Caverion has divested its Russian subsidiary at the end of 2021 and has no operations in Ukraine or Belarus. Therefore, the impact of the conflict on Caverion is currently indirect. Caverion has experienced increases in material prices and delays in the supply chain and in decision-making, however Caverion continued to manage them on a daily basis without having a significant impact on the performance during the first nine months of 2022. Market outlook for Caverion’s services and solutions in 2022 and megatrends impacting the industry
Caverion expects the underlying demand to be overall positive in Services during the rest of 2022. In Projects, Caverion expects the underlying business activity to remain stable for the last months of 2022. In Projects, however, the economic uncertainty may start to impact the demand environment negatively. This scenario assumes a sufficient control of the corona pandemic impacts with no significant unforeseen setbacks during the last months of 2022 and no further escalation of the conflict in Ukraine.
The conflict has resulted in geopolitical tensions, mounting inflation, rising interest rates and lowered economic growth prospects and the situation is estimated to persist. Also the probability of recession has increased. In order to control the mounting inflation, the European Central Bank (ECB) has continued to raise the key interest rates and indicated further increases in its upcoming meetings.
The business volume and the amount of new order intake are important determinants of Caverion’s performance in 2022. A negative scenario whereby the ongoing geopolitical conflict or the corona pandemic start to negatively impact market demand cannot be ruled out. However, a large part of Caverion’s services is vital in keeping also critical services and infrastructure up-and-running at all times. Furthermore, the continued focus on energy efficiency and CO reduction activities and projects continues to support the activity and business volume. The energy crisis is expected to increase the need for energy efficient solutions for the built environment.
Increased material prices, including fuel costs, and longer delivery times may continue to affect also Caverion’s business going forward. Potential risks may still emerge from the supply side, not only from cost inflation but also from labour shortage, potentially further fuelled by increased sick leave levels or quarantines caused by the corona pandemic. Any further delays in the supply chain and potential cost increases may have a negative impact on business execution and order intake going forward.
The digitalisation and sustainability megatrends are in many ways favourable to Caverion and believed to increase demand for Caverion’s offerings going forward. The increased energy efficiency requirements, increasing digitalisation, automation and technology in built environment as well as urbanisation remain strong and are expected to promote demand for Caverion’s services and solutions over the coming years. Especially the sustainability trend is expected to continue strong.
The economic stimulus packages provided by national governments and the EU are expected to increase infrastructure, health care and different types of sustainable investments in Caverion’s operating area over the next few years. The main themes in the EU stimulus packages are green growth and digitalisation. Caverion expects the national and EU programmes to increase demand also in Caverion’s areas of operation in 2022. The EU aims to accelerate the green transition due to the current geopolitical situation that has led into energy crisis in many countries that have been largely dependent on imported gas from Russia.
Increasing awareness of sustainability is supported by both EU-driven regulations and national legislation setting higher targets and actions for energy efficiency and carbon-neutrality. This is furthermore supported by the society’s end-users’ general request for an environmentally friendly built environment. Examples of current initiatives include e.g. the proposed revision of EU’s Energy Performance of Buildings Directive (EPBD) and Minimum Energy Performance Standards (MEPS) it aims to establish as well as the “Fit for 55” climate package and the Renovation Wave Strategy. The “Fit for 55” climate package proposes to make EU’s climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The objective of the European Commission’s Renovation Wave Strategy is to at least double the annual energy renovation rate of residential and non-residential buildings by 2030. Mobilising forces at all levels towards these goals is expected to result in 35 million building units renovated by 2030.
Services
Caverion expects the underlying demand to be overall positive during the rest of 2022. Caverion’s Services business is overall by nature stable and resilient through business cycles. Stimulus packages are also expected to positively impact general demand in the Services business.
There is an increased interest for services supporting sustainability, such as energy management. Caverion has had a special focus for several years both in so-called Smart Technologies as well as in digital solutions development. These are believed to grow faster than more basic services on average and enable data-driven operations with recurring maintenance. The sustainability trend is also increasing the demand for building automation upgrades.
As technology in buildings increases, the need for new services and digital solutions is expected to increase. Customer focus on core operations also continues to open opportunities for Caverion through outsourcing of industrial operation and maintenance, property maintenance as well as facility management.
Projects
The market instability resulting from the war in Ukraine and the high inflation are expected to dampen the willingness to invest in new construction. Uncertainty is caused by the availability of building materials and the significant cost increases. However, the demand for energy improvement projects is expected to increase going forward, driven by the focus on energy consumption due to the energy crisis. The stimulus packages are expected to positively impact the general demand also in the Projects business. Caverion expects the underlying business activity to remain stable for the last months of 2022. In Projects, however, the economic uncertainty may start to impact the demand environment negatively.
From the trends perspective, the digitalisation and sustainability megatrends are supporting demand also in Projects, as Caverion’s target is to offer long-term solutions binding both Projects and Services together. The requirements for increased energy efficiency, better indoor climate and tightening environmental legislation continue to drive demand over the coming years.
NEWS CONFERENCE, WEBCAST AND CONFERENCE CALL
Caverion will hold a news conference on its Interim Report on Thursday, 3 November 2022, at 10.00 a.m. Finnish time (EET) at Flik Studio Eliel, Töölönlahdenkatu 2C (Sanoma House), Helsinki, Finland. The news conference can be viewed live on Caverion’s website at www.caverion.com/investors. It is also possible to participate in the event through a conference call by registering beforehand on the following link: https://call.vsy.io/access-8279. Phone numbers and the conference ID to access the conference will be provided after the registration. To ask a question, press *5 on your telephone keypad to enter the queue. More practical information on the news conference can be found on Caverion’s website, www.caverion.com/investors.
Financial information to be published in 2023
Financial Statement Release for 2022 will be published on 9 February 2023. Annual Review 2022 including the financial statements will be published during week 9/2023, at the latest. Interim/Half-yearly Reports for 2023 will be published on 27 April, 3 August and 3 November 2023.
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