Healthy growth and good profitability

Revenues for Q2 totalled NOK 8,292 million (NOK 7,189 million) and amounted to NOK 15,101 million (NOK 13,398 million) for the first half of the year. Profit before tax was NOK 426 million (356 million) in the 2nd quarter and NOK 635 million (602 million) for the first half of the year. This resulted in a profit margin of 5.1% (5.0%) for Q2 and 4.2% (4.5%) for the first half of the year. AF Gruppen had an order backlog of NOK 42,003 million (37,837) at the end of the quarter.

“Good project management and technical expertise in the projects enable us to report good results for the quarter. Our risk management model helps us deliver consistently good results over time. With high energy and raw material prices and global uncertainty, good and goal-oriented project management is more important than ever,” says Amund Tøftum, CEO of AF Gruppen.

AF Gruppen is in a strong financial position. Net operating cash flow was NOK 619 million (529 million) in Q2 2022 and NOK 1 226 million (NOK 734 million) for the first half of the year. As at 30 June 2022, AF Gruppen had net interest-bearing receivables of NOK 145 million (-333 million). Earnings per share amounted to NOK 2.67 (NOK 2.09) in Q2, and NOK 4.07 (NOK 3.65) for the first half of the year.

AF imposes the same strict security requirements on all its partners and suppliers as it does on its own employees. Figures from subcontractors are included in the injury statistics. The LTI rate for Q2 was 1.7 (0.9). For the first six months of 2022 the LTI rate was 1.3 (1.2).

AF works in a systematic and targeted manner in order to avoid work-related absence. Sickness absence in Q2 was 4.1% (4.3 %), and for the first six months of 2022 it was 4.8% (4.7%).

“Active risk management is one of the cornerstones of our business model. We wish to assume operational risk that we can impact and control, and at the same time limit exposure to risk that cannot be affected. We have therefore developed management processes that are well adjusted to the business, and that can provide uniform risk management in all parts of the organisation,” Tøftum says.

 

Selected highlights from the quarter:

• Revenues in Civil Engineering are high, and the profit margin good. AF Anlegg has three major projects in production, E39 Kristiansand vest–Mandal øst, Bergtunnlar Lovö in Stockholm and E6 Rentvannstunnel in Oslo. The E6 Rentvannstunnel project in Oslo is being carried out as a joint operation with Ghella and started up in Q2. Målselv Maskin & Transport and Consolvo reported very good results during the quarter.
• Construction achieved a growth in revenue of 35% compared to the same quarter last year, but the profit margin for the business area was unsatisfactory. Price developments for raw materials such as steel and wood products have a negative impact on the profitability of the construction units. Haga & Berg and AF Håndverk stood out with excellent results. AF Bygg Oslo, AF Bygg Østfold, Strøm Gundersen Vestfold and Åsane Byggmesterforretning also delivered good results in the quarter.
• Betonmast saw an activity level similar to last year, and delivered weak profitability in the quarter overall. There are great variations in the units’ results, where the units Betonmast Oslo, Romerike, Trøndelag, Røsand and Østfold report good results.
• Property reported a very good result for the quarter after concluding the sale of the hotel and office building Karvesvingen 7 at Hasle in Oslo. Sales contracts for 64 (148) homes were signed in the quarter, of which AF’s share is 29 (70). So far this year, sales contracts have been signed for 121 (270) homes, of which AF’s share is 54 (125). There were eight residential property projects in the production stage at the end of the quarter. A total of 917 units are in production, of which AF’s share is 410. The sales ratio for commenced projects is at 83%.
• Energy and Environment delivered a good result in Q2. AF Decom, the unit that demolishes and sorts various materials for recycling, has somewhat lower activity than last year, but reports very good results. AF Energi reported good results for the second quarter. AF Energi’s business includes designing and supplying energy plants for the delivery of alternative forms of energy to residential and commercial projects, which are favourable in a long-term ownership perspective.
• The Sweden business area increased revenue and profit compared to the same quarter last year. The civil engineering company Kanonaden saw strong revenue growth compared to the same quarter last year, and the unit continues to report good results. AF Härnösand Byggreturer saw very good results in the quarter. The results for the building units are impacted by increased energy and raw material prices, as well as supply challenges in the projects.
• The Offshore business area delivered a very good result in Q2. The good result in the quarter reflects a high level of production and good operations at AF Environmental Base Vats. New demolition campaigns have started up in August.