The decline in the building and construction market gradually came to an end during the autumn of 2009. A low interest rate level and effective stimulus packages have contributed to more activity and a growing optimism in all the Scandinavian countries. The effects have been most noticeable in the housing market, where prices went up during most of 2009.

Building activity has been low both within housing and non-residential building. In all probability, the start-up of new, residential housing projects reached a bottom level in the fourth quarter, while the decline in the market for residential building most likely will continue a little longer. Large investments in public road and railway 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. This also means that all projects must be manned with the right people.

Veidekke’s order backlog has increased throughout 2009. This increase is primarily related to public clients, but the private market has also picked up. The new projects have been taken up under much tighter market conditions than before.

We have seen a reduction in prices from our subcontractors, both as regards materials and services. Risk is now attached to the market development and our assessment of when to enter into binding agreements in connection with contracts signed and tenders given. This risk is handled by, among other things, entering into long-term cooperation agreements with strategic suppliers.

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. The number of new projects is expected to rise in 2010.

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.