The Market

INCREASING DEMAND FOR SYSTEMS AND RELATED SERVICES

Nordic Waterproofing is active in three segments of the construction market; waterproofing, prefabricated elements and green infrastructure. The segments can also be divided into traditional building materials and green building materials, where the traditional also are constantly evolving towards increased durability.

WATERPROOFING – FOCUS ON SYSTEM SOLUTIONS FOR OPTIMIZED CONSTRUCTION

The waterproofing market is consolidated, and the market shares tend to remain stable over time. In addition, the market requires local production, as transport costs account for a significant part of the total costs (high weight in relation to the value of the product), and expected short delivery times, which presupposes that manufacturers have reliable and efficient logistics solutions.
The production processes in the industry is to a high degree automated, which reduces competition from low cost labour countries. The different waterproofing markets are also characterized by differences in building regulations and building traditions.

The roofs dominate

The offered roof solutions are mainly intended for houses with flat roofs but also pitched. This market is developing in line with the general construction market, with lower variations in different economic conditions as a result of a larger element of renovation and maintenance assignments in installing waterproofing.

The Group’s markets can also be divided according to type of building, such as residential
and commercial properties. It is estimated about 70 percent of the value of the total waterproofing market in the Nordic region can be attributed to commercial properties and constructions (eg bridges). Commercial and community properties have to a greater extent low-sloping roofs compared with residential properties. The Nordic market for new production has increased by about 20 percent over the past five years, but is estimated to have a lower growth the coming years.

PREFAB – INCREASING CONSTRUCTION COSTS ON SITE DRIVE THE PREFAB MARKET

The costs of construction on site are increasing, which is why time is a critical factor where the climate and season also pose a risk of delays. Construction with prefabricated elements is therefore an increasing trend. In addition, construction is increasing with prefabricated elements with wooden frames for larger buildings such as offices, factories and warehouses, retail, multi-storey buildings and community buildings. The increase is driven by a growing demand for more sustainable materials as well as productivity and thus cost savings.

Experience shows that the total cost of a building with a prefabricated wooden frame is 7-10 percent less compared to traditional construction with concrete.

Building regulations and building design

The construction industry is characterized by the fact that the building regulations are national, which creates different product solutions and reference conditions.

GREEN INFRASTRUCTURE IS SIGNIFICANTLY INCREASING

The market for green infrastructure is largely driven by demands from authorities for increased biodiversity in urban areas, but also by the insight of increased value in the form of a more pleasant and environmentally friendly environment for new development and renovation. This is reflected in the fact that the majority of construction projects of larger buildings have elements of green roofs and where the sedum roofs in particular are increasing.

RENOVATION CREATES STABILITY

Renovation is less affected than new construction by the general economic climate. Renovation and new construction are estimated to account approximately for 50 percent each of the Nordic construction market. The Nordic renovation market did not decrease during the economic downturn in 2007–2009, while the new construction market decreased by 27 percent. Exposure to the renovation market strengthens thus the Group’s operations.
The market for prefabricated elements has a greater economic dependence on new construction. In a recession, however, renovations are increasing. The distribution between renovation and new construction is 10 and 90 percent respectively of the sales value.

The renovation market is driven by:
• Composition and age of the property holdings.
• Renovation of buildings is usually cheaper than new construction. In addition, lack of maintenance can potentially lead to large costs due to e.g. water damage, which makes renovation decisions crucial.
• The requirement for increased energy performance in existing buildings. Not least the large housing stock built during the 1960s and 1970s has a great need for better insulated roofs and facades.

SEASONAL VARIATIONS

Nordic Waterproofing’s operations are affected by seasonal variations, with January, February and December being the weakest months. In the financial year 2020, sales during these three months accounted for just under 18 per cent, while the other nine months accounted for 82 per cent, which is in line with the five-year average. The decline during the winter months is explained by cold and challenging weather conditions and its impact on the construction industry. In general, there will be some stockpiling during the winter months, which will lead to a reduction in stock during the summer months as a result of the increased activity in the market. If winter arrives early, it may result in the postponing of several planned projects, which in turn has a negative effect on the year’s results. The same applies if the winter is long and the season starts in late spring.
For risks and sensitivity analysis, please see Note 34.