Throughout 2009, Scandinavia has been characterised by a weakened market for housing and private non-residential building, and subsequently, a reduced level of activity.

However, there are many indications that the downturn in the building and construction market is now flattening out. Credit has become more available, and a low interest rate level combined with public investments in the building and construction industry have helped improve the situation. In the private sector, there is nevertheless some caution when it comes to starting up new building projects.

The prices of used housing have increased significantly throughout 2009, both in Norway and Sweden, as a consequence of low interest rates and a healthy growth in household incomes. So far, this growth has not led to an equivalent increase in demand for new housing. Large investments in public infrastructure projects have contributed to increasing the activity within the Scandinavian heavy construction sector. This development is expected to continue into 2010.

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.

Veidekke’s order backlog is showing a positive development compared with 31 December 2008 and 30 June 2009. The increase in the order reserve is related to public clients, but we are nonetheless under the impression that the private market is also recovering. However, competition for projects is great, and this may entail increased margin pressure.

Many companies within the building and construction industry are still struggling financially. Therefore, Veidekke will continue to attach 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.

Future earnings in the property segment will depend on the start-up of new projects. So far in 2009, Veidekke has started up five new housing projects, and we are planning start-up on a further seven projects in the fourth quarter. All in all, this covers approx. 250 housing units, which indicates a low level of activity compared with previous years.

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.