Restructuring costs and loss provisions affect fourth-quarter profits
Veidekke has carried out a review and evaluation of the group’s construction and industrial operations. Provisions for future losses on individual projects in the portfolio, in addition to restructuring costs in the construction business in Sweden and Norway, will be charged against the profits for the fourth quarter of 2019. Veidekke’s profit before tax in 2019 including these items is approximately NOK 940 million.
Veidekke announced in November that the company intends to demerge its property development activities. Work to establish this business with a revised ownership structure is proceeding according to plan and a decision about the transactional model and its implementation will take place during the first half of 2020. Following the demerger, Veidekke will be purely a construction and industrial business.
Restructuring costs and loss provisions for projects charged against 2019 profits
In connection with this restructuring process, Veidekke has carried out an evaluation of its remaining operations.
‘The demerger of Veidekke’s property development activities has necessitated a thorough strategic review of the remaining construction and industrial business. This review has uncovered a need to reduce risk in some areas of the project portfolio, and in this regard, we have resolved to make provisions for losses on individual projects. Additionally, the construction business in Sweden and Norway is currently implementing strategic adjustments, which has resulted in restructuring costs being charged against our profits,’ says Jimmy Bengtsson, Group Chief Executive of Veidekke ASA.
• Veidekke has resolved to allocate NOK 200 million for future losses on the project portfolio in its Swedish construction business. This loss provision will be charged against the fourth-quarter profits for 2019.
• During the course of 2019, Veidekke’s construction businesses in Norway and Sweden have carried out strategic adjustments to operations. As a result, Veidekke is recognising restructuring costs totalling NOK 130 million. These costs will be charged against the fourth-quarter profits for 2019.
As a result of the loss provisions for projects and the restructuring costs, Veidekke will report a profit before tax in its segmented accounts of approximately NOK 940 million for 2019.
Profitability targets for 2020 remain in place
Veidekke will maintain its target of a pre-tax profit margin of 3.0–3.5 per cent in 2020 for its overall construction and industrial operations, as was communicated at Veidekke’s capital market update in May 2019.
‘The steps we are now taking are forming the basis for establishing a complete and robust construction and industrial business. The restructuring is part of initiated improvement measures that will boost the company’s profitability, and the loss provisions mean that we are comfortable with the risk in our remaining project portfolio as we head into 2020,’ Jimmy Bengtsson concludes.
Further details related to Veidekke’s fourth-quarter and annual profits for 2019 will be published together with the quarterly report on 11 February 2020.
This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.
For more information, contact:
Group Chief Executive Jimmy Bengtsson, +47 984 70 000
Executive Vice President Lars Erik Lund, +47 413 31 369
SVP Finance Jørgen Michelet, tel. +47 917 43 856
Veidekke is one of Scandinavia's largest construction and property development companies. The company undertakes all types of building construction and civil engineering contracts, develops residential projects, maintains roads, and produces asphalt and aggregates. The company is known for its involvement and local knowledge. Annual turnover is approx. NOK 36 billion, and around half of its 8600 employees own shares in the company. Veidekke is listed on the Oslo Stock Exchange and has always posted a profit since it was founded in 1936.