Interim Report January 1 - September, 2016 (published October 27, 2016)
Operating environment in the third quarter and during the first nine months of 2016
The overall market situation was relatively stable throughout the period. Demand developed favourably for divisions Finland and Austria. Caverion has also been successful in Industrial Solutions in executing seasonal shutdowns during the third quarter. In Sweden the overall market environment remained positive. Divisions Eastern Europe and Germany remained stable. In Denmark-Norway, the general economy has still been impacted by the slowdown in the oil industry despite the recent stabilisation. Caverion has actively responded to the recent market changes in Norway through careful selection of new projects and service contracts as well as by proving its long-term commitment to key clients while also restructuring its operations.
The market for Technical Installation and Maintenance business was stable for the period. The price competition was tight in Technical Installations projects. However, requirements for increased energy efficiency, better indoor climate and tightening environmental legislation are supporting positive market development for the rest of the year. In Norway, the slowdown in the oil industry continued to have an effect on the Technical Installation and Maintenance business despite the recent stabilisation.
In the market for Large Projects positive signs were seen in tendering activity, especially in the public and industrial sectors. The demand for Design & Build of Total Technical Solutions developed favourably within large and technically demanding projects. Low interest rates and availability of financing supported investments. However recent uncertainty in economical situation has affected new projects resulting in price pressure and further project postponements or cancellations.
Demand for Managed Services remained strong. Clients’ willingness to focus on their core operations opened up new opportunities for Caverion in terms of outsourced operation and maintenance mainly for public authorities, industries and utilities. Interest in private public partnerships and other Life Cycle Solutions was increasing in the Nordic countries while these kind of commercial models still represent only a marginal part of the entire market.
Outlook for 2016
Market outlook for Caverion’s services and solutions
The megatrends in the industry, such as the increase of technology in buildings, energy efficiency requirements, increasing digitalisation and automation as well as urbanisation continue to promote demand for Caverion’s services and solutions over the coming years.
The Technical Installation and Maintenance market is expected to remain stable, however price competition is expected to remain tight in Technical Installations projects. Requirements for increased energy efficiency, better indoor conditions and tightening environmental legislation will be significant factors supporting the positive market development. In Norway, the general economy has been impacted by the slowdown in the oil industry and despite the recent stabilisation, this may continue to have a negative effect on the Technical Installation and Maintenance business.
In the Large Projects market, the new tenders for buildings and industry are expected to increase during the year. Low interest rates and availability of financing are expected to support investments. The demand for Design & Build of Total Technical Solutions is expected to develop favourably in the large and technically demanding projects. However uncertainty in economical situation has affected new projects resulting in price pressure and further project postponements or cancellations.
Underlying demand for Managed Services is expected to remain strong. As technology in buildings is increasing the need for new services and the demand for Life Cycle Solutions are expected to increase. Clients’ tendency towards focusing on their core operations continues to open opportunities for Caverion in terms of outsourced operation and maintenance especially for public authorities, industries and utilities.