Sweco AB (publ)

STO:SWEC B

Earnings Call Transcript 2022-Q4

[Marcela Sylvander, executive]

Good morning, and welcome to this presentation of Sweco's Q4 and year-end report. My name is Marcela Sylvander, and I'm heading Communication for the Sweco Group.

With us today is Sweco's President and CEO, Åsa Bergman; and CFO, Olof Stålnacke. They will take us through the results of the fourth quarter and also for the 2022. After the presentation, we will, of course, open up for questions.

Please, Åsa.

[Åsa Bergman, executive]

Welcome, everyone, to Sweco's presentation of Q4 and year-end results.

Let me start by giving you a quick recap of Sweco. For those of you following our quarterly reports, you are familiar with this information. We are Europe's leading architecture and engineering consultancy. In the quarter, we surpassed 20,000 experts, corresponding to a bit over 18,500 full-time employees. We are present in close to 50 markets in Europe, organized in 8 geographical business areas. We have a turnover of more than SEK 24 billion.

And with that introduction, let's move on to the Q4 results. We finished the year with a strong quarter result. Net sales increased to SEK 6.7 billion. We delivered strong organic growth of 8%, driven by an overall positive demand for services and increased fees. We also add 2% from acquisitions. Increased -- EBITA increased to SEK 709 million with a margin of 10.5%.

I'm very pleased with this result and the fact that we have improvements across all our business areas. 7 out of 8 business areas reported organic growth, and 6 out of 8 business areas reported margin improvements. Our financial position remains strong, and we also continue to act on opportunities in the market with new acquisitions.

On the slide here, you can see one of the projects won during the fourth quarter. We signed a new framework contract to continue our engineering activities on the metro network in Paris. We have worked on this project since 2016, and we will now continue until at least 2030. The new metro network will connect several strategic locations in Paris, such as the regional airports and the Olympic Stadium, and also save 27 million tonnes of CO2.

Now let's move to the full year results. Q4 marked a strong end to a mixed year. On one hand, 2022 was a year hit by the war and all its terrible consequences. Focusing on the business side, there were uncertainties in the macroeconomic environment and, among others, a clear decline in the private real estate segment. On the other hand, we also saw a continued positive overall demand for our services with a clear uplift in areas such as energy.

Net sales surpassed SEK 24 billion with organic growth of 6% for the year. EBITA increased by 8% compared to last year with a margin of 9.2%. We have, throughout the year, improved our organic growth through positive fee development and accelerated recruitment. We continue to execute on our acquisition agenda, having completed 2 acquisitions in Q4 and 12 acquisitions over the full year.

In total, we have added close to 400 new experts to Sweco and, by this, strengthened our position in strategically important segments. One of the acquisitions was Futureproofed, a Belgium climate tech firm. I will get back to the acquisitions later in this presentation. We maintained our strong financial position with a net debt/EBITDA ratio of 0.4, which is unchanged from last year. The Board of Directors proposes a dividend of SEK 2.70.

Let's now take a closer look at the market situation. As I said, the macroeconomic climate remained uncertain due to various events such as the inflation, the Russian invasion of Ukraine and the lingering effects of the pandemic. Despite this, the overall demand for our services remained good in the fourth quarter, especially in the infrastructure, energy, environmental and water segments as well as digital services.

The image you see on this slide is another example of a project we won in Q4 in Belgium based on our expertise in infrastructure. Here, we will work on the reconstruction of 27 movable bridges. The project ensures the upgrade to a reliable infrastructure with optimal equipment in terms of remote control.

Due to the macroeconomic situation, the demand in certain parts of private buildings and real estate continue to weaken, especially in architecture services. Altogether, we continue to see solid demand for our services, and we continue to strengthen our order book. The long-term demand, driven by trends in society connected to sustainability, digitalization and urbanization, remains in our favor.

Now let us take a closer look at the result in the fourth quarter. Our organic growth was 8% in the quarter, adjusted for calendar effects. We delivered positive organic growth in 7 out of 8 business areas. As you can see here, Norway, Denmark, Finland, Netherlands and the U.K. all delivered double-digit organic growth. Sweden also delivered a strong level. The positive development is driven by an overall good demand in many sectors combined with a positive trend in pricing and numbers of FTEs.

Let us now move over to the results. EBITA increased to SEK 709 million, which is an improvement by 30% in the quarter and equivalent to SEK 178 million adjusted for calendar effects. Denmark increased EBITA significantly yet again and had an all-time high margin. Belgium also had positive development in the quarter compared to last year. Sweden delivered very strong margins, and Finland is now close to our financial target of 12%.

We are seeing first signs of the actions taken in Q3 starting to have effect on efficiency in these business areas. In total, we improved our margins in 6 business areas to a total of 10.5% in the quarter.

We will now dive into our acquisitions. We continue to execute on our acquisition agenda. And during this year, we have acquired 12 companies, welcoming close to 400 new experts to Sweco. During Q4, we announced the acquisition of 2 companies, one being Via Trafik Rådgivning, Denmark's largest specialized consultancy within traffic and mobility with some 55 full-time employees.

As I mentioned briefly earlier, in December, we acquired Futureproofed, a Belgian climate tech firm that guides companies and cities towards a low-carbon future through their Software-as-a-Service platform, which enables clients to measure, reduce and report CO2 emissions. This further adds to Sweco's offering in sustainability services and digital solutions.

We also kickstarted 2023 with 3 acquisitions, one being Belgium group VK architects+engineers, specialized in architectural, technical and infrastructure design solutions within the infrastructure and building segments. VK is active in the Belgian market and has also presence in the Netherlands, Luxembourg, the U.K. and Vietnam. The VK group has some 600 experts and an annual net sales of around SEK 750 million. The acquisition is subject to approval from the Belgium Competition Authority with closing expected in the first half of 2023.

I will now give the floor to Olof, who will go through the numbers in more detail. Please, Olof.

[Olof Stålnacke, executive]

Thank you, Åsa, and good morning, everyone. Starting with the long-term trend on organic growth, we are slightly down versus Q3, but organic growth is still on historically high levels at 8%.

Looking then at net sales development. With this organic growth, net sales in the quarter is SEK 6.7 billion, taking LTM net sales to SEK 24.3 billion. And we see a significant negative calendar effect in the quarter from 6 less hours. Positive impact from M&A is 2%, and from FX now with the weak Swedish krona up to 5%, bringing the total growth to 14% for the quarter.

Looking at the EBITA development. EBITA is SEK 709 million in the quarter and LTM EBITA, thereby, increasing to over SEK 2.2 billion. EBITA is up SEK 178 million or 30%, excluding the SEK 54 million negative impact from calendar.

Looking then at the EBITA bridge by business area. We are, of course, very pleased to see EBITA increases in all our 8 BAs and Especially pleased with the increases we see in Sweden and Finland, showing that our actions that we talked about in Q3 have started to take effect. Denmark has shown a long-term positive trend and now has the second-biggest EBITA contribution and, again, an all-time high EBITA margin of 15.7%.

Belgium continues to maintain a good momentum. Norway grows EBITA and increased margins. Netherlands also grows EBITA significantly, but is slightly down in margin. U.K. and Germany and Central Europe also improved from relatively low levels in Q4 last year. Across business areas, the drivers behind the EBITA growth are accelerated recruitment, continued fee increases and also an improved billing ratio.

On the non-salary cost side, we continue to see increases, but the rate has slowed down significantly compared to what we saw in Q2 and Q3. Sickness absence, which had a significant negative impact in Q4 last year, was, in the end, actually even higher this year. However, less vacation taken brings total impact from absence to more or less 0 versus last year. And it's important to note that for the full year, vacation is in line with previous years.

Looking then at our financial position, it remains strong with net debt at SEK 1.1 billion, slightly up versus last year. The stronger full year operating cash flow is outweighed by larger outflows for dividends and acquisitions. Leverage is at 0.4, in line with last year and less than 1/4 of our target maximum. We have available liquid assets at the end of the year of SEK 4.9 billion.

And with that, back to you, Åsa, to conclude.

[Åsa Bergman, executive]

Thank you, Olof.

Let us now look at some conclusions for the quarter and the year as a whole. As previously said, it was a strong ending to a mixed year. 7 out of 8 business areas delivered organic growth, and 6 out of 8 business areas improved their margins. We have a stable inflow of orders that continue to strengthen our order book. We maintain a strong financial position, which allow us to be flexible and act on opportunities that arise.

In the short term, we focus on increasing prices and our fee structure in order to mitigate salary inflation. Despite the market uncertainties, we see strong demand for our services, and I'm confident that the demand for Sweco's expertise will continue to grow as society needs to accelerate the green transition. The transition creates opportunities for us, and we are winning many new interesting projects. Sweco is standing in the center of this transformation, and we are well positioned to capitalize on our broad experience.

We will stay on track with our strategy, keeping our leverage low to be flexible and act when opportunities arise in the market. We will maintain our diverse portfolio within segments, clients and markets, limiting exposure to macroeconomic events. We will continue to be agile, shifting our expertise to where it is needed. Lastly, I'm proud to say that we, in many aspects, are leading the way together with our clients.

Before we open up for questions, I would like to briefly direct your attention to the news we published yesterday, concerning a contract that we signed with Nefco, the Nordic green bank. There are approximately or at least 6.2 million internally displaced people in Ukraine. In response to the effects of the war, the EU has decided to finance housing, schools, preschools and hospitals as well as to repair infrastructure in the liberated cities in Ukraine.

In the scope of this assignment that Sweco will be -- we will support the project organization when it comes to the construction of housing in 6 cities in Western Ukraine. The objective is to quickly meet the needs of internally displaced people with housing, heating, water and electricity. Sweco will be collaborating with local Ukrainian consultants that we worked with in the past in this assignment. It feels incredibly gratifying that we can contribute with our expertise in a concrete manner that enables meeting people's basic needs.

And with that, let's open up for questions. Thank you.

[Marcela Sylvander, executive]

Thank you, Åsa. Thank you, Olof. And we will now open up for questions, and you may ask them either directly through the phone line or through the chat function.

So please, Eugenia, if you could give us the instructions.

[Operator]

[Operator Instructions] Our first question is from Dan Johansson with SEB.

[Dan Johansson, analyst]

Three questions. I'll take them one by one, if that's fine. Perhaps starting a bit, if it's possible, to say the level of price increases in the quarter or at least the split between price and volume. Is something like 50-50 a fair assumption? Or was it more price increases this quarter?

[Olof Stålnacke, executive]

I think it's fair to say that this quarter, it is more volume than price increases. So price increases are slightly down versus Q3. We don't see this as any trend in the market just that we see fluctuations between quarters. But this quarter, the FTE growth and volume was the strongest driver.

[Dan Johansson, analyst]

Perfect. And also a question on the targeted actions you have had to improve utilization, which since they've given effect here in this quarter, are you seeing the full impact already now in Q4? Or should we expect some more benefits now entering into 2023 from this?

[Åsa Bergman, executive]

So we have -- we started to see the impact. But from some of the activities that we have taken, that we have more to gain going forward.

[Olof Stålnacke, executive]

Yes. And as we talked about in Q3, one of the areas where we are taking action is when it comes to office space, and that's obviously something you don't address in a quarter. So that's ongoing work, for example. But it's a good start, and we're pleased to see the first signs, as we said.

[Dan Johansson, analyst]

Yes, totally agree. It makes sense. And perhaps a last question on Finland specifically. You've previously been a bit impacted by weaker market there. You're saying in the report that the market remains somewhat [ wilt ], but had sales growing 10% organically and the margin is up a bit in the year. So just wondering here, what explains that better performance here in Q4? Is it any major new assignments? Are you taking market shares? Or what explains that turnaround to be ongoing in Finland there?

[Åsa Bergman, executive]

If you recall -- I mean it's right that the market is still a bit weak in Finland. But if you recall what happened in Q3, we talked about there were some larger projects being postponed, and there was also some weak start in Finland. But it's also about that -- I mean, when you end up with those effects, it's really about focusing on the market, our clients and our projects, really leaning forward and making sure that we win the project that is on the market, and that is what has happened in Finland.

[Olof Stålnacke, executive]

And adding to that, I should say that we have something that is a bit of a one-off in Q4 as well in Finland. We have a SEK 10 million positive project result from an incentive structure in a large project when ending that. So that's a SEK 10 million -- it is connected to a customer project, but the quarterly effect is somewhat of a one-off in the quarter.

[Operator]

The next question is from Johan Dahl with Danske Bank.

[Johan Dahl, analyst]

Just on attrition and personnel turnover, are you seeing any changes in the market there in Sweco?

[Åsa Bergman, executive]

I mean we're still facing a market where there is lots of people leaving, and we are succeeding with our recruitment. We are succeeding with our onboarding. And I mean we continue to focus there. You could expect that the personnel turnover will decrease a bit. What we see now is it's more stable, but we need to continue to focus on that and see what it will bring going forward.

[Johan Dahl, analyst]

All right. And back to the question of efficiency, you talked about less -- a lower pace of increase in sort of overhead operating expenditure. I'm just -- can you help us a little bit here looking into 2023, what are basically the numbers here? Because, I mean, it's easy to get carried away here. You have some SEK 150 million in burdened results in the last 12 months or last 15 months from high sick leave. That hasn't come back yet, if I understand you correctly, here in Q4. And on top of that, you've got this sort of OpEx decrease. In the bridge for '23, how much money are we talking about here in terms of efficiency measures? And I'm not talking billing ratio.

[Olof Stålnacke, executive]

It -- I mean the answer, unfortunately, will have to be that it depends a bit because we also want to continue to grow, to drive growth as we have done in the quarter with continued high net recruitment, of course, continue to increase fees even if that shouldn't affect costs, of course. So we will continue to work with the cost, but we don't want to communicate anything about the future.

It's important for us. We have taken a step in terms of getting to the cost levels we want to that we see are sustainable long term, and we're going to continue that work. And so we are not, given the high growth and the good profitability development, we are not in a cost-cutting mode, but we are more in a sort of getting the costs right mode. But it's difficult to put a number on it for '23.

[Johan Dahl, analyst]

And on the sick leave, I mean is that -- how are you thinking about that? Is that just normal right now? Or do you think that will be ever recovered in your view? It's difficult to answer -- question to answer, but just how you think about that issue?

[Olof Stålnacke, executive]

No. No, it's very clear. As I said, we had even higher sickness rate than we had in Q4 '21, and that was above levels we've seen before COVID. So it's definitely still at an abnormal level. But it remains to be seen what the new normal is with the current environment. But that said, I mean you should expect it to go down at least somewhat going forward.

[Johan Dahl, analyst]

Just a final question. Looking at your sort of most cyclical parts, if you look on architecture and parts of your installation business in Sweden, for example, how far would you say that you've got them into this cyclical weakness? I mean, why such experience from previous downturns? Are we sort of approaching the middle? Or are you seeing some flattening out in terms of demand? Just interesting to hear your perspective there.

[Åsa Bergman, executive]

I mean it's a difficult question, too, but I will try. First of all, I mean one thought is that the downturn or the weakening market when it comes to housing has gone on for quite a long time. So we have been able to, I mean, reorganize or actually utilize the resources into different segments over the time. I think it's important to also see the whole portfolio we have and why we always talk about having this broad portfolio.

Our architects and our technical installations engineers can really work towards the public buildings, toward infrastructure buildings. And so we can really -- we can utilize the resources in a very good way. It doesn't really explain your -- or it doesn't really answer your question. But with that said, we have been able to maneuver how deep and how far we are into the kind of market situation, I really don't know.

But what I have experienced or we have experienced is that the different countries have a bit of different cycles. So I mean we're staying really close, and we are making sure that we mitigate whenever we need it. And we also work across countries to utilize resources in a good way.

And we are fortunate, due to our resilient strategy or client portfolio, service portfolio, that we really can work this way. So I mean you haven't seen us taking any heavy actions when it comes to reduction of personnel or anything like that. And the answer to that is due to that our broad portfolio gives us this opportunity.

[Operator]

The next question is from Stefan Knutsson with ABG.

[Stefan Knutsson, analyst]

Congratulations, Åsa and Olof, on a strong report.

[Åsa Bergman, executive]

Thank you.

[Stefan Knutsson, analyst]

A question regarding price-wage balance in 2023. You talked a bit about it, but are you still optimistic about the ability to continue to raise prices? Or do you think it will become more challenging this year?

[Olof Stålnacke, executive]

First of all, Stefan, welcome to Sweco, since this is your first telephone conference with us. On the fee-salary balance for 2023, as we've said before, it remains our biggest concern. It's the most important thing to focus on for us going forward. We are still -- and the answer to your question, we are still confident that we can make that balance, but it will require continued hard work on pricing.

[Stefan Knutsson, analyst]

Perfect. And then, if you want, to follow up only on the onetime activation of software you had in Denmark. How large of an impact was that? And then also on the impressive margin in Sweden, can you give some more flavors of drivers there and if you think it's a sustainable improvement?

[Olof Stålnacke, executive]

On the software capitalization in Denmark, that is SEK 12 million. It should be noted though that even without that, it was an all-time high margin in Denmark. So it is a big one-off, but they are still underlying performing very strongly.

On Sweden, these are the types of margins that we have seen in -- before in Sweden. So they are sort of back to where they have been historically. And the main drivers are FTE growth and also fee increases in Sweden. And in terms of sustainability, we don't like to make forecasts, but it's very clear that the actions that Sweden have taken, since we talked about in Q3, are having an effect. So that's very positive.

[Operator]

The next question is from Raymond Ke with Nordea.

[Raymond Ke, analyst]

Two questions from me. The first one, regarding the use of subconsultants, is it still at an elevated level where you would like to see it lower to get down to normal levels, so to speak?

[Olof Stålnacke, executive]

It is still at an elevated level, not as high as we saw it in Q3, still at an elevated level. If you look at one of the countries that are using most subconsultants, it's Denmark. So I think it's partly an effect of the high growth and the fact that we always use subconsultants.

I don't know if you want to...

[Åsa Bergman, executive]

Yes, maybe a comment on how we think about subconsultants. I mean we don't have any real targets, and we don't have a clear strategy around that because it's really about -- it's really linked to what kind of types of contracts we are winning and how we put together the team to be able to really deliver and execute. So it fluctuates in relation to what kind of projects we are winning and what phases we are in those projects.

[Raymond Ke, analyst]

Understood, and thanks for the flavor regarding that. And the second question then, is it possibly that you make sure you compensate price-wise for subconsultants so that they are in no way a margin drag compared to using your own people? Or are they still typically, just generally speaking, across the board, still a margin drag?

[Olof Stålnacke, executive]

That varies quite a lot. So it's difficult to say anything on average there.

[Åsa Bergman, executive]

And I just -- I mean just an add-on comment, it's -- I mean we are focusing as much as we can on also making sure that we price ourselves in the right way and think about profitability also when we take in subconsultants. So I mean it's the whole package, I would say.

[Operator]

The next question is from Johan Sundén with Carnegie.

[Johan Sundén, analyst]

Lots of good questions thus far. I think I had a few ones on Germany. And just taking a step back and if you can just elaborate a bit on the turnaround process in the German business, how far you have come in the kind of troubled projects that caused issues in late 2020 and how far less there is on them? And a little bit more status update on German situation.

[Åsa Bergman, executive]

Yes. As you all know, we started the turnaround by shifting out the top management, and we have done lots of management changes. We have also worked by implementing new processes and ways of working, new revenue recognition rules. We still have some way to go due to that. It takes some time when you're going to turn around a business like this because it's really linked to capability and behaviors. It's really linked to making sure that we go to market in a way.

So we're quite selective on the German market, and that is the reason that you see negative growth in Germany. We do want to make sure that we actually are taking on the right kind of projects. So we are seeing some lights and a little bit more stability. It goes quite slow, I have to say, but we are on the right way in Germany.

Maybe some comments from you?

[Olof Stålnacke, executive]

Yes. I think we are very happy that they have stabilized on a profitable level. That being said, of course, we want higher margins over time from Germany. But it is -- we want to do it the right way. We need to work out the legacy projects. As Åsa said, we need to be selective on what we take in the market. So continue moving in the right direction is what we're looking for.

[Johan Sundén, analyst]

And the few bigger troubled projects, how much is left on those?

[Olof Stålnacke, executive]

Well, it's a very mixed picture. Some of them are already out of the portfolio. Some have sort of either finished this year or in the coming few years. But there are -- there will be some tail of legacy projects left for some time yet.

[Johan Sundén, analyst]

Great. And then a second question, it's on capital allocation and M&A pipeline. We've noticed that you've been more active beginning of this year. You talked about that pricing negotiation with sellers has been a little bit tough. What's your feeling on the M&A pipeline as of now? And should we expect you to be more active near term?

[Åsa Bergman, executive]

I mean, as said before, we -- and as we have, I mean, communicated over the years, we have -- we focus business area by business areas to create an M&A pipeline and keep relations on each market and be selective of what kind of services and how -- so I mean, if we get the opportunities, then we will act on those.

We have seen more activity the last year due to, I think, that it -- I mean it takes some time. So it's more of that the market has opened up. And of course, it's also connected to the market, the macro economy. So I mean we will continue that work. And I mean we have an M&A pipe country by country. And as said, I mean we have the financial strength. We also know what competencies and what companies we would like to acquire, but it takes 2 to tango.

[Operator]

The next question is a follow-up from Johan Dahl with Danske Bank.

[Johan Dahl, analyst]

Just a follow-up on your Swedish infrastructure exposure. There's quite a lot of talk last year about very competitive tendering activity, et cetera. Are you seeing any changed behavior from the buyers in that space? And is there a change in mix towards more or less profitable areas as you go into 2023? And is this still a sort of growth area for you if you look on Sweden particularly?

[Åsa Bergman, executive]

Yes, it is a growth area. And I have to say that the market hasn't changed that much. What we see, though, is that the order book we have in the infrastructure sector is good. So I mean it is -- I mean we have a potential to grow. And when it comes to competitiveness on the market, I mean it's the same. So it's more about how we operate that market and how we organize ourselves to be efficient enough to execute on, I mean, profitable levels in those projects.

[Olof Stålnacke, executive]

And I think it's worth mentioning also that what we are seeing in the north of Sweden in terms of industrial projects also drives a lot of investments in other areas such as infrastructure. So that's a very strong market for us as well.

[Johan Dahl, analyst]

Okay. Final question just on the order book. I think you talked throughout 2022 about strengthening the order book each and every quarter, if I'm not mistaken. Can you just put it into context where we stand today compared to 1 or 2 years ago in terms of visibility and how that order book looks in numbers?

[Olof Stålnacke, executive]

Well, we don't give numbers on the order book. But the visibility is, I would say, in terms of annual turnover, it's the same as it has been. So the order book has sort of, over time, grown with revenue. So we have the same visibility in terms of annual turnover, if that makes sense.

[Operator]

The next question is from Fredrik Lithell with Handelsbanken.

[Fredrik Lithell, analyst]

Congrats to a good report. I hope you are well. I had a question on wage drift, really, if you have seen any changes in behavior or that you have needed to move wages in order to safeguard enough consultants in the organization?

And also, if you could elaborate a little bit on what you expect in terms of the negotiations, especially in Sweden then on coming new central agreements, would be interesting to hear. And maybe if you could expand a little bit on the nice project you're participating in the Nefco project, it would be interesting to get some more color on that. Happy news there.

[Åsa Bergman, executive]

I mean if I start with the salary inflation or the market when it comes to that, for us, it's about making sure that we have market-based salaries. And we have a very structured process when we work with our salaries and that we will keep. Of course, the salary inflation is a challenge for everyone in the industry. But we have shown in -- I mean, during 2022, that we can mitigate it with higher prices and increased prices, and that we will continue.

And it has really been known for us, I mean, the whole -- I mean it doesn't come as a surprise year-end that this year might be even tougher when it comes to the salary inflation. So I mean we have really focused on this to make sure that we continue this work and even accelerating it.

I think it's also worth mentioning that we have a project portfolio of 100,000 projects. The average size project in Sweco is around EUR 25,000. We put out new prices all the time on the market. And many of our contracts has an indexation clause in our contracts. With that said, it still is a concern, as Olof said, meaning that we really make -- need to make sure that we can price ourselves in a good way.

[Olof Stålnacke, executive]

And maybe to add to that, we haven't seen in Q4 any changes in terms of salary movements compared to earlier in the year. So there is no change. That doesn't change anything for 2023, but we haven't seen anything out of the ordinary in Q4.

[Åsa Bergman, executive]

And then on your question around the Ukraine project, I mean, for us, I mean we started -- when the war or the invasion of Ukraine started, we had 2 projects ongoing in Ukraine. So we have had long relationships with Ukrainian consultants. We also had a clear view of that we would like to make sure that we position ourselves really early to make sure that we can contribute with our competence and our knowledge.

So we have really been there showing ourselves for Nefco as one potential investor. But we are also showing ourselves in the different countries, making sure that we can contribute in the best way. So this is, of course -- it creates proudness, but it's also really a way for us to use what we have to support Ukraine. Even if -- I mean I really look forward to be able to support to really rebuild the country in the future.

But this is a very good start, and we will be focusing on making sure that we can support whatever is needed when it comes to these kind of projects. And as said, there is those Ukrainian consultants that we have worked with before. We will work with them, and we will support them in this work.

[Fredrik Lithell, analyst]

Can I just follow up on that? And how -- I mean the project starts immediately, you say. And how many of your employees will be engaged in this?

[Åsa Bergman, executive]

It has already started. Now it's 5 people working with this project. And hopefully, it will grow over time.

[Operator]

[Operator Instructions] The next question is a follow-up from Raymond Ke with Nordea.

[Raymond Ke, analyst]

Just one more from me. Let's see, I lost -- yes, if you compare the ability to deal with wage-price balance in Continental Europe against, say, the Nordics, do you know there's any difference, as in is either one more challenging for you? Or do you feel that both are comparable in terms of labor market and end-market demand?

[Åsa Bergman, executive]

I think it's all -- I mean it's -- you can actually compare them. I mean you might know that there is differences when it comes to how the different governments handle the inflation situation. So of course, the expectations on the different markets differs. But I mean we have the same kind of structure when it comes to our contracts. We have a little bit more fixed price in our countries outside of Nordic countries. But in those contracts, we also have, in many contracts, indexation clause.

So I mean the whole Sweco model and the reason that we talked so much about implementing the Sweco model has to do with, I mean, being close to the client. But especially, it also has to do with what kind of product portfolio would you like to have and how do you work with contract management and what do you ensure to make profit in your project and how do you execute your project. And that goes for all countries now because we have worked really hard to make sure that we have implemented the Sweco model in the different countries.

Yes. Something to add?

[Olof Stålnacke, executive]

No, I think there are differences between the countries, but there is not sort of a general difference between Nordics and Continental Europe, I would say.

[Operator]

Marcela, there are no more questions from the conference call at this time.

[Marcela Sylvander, executive]

Thank you, Eugenia. We have one question in the chat function, and that's from [ Stephen ] from Goldman Sachs, and it's about Germany. I think it has been answered, but there might be something you want to add to that. He writes, congratulations on the good results. Thank you. Could you elaborate on the German and Central Europe division as I've seen growth there decline?

[Olof Stålnacke, executive]

I think we commented on that. It is working out the legacy projects. It's about being selective when we take new projects. So growth is not the first priority in Germany right now, but more getting back to stable profitability. And then long term, we are very much looking for growth in Germany, but it's not a priority right now, I would say.

[Marcela Sylvander, executive]

Yes, agree. Okay. No more questions in the chat. Eugenia, what about you?

[Operator]

No questions.

[Marcela Sylvander, executive]

Okay. So we have no more questions. And with that, we want to thank you for joining us, and we wish you a pleasant nice day. Thank you so much.

[Åsa Bergman, executive]

Thank you.

[Olof Stålnacke, executive]

Thank you.