The high degree of uncertainty and recession that we experienced in 2009, is now supplanted by a more stable and normal economic development. This also applies in the building and heavy construction market.

Housing prices increased on average by 1.5% in Norway in the first quarter, and residential construction is rising. The decline in the start-up of non-residential buildings has slowed. Public infrastructure projects are helping to maintain activity levels in heavy construction. Capacity in this area remains high with corresponding price pressure.

Market developments in Sweden have also been as expected so far this year, with slight growth in all areas. The regional differences are large, with the greatest growth coming from the Stockholm area and low activity in western Sweden.

The Danish building and heavy construction market is still characterised by low activity, particularly in the housing market. Residential construction is low, but the prices of existing homes appear to be increasing.

We expect a continued normalisation of the building and heavy construction markets in Norway and Sweden with weak growth in all sectors, while the Danish market is likely to be weak throughout 2010.

Risk and uncertainty factors

Veidekke activities are related to the execution of individual projects. There is considerable variation in orders with respect to project complexity, size and risk. It is crucial to Veidekke’s results that project risk be handled in a systematic manner. This also means that projects must be staffed with the right people.

Veidekke’s orders-on-hand increased throughout 2009 and fell slightly in the first quarter of 2010. Our project portfolio has in the past year received a larger share of public contracts, but it has also been boosted by the private market. The new projects have come in under much tighter market conditions than before.

In the past year, our suppliers have reduced their prices both in terms of materials and services. The risks relate to market developments and our assessment of when we should enter into lock-in agreements relating to signed agreements and tendered offers. This risk is partly managed by entering into long-term cooperation agreements with strategic suppliers.

There are still many companies in the building and heavy construction industry which are struggling financially. We will therefore continue to focus highly on following-up our sub-contractor’s ability to deliver, both ongoing and new projects. A possible sub-contractor bankruptcy may result in the risk of overuse and delay progress plans.

Future earnings in the property segment will depend on initiating new projects. We expect an increase in the number of new projects in 2010, and we see that first quarter developments are consistent with this.

Credit risk associated with customers’ ability to pay is important. This risk relates primarily to activities within the Industry segment.

Veidekke is following developments closely in order to manage risk situations as they arise and take any necessary actions.