So far in 2009, Veidekke has started up three new housing projects.

The credit risk attached to the customer’s ability to pay is significant. This risk is primarily related to the industry operations.

Veidekke is following the development closely to be able to handle the risk situation at all times, and implement any necessary measures. Read more in Veidekke's latest economic activity report .