AF Gruppen

Quarterly Report • Nov 11, 2022

AF Gruppen ASA Q3 2022

11 November 2022

Highlights

AF Gruppen with Strong Growth, Varying Profitability and a solid Order Backlog

• Revenue: NOK 7,537 (6,358) million in Q3 and NOK 22,638 (19,756) million year-to-date
• Earnings before tax: NOK 263 (344) million in Q3 and NOK 898 (945) million year-to-date
• Profit margin: 3.5% (5.4%) in Q3 and 4.0% (4.8%) year-to-date
• Cash flow from operations: NOK 272 (380) million in Q3 and NOK 1,498 (1 114) million year-to-date
• Order backlog: NOK 39,716 (40,391) million as of 30 September 2022
• Net interest-bearing receivables of NOK 254 (-26) million as of 30 September 2022
• The Board of Directors has proposed a divided of NOK 4.00 (4.00) per share for the second half of the year

Health and Safety

1.5 0.0 0.5 1.0 2.0 2019 2020 2021 1.1 YTD 22 Q3 22 1.2 0.9

Number of lost-time injuries and severe personnel injuries not resulting in lost-time, including subcontractor employees, per million hours worked

Number of lost-time injuries, injuries involving substitute work and medical treatment injuries, including subcontractor employees, per million hours worked

Revenues and Earnings

Revenues Earnings Before Tax Profit Margin 344 263 0 100 200 300 400 500 600 700 Q4 21 NOK million Q3 21 Q1 22 Q3 22 Q2 22

Return on Capital Employed

Earnings Before Tax and Interest Expense *

Interest expences added

* Rolling average last four quarters

Average Capital Employed Return on Capital Employed

Cash Flow Statement

NOK million	Q3 2022	Q3 2021	YTD 2022	YTD 2021
EBIT	271	344	907	970
Depreciations, amortisation and impairment	133	151	399	428
Change in net working capital	-77	-68	532	-24
Other adjustments / taxes paid	-54	-48	-341	-260
Cash flow from operations	272	380	1,498	1,114
Net investments	-25	118	144	-18
Cash flow from capital activities	-20	-24	-1,053	-883
Interest paid and change in interest bearing debt	-280	-86	-242	-290
Net change in cash and cash equivalents	-53	389	347	-77
Net cash and cash equivalents at beginning of period	1,086	205	680	708
Change in cash and cash equivalents without cash effect	3	0	8	-38
Net cash and cash equivalents end of period	1,036	593	1,036	593

Cash Flow from Operations

Net Interest-bearing Receivables and Liquidity

Components Net Interest-bearing Receivables 593 1,000 500 -500 0 1,500 NOK million 1,036 -26 254

Q3 21 Q4 21 Q1 22

Interest-bearing receivables Lease liabilities - rental

Interest-bearing debt

Cash and cash equivalents

Q2 22

Lease liabilities - machines

Q3 22

-1,500

-1,000

Available liquidity: NOK 3,939 million (including financial facilities of NOK 3,000 million)

Balance Sheet

NOK million	30.09.22	30.09.21	31.12.21
Non-current assets	7,705	7,646	7,490
Current assets, ex. cash	5,955	4,898	4,937
Cash and cash equivalents	1,036	593	680
Total assets	14,695	13,137	13,108
Equity	3,286	3,378	3,572
Long term debt	1,563	1,369	1,343
Short term debt			8,193
Sum egenkapital og gjeld	14,695	13,137	13,108

All the company's covenants exclude the effect of IFRS 16

Environment

YTD 2021 YTD 2022

Metal Demolished and Sorted for Recycling

50,133 tonnes = 50,133 (39,975) tonnes CO² -equivalents saved

Recycling Environmental Centre Recycling rate 81% (77%) YTD in 2022

Business Areas

3 rd quarter 2022

Civil Engineering

Solid Order Backlog and Strong Results

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	1,462	1,403	4,241	4,480
EBIT	92	98	275	294
EBT	93	97	272	290
EBIT %	6.3%	7.0%	6.5%	6.6%
EBT %	6.4%	6.9%	6.4%	6.5%

• Målselv Maskin & Transport and Consolvo continue to report very good results. AF Anlegg and Stenseth & RS reports good results. Eiqon had high activity, but reports weak results
• AF Anlegg was appointed by Avinor as turnkey contractor with interaction at the new airport in Mo i Rana. The order backlog only includes the interaction phase, and the final target price will be determined before the execution phase with a cost limit of NOK 3,300 million excl. VAT
• After the quarter, AF Anlegg has been appointed as contractor for the construction of the new water treatment plant at Huseby with interaction for Agency for Water and Sewerage department in Oslo municipality. The contract has an estimated value of NOK 3,000 million excl. VAT

Order backlog: NOK 11,887 (7,617) million

Construction

Varying Results and Weaker Profitability

Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
2,631	2,007	8,029	6,026
100	80	199	293
99	80	199	296
3.8%	4.0%	2.5%	4.9%
3.8%	4.0%	2.5%	4.9%

• High activity and large variation in profitability. AF Bygg Oslo, Strøm Gundersen Vestfold and Haga Berg reports excellent results in the quarter
• High energy and construction cost affects the business units profitability negatively. AF Byggfornyelse, Strøm Gundersen, AF Bygg Østfold, LAB and Fundamentering reports negative results in the quarter
• AF Bygg Østfold is appointed as turnkey contractor with interaction for phase one of a new water treatment plant in Fredrikstad municipality for FREVAR KF. The total contract value for phase one and two is expected to be NOK 1,100 million excl. VAT. In addition to this, further two contracts with a total value of approx. NOK 233 million excl. VAT has been reported to the stock exchange
• Order backlog: NOK 11,844 (14,594) million

Betonmast

Weak Profitability

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	1,252	1,203	3,768	3,691
EBIT	37	37	89	78
EBT	41	33	91	63
EBIT %	3.0%	3.1%	2.4%	2.1%
EBT %	3.3%	2.7%	2.4%	1.7%

• Large variation in the business unit's results contributes to weak profitability
• Betonmast Romerike reports excellent results. Betonmast Oslo, Østfold, Asker & Bærum and Trøndelag Østfold reports good results
• Betonmast Innlandet and Boligbygg reports weak results in the quarter
• Order backlog: NOK 5,370 (7,135) million

Property

Low Residential Sales in the Quarter

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	7	6	18	20
EBIT	-5	27	54	43
EBT	-3	27	59	43
Capital employed	548	836	548	836

• Low residential sales in the quarter. Sales contracts signed for a total of 89 (158) residential units in the quarter, whereof AF's share was 34 (77) units
• Seven projects with a total of 793 residential units are in production (AF's share is 369). Sales ratio on commenced projects are 83 %
• Residential portfolio under development: 1,522 (2,085) units. AF's share: 760 (1,060)
• Commercial portfolio under development: 62,342 (54,737) GFA sqm. AF's share: 30,949 (27,175)

Sweden

Demanding Quarter with Negative Results

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	1,759	1,383	5,303	4,407
EBIT	-35	58	86	162
EBT	-36	57	82	157
EBIT %	-2.0%	4.2%	1.6%	3.7%
EBT %	-2.0%	4.1%	1.6%	3.6%

• Sweden reports negative results due to adjustments to project estimates in Betonmast Sweden
• Kanonaden and Härnösand Byggreturer continues to report excellent results
• HMB has sound operations with good results. After the quarter, HMB has been awarded a turnkey contract to build 151 homes for Genova and Redito. In addition to a new upper secondary and high school in Västerås for Hemsö, with a combined value of MSEK 500 excl. VAT
• Order backlog: NOK 8,071 (8,977) million

Energy and Environment

Very Good Profitability

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	261	266	753	839
EBIT	21	24	51	57
EBT	21	23	50	54
EBIT %	8.2%	8.9%	6.8%	6.8%
EBT %	7.9%	8.8%	6.7%	6.4%

• Energy and Environment reports very good results in the quarter
• AF Decom reports a very good results despite somewhat lower activity compared to last year
• AF Energi experience increased demand, and reports significantly increased results compared to last year
• AF Decom has so far this year sorted metal for recycling and recycled materials at the environmental centers corresponding to 34,488 (28,638) CO² - equivalents
• Order backlog: NOK 688 (574) million

Offshore

Excellent Profitability and Order Backlog

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	380	207	870	623
EBIT	51	18	105	43
EBT	46	19	102	41
EBIT %	13.4%	8.9%	12.0%	7.0%
EBT %	12.2%	9.0%	11.7%	6.5%

• AF Offshore Decom reports excellent profitability, as a result of high production and good operations at AF Environmental Base Vats
• AF Offshore Decom has so far this year sorted metal for recycling corresponding to 34,445 (32,029) CO² - equivalents
• AF AeronMollier reports increased revenues compared to last year, profits are still below expectations
• AF Offshore Decom was appointed by TotalEnergies EP Nederland as contractor for the removal and recycling of 10 platforms with an estimated weight of 17,000 tonnes this quarter
• Order backlog: NOK 1,927 (1,600) million

Strong Order Backlog

Rehabilitation Renovation Extensions (RRE)

RRE Market segment

Rehabilitation

Renovation

Extensions

Expertise in a wide range of services

Fire prevention	Service and maintenance	Energy rehabilitation (Energy conservation)
Roofing and tinsmith services	Facade rehabilitation	Tile, stone and concrete rehabilitation
Carpentry work	Installation and rental of scaffolding	Concrete and casting work
Pipe rehabilitation	Rendering systems	Installation and replacement of windows and doors

21

Clearing up the past, building for the future

22

Our most sustainable buildings already exist

Social factors such as local identity and the preservation of cultural values are good reasons for the preservation of facades, details, use of materials.

• The Directorate for Cultural Heritage

Rehabilitation brickwork

The rehabilitation of buildings has only as half the impact on the environment as building new ones

• SINTEF

- Production of building materials Transport Construction process Consumption Waste volumes

-

The EU - a driver on the way to a green transition?

EU Green Deal

The EU (and Norway) > a 40 % reduction in greenhouse gas emissions by 2030 (target of climate neutrality by 2050).

Binding targets

• Fresh air, clean water, healthy soil and biodiversity
• Healthy and affordable food
• More public transport
• Renovated, energy-efficient buildings (EU Renovation wave)

EU Renovation Wave Feedback

The renovation of buildings is a key initiative in reaching climate targets.

• Combatting "energy poverty" and worst-performing buildings
• Renovation of public buildings and social infrastructure
• Decarbonising heating and cooling
• Contribution to economic recovery through new green jobs

• Climate emissions should include both energy efficiency and the emissions from the contractor + the supply chain
• 2% 3% of the building stock should be renovated annually (probably more)
• Residential and commercial buildings account for more than half of electricity consumption in Norway
• Buildings are a source of emissions that the public sector can influence or has a lot of control over

Continuing stable forecasts for the RRE market

Market drivers

• Minor fluctuations
• Increase in building stock
• Change in age distribution
• Need for energy efficiency

Source: Prognosesenteret

Climate requirements

Market forecasts

• 2023: +1.0%
• 2024: +2.6%

26

• Continue to attract, develop and retain the industry's best management and technical expertise
• Reduce our footprint and lead the way in creating socially beneficial business opportunities
• Be the preferred partner
• The industry's most inquisitive contractor

27

Summary

NOK million	Q3 22	Q3 21	YTD 3Q 22	YTD 3Q 21
Revenues	7,537	6,358	22,638	19 756
EBIT	271	344	907	970
EBT	263	344	898	945
EBIT %	3.6%	5.4%	4,0%	4,9%
EBT %	3.5%	5.4%	4,0%	4,8%

• Revenue growth and varying profitability
• Strong cash flow from operations
• Strong financial position
• Solid order backlog: NOK 39,716 (40,391) million
• The Board of Directors has proposed a divided of NOK 4.00 (4.00) per share for the second half of the year

Thank you for your attention

Q4 | 10 February 2023