AF Gruppen

Earnings Release • May 13, 2022

AF Gruppen ASA Q1 2022

13 May 2022

Highlights

Solid growth and record high order backlog, but lower profitability in Q1

• Revenue: NOK 6,809 (6,209) million in Q1
• Earnings before tax: NOK 209 (245) million in Q1
• Profit margin: 3.1 % (4.0 %) in Q1
• Cash flow from operations: NOK 607 (205) million in Q1
• Order backlog: NOK 42,697 (33,818) million as of 31 March 2022
• Net interest-bearing debt of NOK 371 (46) million as of 31 March 2022
• The board of directors suggests a dividend of NOK 6.50 (6.50) per share to be paid in the first half of 2022

Safety

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

Sick leave related to Covid-19 is estimated to account for 1,1 percentage points of the total sick leave of 5,5% in Q1

Revenues and earnings – quarterly

6,000 5,000 0 4,000 9,000 2,000 1,000 3,000 7,000 8,000 Q3 21 NOK million Q1 21 Q2 21 Q4 21 Q1 22 6,209 6,809

Return on capital employed

* Rolling average last four quarters

* Rolling average last four quarters

Interest expences added

1 th quarter 2022

Cash flow statement

NOK million	Q1 2022	Q1 2021	2021
EBIT	215	264	1 609
Depreciations, amortisation and impairment	130	136	567
Change in net working capital	421	-115	-340
Other adjustments / taxes paid	-159	-80	-422
Cash flow from operations	607	205	1 415
Net investments	-34	-38	184
Cash flow from capital activities	-124	-93	-1 187
Interest paid and change in interest bearing debt	-139	-104	-387
Net change in cash and cash equivalents	310	-29	25
Net cash and cash equivalents at beginning of period	680	708	708
Change in cash and cash equivalents without cash effect	-17	-49	-52
Net cash and cash equivalents end of period	974	630	680

Cash flow from operations

Net interest-bearing receivables and liquidity

Balance sheet

NOK million	31.03.22	31.03.21	31.12.21	Equity share
Non-current assets	7,608	7,689	7,490	Long term debt Equity
Current assets, ex. cash	4,993	4,614	4,937
Cash and cash equivalents	974	630	680	Equity-share*:
Total assets	13,574	12,932	13,108	26.8 % (27.5 %)
Equity	3,639	3,553	3,572
Long term debt	1,381	1,402	1,343	Short term debt
Short term debt	8,554	7,977	8,193	* Equity ratio excluding the effect of IFRS 16 is 28.1% per 31 March 2022
Sum egenkapital og gjeld	13,574	12,932	13,108	All the company's covenants exclude the effect of IFRS 16

Environment

¹ Regulatory requirement of 60%

27,806 tonnes = 27,806 (14,470) tonnes CO -equivalents saved

Recycling environmental parks Recycling rate 78% (77%) YTD in 2022

YTD 2021

Business areas

1 th quarter 2022

AF Gruppen is strongly affected by challenging market conditions

Source: SSB. 08657: Construction cost index for residential buildings. Material indexes for lumber, concrete og steel (2015=100), after type of material, month og contents

• Geopolitical turbulences creates uncertainty and less stability short term
• The war in Ukraine, new lockdowns in China and the energy crisis has led to further pressure on an already demanding price and delivery situation for many of our input factors
• Projects are experiencing fluctuations in raw material prices beyond what material cost indices are showing
• SSBs Material cost index from March 2021 to March 2022:
• Lumber: +83%
• Concrete: +11%
• Reinforcing steel: +49%
• Structural steel: +40%

Source: SSB Source: SSB

Civil Engineering

Solid profitability and record high order backlog

NOK million	Q1 22	Q1 21	2021
Revenues	1,242	1,509	6,002
EBIT	84	96	515
EBT	83	94	510
EBIT %	6.7%	6.4%	8.6%
EBT %	6.7%	6.2%	8.5%

• Very good results from Målselv Maskin & Transport. Good results from AF Anlegg and Eiqon. Consolvo has reported low profitability so far this year due to seasonality
• In the first quarter, AF Gruppen signed the final agreement to purchase 80% of the shares in Stenseth & RS Holding AS. The acquisition was completed during Q1
• Together with Italian Ghella, AF Anlegg signed a contract with Oslo municipality for building the new water distribution tunnels in Oslo. The contract has an approximate value of NOK 8,750 million excluding VAT. AF Gruppen's share is 60%
• AF Anlegg also signed a contract with Equinor to build the new landfall tunnel for the Statpipe pipelines on Karmøy. The contract has a value of approximately NOK 300 million excl. VAT
• Order backlog: NOK 12,425 (7,140) million

Construction

Low profitability and considerable provisions made

NOK million	Q1 22	Q1 21	2021
Revenues	2,481	1,853	8,865
EBIT	18	82	447
EBT	17	82	450
EBIT %	0.7%	4.4%	5.0%
EBT %	0.7%	4.4%	5.1%

• Price developments for raw materials (lumber and steel) and energy affects the construction unit's profitability negatively. Provisions for future losses has been made and estimates have been revised downwards as a result of higher material prices
• Haga & Berg still reported excellent results in the quarter. AF Bygg Østfold and Åsane Byggmesterforretning also reported good results
• AF Bygg Oslo signed a contract to build block 2 of the Storøykilen residential project at Fornebu in Bærum. The contract has a value of NOK 274 million excl. VAT
• LAB Entreprenør signed two contracts in Q1. The contracts were signed with Vik municipality and Bonava with total value of NOK 562 million excl. VAT
• Order backlog: NOK 13,211 (12,041) million

Low profitability, but large variation in the results of the various units

NOK million	Q1 22	Q1 21	2021
Revenues	1,243	1,222	5,196
EBIT	23	25	132
EBT	20	16	111
EBIT %	1.8%	2.1%	2.5%
EBT %	1.6%	1.3%	2.1%

• High raw material and energy prices also affects the units in Betonmast
• Betonmast Romerike, Røsand, and Østfold still reported satisfactory results
• An agreement for the sale of Betonmast Telemark was entered in the quarter. The transaction was completed in February 2022 and has not affected the results
• In the first quarter, Betonmast entered into an agreement with Sulland Eiendom AS and Nordbo Mjøsa AS to build 74 apartments in Toten. The contract has a value of NOK 240 million excl. VAT
• Order backlog: NOK 6,258 (6,563) million

Property

Sale of the hotel and office building Karvesvingen 7. Low residential sales in Q1

NOK million	Q1 22	Q1 21	2021
Revenues	6	6	35
EBIT	2	7	75
EBT	3	7	76
Capital employed	678	897	703

• Low residential sales in the quarter. Sales contracts were signed for a total of 57 (122) homes, whereof AF's share was 26 (56)
• The final agreement to sell all the shares in the company owning the hotel and office building Karvesvingen 7 in Hasle, Oslo (21,056 square metres GFA) was signed in the quarter. The transaction was completed after quarter end
• Six projects with a total of 770 units are in production (AF's share is 236). Sales ratio on commenced projects are 86%
• Residential portfolio under development: 1,658 (2,438) units. AF's share: 802 (1,223)
• Commercial portfolio under development: 51,856 (143,380) BTA sqm. AF's share: 25,749 (41,196)

Revenue growth, but lower profitability

NOK million	Q1 22	Q1 21	2021
Revenues	1,585	1,394	6,300
EBIT	46	51	302
EBT	44	49	295
EBIT %	2.9%	3.7%	4.8%
EBT %	2.8%	3.5%	4.7%

• High prices on raw materials and delivery challenges also affects the Swedish business area
• Betonmast Sweden has become part of the business area Sweden from Q1 2022. The comparative figures have been restated. The Swedish Betonmast units reported strong revenue growth in the quarter, but had low profitability
• Overall, the other units reported a satisfactory profitability
• Kanonaden reported revenue growth and the unit continues to excel with solid results. AF Härnösand Byggreturer also reported good profitability in the quarter
• Two contracts were announced in Q1, with a total value of SEK 283 million excl. VAT
• Order backlog: NOK 8,531 (5,475) million

Improved margin in the quarter

NOK million	Q1 22	Q1 21	2021
Revenues	237	250	1,152
EBIT	12	11	109
EBT	11	9	107
EBIT %	4.9%	4.4%	9.4%
EBT %	4.5%	3.7%	9.3%

• Energy and Environment reported improved margin in the quarter and a higher result
• AF Decom reported a good first quarter with increased activity and profitability. AF Decom has in the first quarter sorted metal for recycling and recycled materials at the environmental centers corresponding to 15,049 (6,521) CO² -equivalents
• The environmental parks have seasonal lower activity, and some of the received materials in the quarter has not been recycled yet
• AF Energy reports lower revenues, and a weaker result compared to the same quarter last year. There is varying profitability in the project portfolio
• Order backlog: NOK 763 (701) million

Offshore

Revenue growth and a strong profitability improvement

NOK million	Q1 22	Q1 21	2021
Revenues	185	160	848
EBIT	17	8	83
EBT	16	6	78
EBIT %	9.4%	4.9%	9.8%
EBT %	8.6%	3.7%	9.2%

• Offshore reported a strong revenue growth and very good results in the quarter
• AF Offshore Decom had high activity and a very good profitability following high production and solid operations at AF Miljøbase Vats, as well as a positive effect from increased sales of precious metals
• AF Offshore Decom has in the first quarter sorted metal for recycling corresponding to 16,577 (10,764) CO² -equivalents
• AF AeronMollier reported increased revenues and higher results compared to the same quarter last year. In addition, the unit had a strong order intake in the quarter
• Order backlog: NOK 1,583 (1,460) million

1 th quarter 2022

Strong order backlog

The Offshore Business Area

Q1 2022 | Theme presentation

Stable development in health, safety and the environment

The Offshore Business Area

AF Environmental Base Vats – Europe's most modern and environmentally sound facility for recycling and disposal of advanced offshore installations

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Sunrise Wind Client: Aker Solutions

BRAE Bravo Client: TAQA

Curlew FPSO Client: Shell UK Ltd

Project Fjord1 electric ferries

Project Siremar (HVAC for LNG hybrid ferry) Client: Sefine Shipyard Client: Fjord1 Kongen (Oslo-Nesodden)

Client: Norled

Strong profitability improvement and strong order backlog

Success factors to ensure healthy profitability and growth over time

Culture	Competence	Strategy
Active risk management	Good specialist expertise	Partner orientation
Strategic project selection	Proper organisation	Growth, both geographically and through expansion of services
Entrepreneurial spirit and commercial know how	Own production	Contribute to global, green shift

Solutions for a sustainable, green restructuring of the offshore sector

Offshore vind Circular economy Safe disposal of harmful substances

Electrification of the offshore sector

Adapted to regulations and increased digital requirements

The offshore business area is well equipped to seize opportunities and deliver for tomorrow's requirements and needs

Well positioned for further profitability and growth

▪ Solid order backlog, increasing demand and potential for further expansion of the value chain

Global potential

▪ Use own expertise with complementing partnerships, both globally and when extending the range of services

A part of tomorrow's solution

▪ Green restructuring and circular economy

1 th quarter 2022

Summary

NOK million	Q1 22	Q1 21	2021
Revenues	6,809	6,209	27,868
EBIT	215	264	1,609
EBT	209	245	1,580
EBIT %	3.2%	4.2%	5.8%
EBT %	3.1%	4.0%	5.7%

• Positive trend in the safety work
• Revenue growth, but lower profitability due to higher prices and delivery challenges on raw materials
• Strong cash flow from operations
• Strong financial position
• Solid order backlog: NOK 42,697 (33,818) million
• The board of directors suggests a dividend of NOK 6.50 (6.50) per share to be paid in the first half of 2022

Thank you for your attention

Q2 | 26 August 2022