I have been longing for a merger between Kreate and GRK. Vikström didn’t shoot this down; instead, he answered the matter politically with a smile. Of course, the matter is not within his decision-making power, but as a hopeful person, I interpreted that some consideration has been given to it in the background. But even if it’s not the case and GRK gets listed, I will at least have to seriously consider which one to invest my money in. GRK seems to have been a more profitable company in recent years, and their geographical portfolio is broader.
I don’t understand anything about these, but for your longing, in a speculative sense, the GRK+Nyab combination certainly looks better on paper: a significantly broader market and customer base, complementary expertise, and in line with the home market of Finland+Sweden, a main listing in Stockholm and a dual listing in Helsinki🤣-then it would be an Infrastructure Builder with a big I🤣
Kreate’s peer and competitor GRK is planning to list. It’s interesting how GRK has truly managed strong growth with strong profitability, as was also marveled at in ROAST, even though Kreate’s momentum has somewhat slowed down.
The government has allocated an additional 200 million euros in funding for this year to reduce the road network’s repair backlog, of which 180 million will be used for paving roads and 20 million for repairing road bridges.
The additional funding for bridge repairs means that a total of 111 million euros will be available this year.
Additional funding is always beneficial, but that 20 million sounds like a very small sum, considering how many bridges are in poor condition; the Finnish Transport Infrastructure Agency alone owns 15,000 bridges whose condition has been declining within the last 10 years.
Furthermore, bridges built in the 60s and 70s are starting to reach the end of their lifespan.
The development phase of the Tampere passenger rail yard is moving into the implementation phase. Work will start on 7.4.2025 and the contract value is approximately 40 million euros.
Here are Kaisa’s preliminary comments as Kreate publishes its Q1 report on Thursday, April 24.
We expect the decline in revenue to have continued in Q1, driven by a weaker order book, but we estimate profitability to have improved as project margins strengthened and price pressures eased. We estimate the first half of the year will remain weaker and market activity will gradually recover towards the end of the year. However, the recently escalated trade war brings uncertainty to the outlook, which may also slow down the recovery of infrastructure construction, even though the situation does not have direct effects on Kreate. We are not making changes to our forecasts or our view before the Q1 results and therefore reiterate our ‘add’ recommendation and our target price of 8.00 euros.
Order backlog was 225.7 (183.6) million euros, an increase of 22.9%
Revenue decreased from the comparison period and was 52.4 (54.4) million euros
Change in revenue from the previous year was -3.6% (-17.4%)
Operating profit (EBITDA) was 1.7 (1.6) million euros, or 3.2 (3.0) percent of revenue
EBITA was 0.1 (0.3) million euros, or 0.1 (0.5) percent of revenue
Earnings per share were 0.01 (-0.06) euros
Operational free cash flow was 6.0 (-3.1) million euros
Interest-bearing net debt was 24.4 (20.9) million euros
Operating environment in brief
The construction sector as a whole in Finland is expected to see a moderate recovery in 2025–2026.
In Finland, infrastructure construction volumes are expected to grow by 3 percent in 2025 and 2 percent in 2026.
Cost development in the early part of the year has been stable, with certain construction costs even decreasing.
In the short term, the development of the infrastructure market is constrained by the timing of public project commencements in the latter half of the year, the sluggish development of the Finnish national economy, and uncertainty caused by trade policy tensions.
The longer-term outlook for infrastructure is bright: the Finnish government’s investment program focused on transport routes, investments required by the geopolitical situation, and the clean transition support business development.
Competition remains fierce, especially in less demanding and smaller infrastructure projects, due to the still low number of housing starts.
The market outlook in Finland for the market suitable for Kreate strengthens towards the latter half of the year.
Kreate’s market outlook in Sweden is strong in the market suitable for it.
Here are Kaisa’s quick comments on Kreate’s Q1 results.
Kreate published its Q1 report this morning, which was slightly weaker than our expectations in terms of figures. Revenue decreased almost exactly in line with our expectations, but the earnings level in Q1 was slightly softer than our forecasts. However, a positive aspect of the report was Kreate’s order book, which grew more strongly than we expected. According to our assessment, the first half of the year will be weaker, and growth will be concentrated towards the end of the year, reflecting typical seasonality, which the company’s guidance also refers to.
00:00 Introduction
00:20 Kreate’s year started according to plan
00:47 Revenue development in specialized construction
01:40 Revenue development in infrastructure construction
02:47 Growth from Sweden
03:36 Profitability and project development
05:03 Order book growth and outlook
07:39 Tight competitive situation in infrastructure construction
Kaisa has prepared a new company report on Kreate after Q1.
Kreate’s revenue decreased in Q1 as we expected, with the result slightly below the comparison period. We expect the first half of the year to remain subdued, with growth concentrating on the latter half of the year, reflecting the typical seasonality of the industry. In Kreate’s case, projects in the development phase are expected to increase the order book during the early part of the year, providing good foundations for growth as the market recovers. Relative to earnings growth in the coming years, we believe the stock’s valuation is moderate, and a strong dividend yield supports the return expectation.
Quoted from the report:
As a small positive, we can highlight the improved cash flow during the early part of the year (operating free cash flow Q1’25: EUR 6.0 million vs. Q1’24: EUR -3.1 million), supported by a favorable development in net working capital. Kreate’s financial situation also remained stable (net debt / adj. EBITA: 1.6x), and the company’s strengthened order book supports growth for future quarters. However, successful working capital management continues to play a key role, so the development of cash flow remains an important matter to monitor as the year progresses.
The development phase of the Vantaa tram depot has commenced through the joint efforts of Kreate and GRK, valued at approximately 2 million euros, with the total implementation at 18 million euros.
More work from Sweden. On July 15th, we will get the Q2 results. It will be nice to see if there has been an upward trend in the results, and on the other hand, the outlook for H2 is also very interesting.
Kaisa has written comprehensive comments on this recent Swedish project.
Kreate announced yesterday that its Swedish subsidiary has won a project worth approximately EUR 13 million, which concerns the interior outfitting of the Lovö tunnel, part of the Stockholm Bypass project. In terms of value, the contract ranks as the largest in Kreate’s Swedish operations’ history and, in our view, is a good example of the fruits of Kreate’s growth investments. Kreate’s order book at the end of Q1’25 was approximately EUR 226 million, compared to which the contract is not significant in the group’s scale, but, in our estimation, supports both reaching this year’s guidance and next year’s development.
