Ncc AB

STO:NCC B

Earnings Call Transcript 2020-Q4

[Tomas Carlsson, President & CEO]

Good morning and welcome to this presentation of the fourth quarter and the full year 2020 for the NCC Group. My name is Tomas Carlsson, the CEO of NCC. And with me here this morning, I also have the CFO of NCC Group, Susanne Lithander. Under normal circumstances, we prefer to do this presentation live. And for the last couple of quarters, we've done it with a video broadcast. But due to the current circumstances with the pandemic, we've decided to do a phone-in presentation only to minimize the crew necessary to produce this broadcast. The Contracting business is improving quarter-after-quarter and also for the full year, and that is Building Sweden, Building Nordics and Infrastructure business areas. We have identified further opportunities to improve the performance of the Industry business area, and we have taken decisive action to do that during the fourth quarter. We presented some of it in the third quarter presentation. We've done most of that, but we've also identified even more potential savings for the foundation business in Hercules that we think will give better profits going forward, and we're taking action for that in the quarter as well. For Property Development, we have a really good full year. In the quarter, we have fewer sales of properties, and that is reflected in the earnings, but that's a normal development for Property Development. But I think it's well worth noting that Property Development has a really high level of letting in the quarter, actually being on historically high levels. And then finally, we have strong cash flow from operating activities this year as well and this quarter as well. So that's the important summary. If we look at the full year and the quarter, it looks like this on a very high level: Full year, a little bit better than last year, improving margins. In the quarter, it's lower absolute earnings and a somewhat lower margin, but I think it's still a good quarter, and I will give you the reasons why in a short while. And the way I think about it is this: Comparing to the fourth quarter 2019, Contracting business is improving SEK 150 million. It's true that we have a positive one-off impact from the divestment of Optiplan in Finland of SEK 40 million. But even without that divestment, we have a positive development in the quarter from the Contracting businesses. Property Development have no large projects recognized in the quarter compared to last year. So this is pretty much a normal variation that you see in the business. However, we had a large profit recognition of -- from PD in the beginning of the year, and you will see that in the same type of analysis for the full year. Industry: Lower earnings this quarter, but that is mainly due to that we have done most of the divestment program for asphalt -- the asphalt business. And then we have identified additional earnings -- additional cost savings of SEK 10 million annually. And to get those savings, we are taking costs this quarter of SEK 30 million in Hercules. So it's a part of the improvement program for Industry and also continues going forward in Infrastructure when we move Hercules. Then we have the Road Service business that we decided to divest 2 years ago. During the year, we have signed contracts to divest the Swedish and Finnish business as one package and the Danish business as one package. In total, they have no earnings impact overall on the group. However, we have managed to close the Swedish and Finnish divestment during the quarter, and that has a negative impact for the group, while the Danish divestment is still pending due to decision from Danish antitrust authorities. We see no reason why they shouldn't approve this divestment going forward. So that has an impact on the earnings. And in addition to that, we have a lower result before we closed the deal in Sweden and Finland. And then Other and Eliminations, that is more a question of allocation of costs over the year and normal phasing of costs that we have, and you will see that on the full year earnings, bringing us to SEK 379 million. So good earnings in the Contracting business; PD, normal variations and good letting; Industry, taking decisive actions for future better profits; and then we're moving ahead with the divestment of Road Service, and that has an impact in this quarter. Looking at the same type of bridge for the full year, looks like this: Contracting business improving at SEK 281 million, still Optiplan one-off, but still a significant improvement in the Contracting business. And all of the business areas improving over the full year, reaching approximately the same level of earnings. Property Development had a strong year, SEK 121 million better than last year. And I think that's quite an achievement during a year with a pandemic and quite some uncertainty in the office market. For Industry, we have lower earnings mainly due to one-off costs that we have taken in the last -- in the -- towards the end of the year to make sure that we have a better performance going forward, but you also have to remember that we had a one-off effect from bitumen hedging in the second quarter when we had lots of uncertainty regarding the situation with Nynas and supply of bitumen. And then Road Service, continuing bad performance over the year. We had minus SEK 41 million accumulated of the third quarter and then adding the fourth quarter brings us to a minus of SEK 94 million, and that will primarily be gone into -- for practical purposes, gone going forward. And then if you look at Other and Eliminations, for the full year it's minus SEK 112 million compared to 2019. That is corresponding to the effect of sale and leaseback of our headquarters here in Stockholm due to IFRS rules. So excluding those sale and leaseback rules where we eliminate the profits from the sale of our headquarters, it's actually on the same level for the full year, Other and Eliminations, brings us to SEK 1,360 million EBIT. Going forward, for the quarter, orders received on the normal level. Last quarter we talked a lot about the lower levels, and said that we had several business areas on lower level but within normal variations. This quarter, we're back on more normal orders received. We still have a higher degree of early involvement projects, particularly for Infrastructure. And since we always get that question regarding residential orders, the fourth quarter was a really good quarter with the residential orders received. And in all countries, we had good developments for the residential business. That gives us an order backlog on slightly lower level than what we've seen over some time, but on a healthy overall level. Net sales, lower level total for the year. Part of it is PD phasing. PD has lower sales in the quarter, part is Infrastructure and Building Sweden due to more selective business. And then if we compare the order backlog versus net sales, the picture is like this, where the gray bar represents order backlog and the blue bar represents net sales. For Building Sweden and Building Nordics, order backlog is well above 1 years’ worth of sale, which is on a healthy level. Infrastructure is somewhat lower, but then we have the point that the higher volume of early involvement projects with what we consider to be better-quality projects. And then finally, let's talk about financial objectives 2020. Operating margin with the target until 2020 of 4%. Clearly, we're not meeting that, but we are improving to 2.5% compared to 2.2% the year before. Net debt, well below the stated target or actually net cash position. So that's well -- we're meeting that target really well. Return on equity at 37%, meeting the target of 20%. And then the dividend policy of at least 40% of profit after tax, the Board proposes SEK 5 per share corresponding to 40% -- 43% of the profit after tax, meeting that policy as well. Just to remind you that going forward, we have fewer financial targets. We have an earnings per share target of SEK 16 at the end of 2023. Just for -- to compare, we ended 2020 on SEK 11.68. But then we note that we have a onetime effect from low tax rate in 2020 that we don't think is recurring. And if you restate that, you are SEK 0.9 lower at SEK 10.78. We continue with the net debt target going forward. And as I said, we are well below that. And then continues also with the dividend policy of at least 40% of profit after tax going forward. Before I hand over to Susanne, I will talk a little bit about health and safety in a couple of different ways. The first one is accident frequency. And this is the normal way that the Swedish construction industry measures it with lost time injury frequency 1 day, where we have a flat or slightly decreasing trend for the group. This is on a low level for the industry, so we're happy about that. And then we also compare with the European standard, which is the lost-time injury frequency of more than 4 days, representing somewhat more serious accidents, where we have a downward trend since some years. All business areas are contributing to this decrease to 3.6 accidents per million worked hours. And then finally, the corona situation. We have no clear or material impact from the corona pandemic in the NCC Group. Just to give some nuance to that, all parts of our business have, of course, experienced the pandemic but dealt with it in a really good way, making sure that we find solutions on a place-by-place and project-by-project basis. We have a strong underlying demand in all our countries and all our business areas for our products and services, but the potential long-term negative impact from the -- on the economy is really hard for us to assess. And we just note that our market is trailing the general development in the economy. You probably have a better view on what will happen from the corona pandemic than we have. We see somewhat -- we see signs of somewhat slower decision process when it comes to commercial property market. But we also know that there's activity in the market. And as I've said, we had really good lapping in the quarter. And we also started a new head office for a pharmaceutical research company in Denmark, Genmab, which I think is an indication of -- that there's more activity in the office market than people perhaps have presumed. And with that, I hand over to Susanne Lithander. Susanne?

[Susanne Lithander]

Thank you and good morning. I start with this short overview of how the business is split in countries, geographies and in the business areas. And as you can see, Sweden continues to be our largest market with now 60%, grown slightly on behalf of Norway that has decreased a bit, down to 12%. If we then look at the business areas, we see a more balanced split. Infrastructure continues to be our largest, but they have gone down with 5 percentage points and -- to 29%. And Property Development is our smallest when it comes to net sales. Continuing with the performance of Infrastructure, the business area had an order intake in the quarter of SEK 2.5 billion, which is on the low side. But as Tomas has explained, it is an effect of many projects in the early involvement phase in Sweden, but it's also an effect of a lower hit rate in the tendering phase -- tendering primarily in Norway. The business area end the year with a decreased backlog amounting to SEK 15.8 billion and with a book-to-bill for the year of 0.8. The order mix for the year shows an increased share of railroads and a decrease for roads, and the split between the countries has really not changed over the year. The net sales decreased 10% to SEK 4.8 billion in the quarter but only 2% for the year, and the decrease comes primarily from Norway and the operations there and also from Swedish megaproject that we have a lower pace in the World Cup. Some of them are coming closer towards the end. The operating profits and margins continue to improve. EBIT was SEK 123 million in the quarter with a margin of 2.6%. Full year earnings was SEK 364 million, and the margin was 2.1% for the year. And the improvement comes from improved margins in the portfolio and a more stable project portfolio. We've added a separate slide this time for Road Services as it has some impact in the quarter. As we have communicated, we've sold the Swedish and the Finnish operations to Mutares. That deal was closed here in Q4 with a negative impact. The Danish unit is sold to Arkil. Closing is still pending, as Tomas said, due to competition authorities. That deal will have a positive effect, however. From the fourth quarter, Road Services is reported in Other and Eliminations, that unit. And the impact on earnings in Q4 was negative SEK 34 million, which includes the negative effect from the Swedish/Finnish divestment, and the impact on the year was negative SEK 75 million. Road Services Norway continues to be managed operationally by Infrastructure, but we will report it under Other and Eliminations. Building Sweden had a strong order intake of SEK 3.9 billion in the quarter and SEK 14.5 billion for the year. The backlog increased to SEK 17.7 billion. Large orders worth mentioning in the quarter was a depot for the subway in Stockholm of SEK 800 million and the new water park at Liseberg in Gothenburg of SEK 700 million. Public buildings have increased their share of the orders for the year mainly driven by a couple of large hospitals that we communicated earlier in the year in the middle part of Sweden. Net sales decreased to SEK 3.8 billion in the quarter and to SEK 13.4 billion for the year due to the order -- lower order intake last year. Earnings improved both in the quarter and for the 12-month period. Improvement comes from improved margins in the portfolio. The margin in the quarter was 3.3%; and for the year, 2.9%. This slide shows that our order intake in residentials in Sweden varies a lot between the quarters. The fourth quarter this year was a quite normal quarter with almost SEK 1 billion in bookings. More than 70% of that was rentals. Building Nordics increased their order intake in the fourth quarter to SEK 5.2 billion primarily driven by the 2 large orders: We Land in Finland and Christiansholm in Denmark. They continue to have a strong backlog, SEK 14.9 billion. And offices and housing account for 60% of the orders received in 2020. Net sales decreased to SEK 3.3 billion in the quarter due to the Finnish operation driving that decrease. The increase for the full year period is driven by the Danish unit that has increased its share of net sales also in the business area with 5 percentage points. It's now 38% of sales in the business area. Earnings in the quarter increased to SEK 181 million with a margin of 5.4%. And that includes the divestment impact of around SEK 40 million. If you exclude the divestment, the margin was 4.2%, which is quite strong margin. The improvement from operations for the year comes from increased volumes and also from a much more stable project portfolio with higher margins. And this slide shows the variation between the quarters in order intake for the residential in the Building Nordics market. And as you can see, Q4 2020 was a strong quarter with SEK 2.2 billion booked compared to the average of around SEK 1 billion. We move over to business area Industry and the volumes. And we can conclude that the volumes are on par with the fourth quarter of last year. They are slightly up for both, sometimes down, but pretty much on par. Order intake in Industry was SEK 2.8 billion in the fourth quarter and SEK 12.3 billion for the year. Division asphalt decreased due to the business in Denmark that received a large state order last year. Stone material was on the same level as last year. Hercules has increased their order intake due to the Swedish operations. Net sales at SEK 3.6 billion in the quarter and SEK 12.5 billion for the 12-month period. The decline in sale is primarily explained by lower customer pricing in asphalt, which is a consequence of lower market pricing of bitumen but also a changed customer mix. There's no real change here in the split of net sales between the geographies. The earnings in the quarter was SEK 89 million, and that includes the restructuring of SEK 85 million that Tomas has mentioned. Restructuring cost of the asphalt unit amounted to SEK 55 million. We announced that we would have cost for SEK 65 million. Most of the costs have been taken, but potentially there could be some that have fallen over to 2021. The remaining SEK 30 million here was for closing down a couple of rebar factories that was not profitable. The expected savings for all of this restructuring now is SEK 60 million, SEK 50 million from asphalt and SEK 10 million from Hercules. The margin in the quarter was 2.5%. But if you exclude the restructuring cost, it was 4.9%. So pretty much almost on the same level as the fourth quarter of last year. Property Development: Net sales reached SEK 464 million in the quarter and SEK 2.7 billion for the year. Earnings were SEK 54 million in the quarter, and we recognized profits from 2 projects, Arendal 4 and Björkö school, both in Sweden. In addition, we had land sales and earnings from previous sales contributing to the profits. In Q4 last year, we recognized 5 projects and also a land sale with building rights in Norway, which explains the drop. For the 12-month period, earnings were SEK 434 million, which is high and very good, as Tomas showed earlier with, in total, 5 projects recognized to profits to compare with 11 projects last year. The unit end the year with margins above target, but they don't reach the targets for return on capital due to keep building and increasing their capital employed. Project starts during the quarter was 2. We have started We Land in Finland and Kontorværket in Denmark. We started with -- we have started 5 projects during 2020. We end the year on the same level as we entered the year with 15 ongoing projects, but with more space in Denmark and Finland and less in Sweden. As Tomas said, the letting picked up in the fourth quarter and 20 contracts were signed. 30,400 square meters were let in the quarter to compare with almost 68,000 square meters for the whole year, so a significant pick up there. And this slide shows that we continue to have a healthy relationship between the letting ratio and our completion ratio with a higher letting ratio of 57% then the completion ratio of 49%. Adding it all up to the income statement for the group, the business areas contributed with SEK 573 million in earnings. And we come to the part of Other and Elimination. That typically has a negative impact on our earnings. First, we have the costs for headquarter and smaller subsidiaries and companies that don't belong in a BA, which had an impact of minus or negative SEK 93 million in the quarter, which is SEK 38 million more than last year. That's explained primarily by the deficit in allocation of pension costs internally, that impact this quarter but really is a cost for the full year. For the year, this item, headquarters and subsidiaries, is lower, SEK 36 million, than last year as -- and that's driven by lower insurance damage costs in our insurance company. The next item is internal gains, and that's where we eliminate the profits in Property Development projects during the construction phase, and we reverse them when we recognize the profit in our projects. It's negative SEK 12 million. It's the net impact in the quarter compared to positive SEK 15 million last year. And this difference is, of course, due to the fact that we recognized more profits in PD last year in the fourth quarter and reversed more profit compared to this year. And for the year, this effect is SEK 40 million. In other group adjustments, we have various accounting adjustments, and the main impact in the quarter is adjustments for pensions according to IAS 19. And in the year, yearly number, the major impact comes from IFRS 16 adjustments that we had to make for the sales and leaseback of the new head office in Solna. And Tomas mentioned that earlier as well. This adjustment will reverse evenly over the lease period of 10 years that we rent the office. That brings us to an EBIT of SEK 379 million that Tomas had already talked about. We do have a lower financial net, and that's due to a lower average corporate debt. Our tax cost is positive in the quarter and is minus SEK 22 million for the year. As you know, our tax cost is impacted by large -- by the large portion of profits from Property Development profit -- project, and they are typically tax-free. In addition, we have 2 one-off items in this quarter with positive effect, and they are both corrections of previous year's tax costs, and they amount to about SEK 100 million in corrections. The net profit for the period is SEK 420 million and SEK 1.26 billion for the year, which corresponds then to an EPS of SEK 11.89. We continue to have a good cash flow in the quarter and for the full year. Cash flow from profits contributed SEK 1.1 billion in the quarter and SEK 2.6 billion [ is the latest ]. And this is actually very good. Cash flow from property projects is negative compared to fourth quarter last year due to more sold projects last year in the quarter. And we, as you can see, continue to invest in our project portfolio. We had also a positive impact from working capital in the quarter and pretty much due to good focus in the business to work with their working capital and also resolving claims. The positive impact last year was much larger, as you can see, SEK 1.9 billion. That was primarily driven by some really large prepayments that we had in Property Development. We do have a positive impact from improved working capital also on the year-to-date numbers, not as big, though. CapEx is slightly up for the quarter but lower than last year for the full year. That's explained by the fact that we have not invested as much in our machineries and equipment, and we've also sold a significant amount of our machines and equipment. Net debt was SEK 4.8 billion at the end of the year compared to SEK 4.5 billion last year. The SEK 300 million increase is driven by leasing liabilities according to IFRS 16 accounting, and that's caused by the sales leaseback of our head office again. The corporate net debt is a positive net cash of SEK 64 million. And our net debt-to-EBITDA target is to be below 2.5x. And we are pretty close to 0, negative 0.03 to be exact as we have the positive corporate net debt. And with that, I hand it over back to you, Tomas.

[Tomas Carlsson, President & CEO]

Thank you. Before we get to the wrap-up, let's talk a little bit about the AGM to be held on March 30. And a couple of things in connection with that. First of all, and perhaps most important, the Board has proposed a dividend of SEK 5 per share to be paid in 2 tranches: the first one, the 1st of April ; and the second one, 9th of November 2020 (sic) [ 2021 ]. That will be a big topic on the AGM. And due to the pandemic situation, we are preparing various scenarios for the AGM depending on what the recommendations for health authorities will be at that point. We will send more information regarding the format and also regard -- [ is in both ] distribute the material for the AGM no later than 4 weeks before the meeting, and that means towards the end of February. So in summary, we're following our designated path. The Contracting business is improving quarter-after-quarter for this quarter and also for the year. We've identified opportunities to even more improve the performance in Industry, and we're taking decisive action for that in the quarter. That has a cost impact. We have a good year for Property Development. We have started 5 new projects, and we have letting in the fourth quarter on a really high level and strong cash flow from operating activities in 2020 as well. And with that, we hand over to the operator and open up for questions.

[Operator]

[Operator Instructions] Our first question comes from Stefan Andersson from SEB.

[Stefan E. Andersson, Analyst]

Yes, a couple of questions from me, and I'll start with Other and Elimination. I mean there's many moving parts here, of course. And I think I understood some of them or most of them. But could you maybe just clarify one thing there when it comes to the sale and leaseback and the impact of that? Let's say, it's around SEK 100 million -- SEK 100-plus million that you say this year is impacted on, and we have that one for many years. Did I understand correctly that you said that those SEK 100 million plus are going to be reversed over 10 years? Or is this the new level, the SEK 100 million plus? Is that going to be following you for 10 years?

[Susanne Lithander]

No. The -- what we did was -- what it means with the accounting that we have to do is that we took part of the profit and we eliminated that. So we took a hit in Q1 of x amount.

[Tomas Carlsson, President & CEO]

SEK 120 million.

[Susanne Lithander]

Around -- somewhere around there.

[Tomas Carlsson, President & CEO]

It's a one-off.

[Susanne Lithander]

A one-off when we put that in. And then as we rent the office, you reverse that until it comes down to 0 over the 10 years period.

[Tomas Carlsson, President & CEO]

So we will have...

[Susanne Lithander]

So quarter-after-quarter, you will have a very small positive impact from that, but you have the big hit in Q1 of 2020.

[Stefan E. Andersson, Analyst]

Okay. Good. So I know you don't give guidance, but this SEK 552 million Other and Elimination is an extraordinary high level. Many moving parts, of course, but it's more correct to look at 2019 or that kind of level or above that? I mean that is correct, right?

[Susanne Lithander]

Yes.

[Stefan E. Andersson, Analyst]

Then just moving over to the order, I mean it's a little bit of a recovery in the order intake in this quarter after last quarter, which was softer. If you look at the pipeline, looking into what you're talking about and so on, how is that developing? The reason I'm asking is connected to the soft order intake on Infrastructure. I'm hearing from some other companies that activity in the public sector due to COVID is a little bit slower, that things aren't moving along as when people were at work. So if you could give any insight to your view on that in general in the order pipeline and those discussions.

[Tomas Carlsson, President & CEO]

Well, in general, I would say that that's not really our experience. We think that we have a good demand in all the countries and in all business areas, and that goes for Infrastructure as well. What we've seen over the year is that the projects that we have won have been early involvement projects. And all the large one have been early involvement projects, and we don't report them until they are converted into the full project, and that can take some time, more than a year in some instances. They are normally of better quality because we've had the opportunity to work together with the customer over some time and define the products and really agree on what we're looking at. That has been the norm for building over many, many years. But we see a change for Infrastructure this year with more early involvement than we've seen before. So that's sort of the question. On top of that, as Susanne alluded to it, it is a little bit on the lower side still, and that is primarily driven by Norway where we have taken a really cautious approach to the large projects that we've seen in Norway, where we make sure that we have the correct risk profile, we have the right expected earnings and we also have the right team, which means that we've had a pretty low hit rate in Norway last year. But we will continue -- we think it's important that we continue to have the right project in the project portfolio in all parts of the company.

[Stefan E. Andersson, Analyst]

And then it seems like residential -- on the building side, residential is increasing its part in the order backlog. Is -- would you say -- do you see any differences in -- well, put it 2 ways, risk and margins when it comes to resi versus other commercial projects that you would have?

[Tomas Carlsson, President & CEO]

Well, there's -- the short answer to that, Stefan, would be no. But I could expand a little bit on it. And if we could go -- is it possible to go back and show the -- no, it's not. But if you remember all the slides we showed on orders received, you see a pretty large variation quarter-on-quarter. And I think the pattern that you see is that even during times where everybody agrees on that there's a strong market, you can have individual quarters with really low order intake as well as a really good one. And even in -- during periods of time where you have a somewhat softer market, you can still have quarters with really good order intakes because there's a lot -- as you said, there's a lot of moving parts depending -- deciding that. So my first part of the question is that we can't use 1 quarter, 1 data point to have a conclusion regarding the trend going forward. That's the important thing. And then we don't see any type of change in the risk profile.

[Stefan E. Andersson, Analyst]

Okay. Final question for me then. You touched on your targets, and the balance sheet is quite far away from your debt target. What are you thinking about that? Are you happy to be so significantly away from the debt target and pleased with having that strong balance sheet and would like to operate on that? Or is there an agenda here to actually make use of that capital in the longer term?

[Tomas Carlsson, President & CEO]

I mean we're happy that we have a strong balance sheet because that has not always been the case. That's the first part. Second is we can probably use a strong balance sheet the same way as any other company can do. There's a number of options. For the short and medium term, we are happy to have this situation. And that's reflected, for example, in the Board's suggested -- proposal for dividend. So right now, we're happy where we are. We're always looking at the opportunities, but we have to be convinced that they are good for the company in the long run. So a couple of quarters or a year or more, that is not a driving factor behind our decisions.

[Operator]

Our next question comes from Tobias Kaj from ABG.

[Tobias Kaj, Research Analyst]

Yes. And I would like to start with some questions regarding your Industry operation and, first of all, regarding the -- you took SEK 55 million in charge in Q4 for the reconstruction measurements, and you communicated SEK 65 million in total before. Does this mean that you will report some SEK 10 million in cost in Q1? Or is it a risk that the costs for the reconstruction has increased since the communication in November?

[Susanne Lithander]

No, as I said, I don't think there will be much more costs coming in. We think we have taken all, but you -- there could be some minor numbers coming in this year.

[Tomas Carlsson, President & CEO]

We think the SEK 65 million will hold.

[Susanne Lithander]

Yes. The SEK 65 million will definitely hold.

[Tomas Carlsson, President & CEO]

But we're not promising that we will come in much lower.

[Tobias Kaj, Research Analyst]

Okay. Excellent. And I mean with the measurements that you have taken, can you indicate anything about what's your long-term ambition for the margin in -- within Industry?

[Tomas Carlsson, President & CEO]

Well, there's a couple of things that expresses ambition for the industry, but we think that the margin of around 6% is -- would be good for the Industry business. Given the fact that they have significant fixed assets, they should have a higher margin. So that's what we think that they should be long term. We also think that there's -- we look at return on capital employed for Industry, and the target is 12% in the same way as we think about all the capital that we use.

[Tobias Kaj, Research Analyst]

And within Building Nordics, even though -- even if you adjust for the positive item of SEK 40 million, it's a quite strong underlying improvement on the margin. Can you specify a little bit more about what that comes from? And also, does the margin varies a lot between the different countries? I noticed that there is a strong growth in revenues in Denmark. In the past, you had very high margins in Denmark. Is that still the case? Is that one reason for higher margins within Building Nordics?

[Susanne Lithander]

Yes. Denmark is still our strongest contributor in the Nordics.

[Tobias Kaj, Research Analyst]

And based on the backlog, will revenues continue to grow in Denmark as a share of the revenues for Building Nordics?

[Susanne Lithander]

Finland is still the largest market, and they also were pretty strong in the end of year, in the quarter with orders. So not really.

[Tomas Carlsson, President & CEO]

We're happy with Denmark, but we think we can do better in the other countries as well, and we're working with that. And you might have seen that we announced the new Head of Building Finland earlier this week.

[Tobias Kaj, Research Analyst]

Yes. And one final question for me. Your order backlog is down 12% in a year. Do you see a risk of a similar drop for revenues during 2021?

[Tomas Carlsson, President & CEO]

I mean conversion is not automatic between order backlog because it depends on what size of contracts that we've had. We've had a period of time with a lot of really large projects in the order backlog. That sort of -- that proportion is decreasing. Having -- so not immediately, but having said that, we would rather have continued a little bit of a decrease in net sales than take on bad projects again.

[Operator]

Our next question comes from Simen Mortensen from DNB Markets.

[Simen Mortensen, Analyst]

Some of my questions have already been asked, so I can ask them in a different way. Also, in Industry, the cost savings you're here guiding for like SEK 55 million to save SEK 50 million annually or SEK 30 million to save SEK 10 million annually, could you just help us understand what kind of cost savings you're talking about here? What are you doing?

[Tomas Carlsson, President & CEO]

Organizations, redundancies in the organization. For [indiscernible] redundancies in the organization in -- for Hercules or rebar, it's -- we've terminated lease contracts and redundancies as well. It's pretty [ tough ].

[Simen Mortensen, Analyst]

Yes. It's just good to have it stated. In terms of HQ and the Other and Eliminations, can you just try to help us a bit along as well what you would consider as -- because we've seen the volatility in Eliminations and Other quite high this time, Road Services divestments, et cetera. But the underlying for the HQ and subsidiaries, what would be like a normalized level entering 2021?

[Susanne Lithander]

I think if you look at 2019, it's probably the best guidance I can give you today.

[Simen Mortensen, Analyst]

Okay. And also in terms of the tax, seemed quite volatile. There was some back and forth for the year. Where do you see your normalized tax into 2021?

[Susanne Lithander]

17% to 18%.

[Simen Mortensen, Analyst]

My other questions have been asked already.

[Operator]

Our next question comes from Erik Granström from Carnegie.

[Erik Granström, Financial Analyst]

I just had 1 or 2 questions. Tomas, you mentioned that the sale of the Road Services is expected to yield sort of a 0 result, and now you're reporting somewhere around SEK 30 million in extraordinary costs because of the sales that we've seen so far, but that you expect then a positive effect in Q1. Should we then interpret it as being about as large but on the positive side for Q1?

[Tomas Carlsson, President & CEO]

Not necessarily. We have a low [indiscernible] until we close the deal as well. So it's not only the phasing effect.

[Erik Granström, Financial Analyst]

And when do you expect it to be reported? What's your best guess?

[Tomas Carlsson, President & CEO]

Well, when you think about the decision point for a national authority, we're really talking about guessing here, but first half year that -- and I would like to -- emphasis, we're talking about guesswork here.

[Erik Granström, Financial Analyst]

Yes. Sure. Absolutely. And then my final question was regarding the divestment in PD that you recently announced that's going to be reported in Q4 of this year. You also stated there should be some sort of cash flow effect already in Q1 because of prepayments. Could you sort of give some sort of indication of how large you expect the cash flow effect to be early on this year?

[Tomas Carlsson, President & CEO]

No, not really.

[Erik Granström, Financial Analyst]

Okay. But sort of the significant prepayment that you mentioned in the press release that...

[Tomas Carlsson, President & CEO]

It will be significant.

[Operator]

[Operator Instructions] Okay. There appears to be no further questions there, so I'll hand back to our speakers for any other remarks.

[Tomas Carlsson, President & CEO]

Thank you all for attending this presentation. I think the key message here is that we are continuing in the same direction as we've been moving for some time now. Contracting business improving quarter-over-quarter and also for the full year. PD, a great year. Good letting in the quarter, and 5 projects both sold and started during the year. Industry, we've identified more opportunities for cost savings, and we're taking decisive actions for that, and good cash flow in the quarter and the year. And with that, thank you all. And hopefully, we will see you live going forward at some point this year. Thank you all.