Aros Bostad AB, a Swedish real estate developer, faced a challenging third quarter with sales dropping 31% to SEK 316 million (USD1 = SEK10.5968), underperforming the projections set by ABG Sundal Collier (ABGSCe). The company's gross profit (GP) margin also fell short of expectations at 20%, compared to the anticipated 24%. Despite these setbacks, Aros Bostad saw a significant increase in earnings before interest and taxes (EBIT), which surged 63% year-over-year to SEK 42 million.
The lower-than-expected performance was attributed to delays in project handovers, including rental units in Täby and the postponement of the "Viggby Ängar 3" project until the fourth quarter. These factors led to a shortfall in the quarter's results. However, Aros Bostad remained active on other fronts, initiating 67 new units and completing the acquisition of two additional ALM projects during the quarter. The company managed to sell 12 units despite sluggish sales.
Aros Bostad noted positive developments in its operational environment, with a slowdown in building cost increases and heightened contractor interest in recent procurements. This could signal a more favorable cost environment for future projects.
The company launched three smaller residential projects located in Uppsala, Bromma, and Ekerö, totaling 67 units. These projects are being financed through Aros Bostad's balance sheet. Despite the current headwinds in the residential market, the company expressed confidence in achieving its target project margin of approximately 20%.
Reflecting broader market uncertainty and low visibility on a rebound, which may not materialize until 2025, Aros Bostad's shares have experienced a decline of around 21% over the past three months. Aros Bostad's shares are trading at an adjusted price-to-book (P/B) ratio of approximately 0.55 times for the year 2023 estimates.
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