REVIEWING OPERATIONS IN PREPARATION FOR CHALLENGING TIMES
Älvsbyhus is Sweden’s leading manufacturer of prefabricated homes. The company has been profitable every year since its inception 74 years ago. However, the uncertainty in the Swedish housing market had a negative impact during the year. MD Kent Johansson is investing in the factories to meet future challenges from further tightening of energy requirements for single-family homes.
Älvsbyhus’s business model is based on cost-efficiently producing high-quality single-family houses at the market’s lowest prices. This is achieved through a high degree of prefabrication in production. Today Älvsbyhus owns factories in Kauhajoki, Finland, in Bjärnum and Vålberg, Sweden, as well as in Älvsbyn, Sweden, where the group also owns a sawmill and concrete moulding factory.
The Group conducts sales through subsidiaries in Sweden, Finland and Norway with a total of about 40 sales offices. The three markets are developed differently depending on the economic trend in each country, regulatory changes and, in particular, different customer preferences. In Norway, the market is stable and has been so for a long time.
“In Finland, the market has been challenging since the financial crisis ten years ago. A Russian embargo on imports further worsened the situation in Finland. Recently, however, the Finnish market has shown signs of recovery and Finnish households are beginning to dare to invest in their homes. Traditionally, Finnish households have been very careful about borrowing, although we are beginning to see a change here,” says Kent Johansson.
In Sweden, the trend is the opposite. After ten years of economic upswing with falling interest rates, many now consider the housing market to be overheated, with heavily indebted households. Political measures such as amortization requirements and debt ceilings have been introduced, quickly causing the housing market to slow considerably.
“It is only partly true to say that the market has ground to a halt across the board. This trend can be seen mostly in tenant-owner apartments in the major cities. Those of us selling prefabricated homes, mainly outside the major cities are not noticing the slowdown to the same extent. We are still selling many houses in numerous locations around Sweden,” says Kent Johansson.
However, the slowdown in the Swedish market has not passed completely unnoticed by Älvsbyhus. While some 600 houses were sold in Sweden in 2017, the forecast for full-year 2018 is about 500 houses.
In parallel with the Swedish slowdown, Älvsbyhus has developed a completely new generation of house models, called “Framtidshusen” – the Houses of the Future. These are characterized by having thicker walls and thus improved energy values expected to meet new target values that the Swedish National Board of Housing, Building and Planning is expected to adopt within a couple of years. Over the past year, all of the factories have been realigned for production of the new model range. The past year has been spent phasing out of the old models and phasing in the new ones. Together with the slowdown in the market, this has brought lower sales and profitability in 2017/2018 compared with the preceding year.
“In developing the Framtidshusen models, we wanted to create a Nordic house model that would serve as a foundation for all three markets, meaning that a number of models were launched in Finland lacking a sauna, which proved to be a mistake. The sauna is an important element in Finnish homes, and we have developed two new single-family homes for the Finnish market with a sauna as standard. We also see a glimmer of light this autumn and are targeting better order bookings in 2018/2019 than last year,” says Kent Johansson.
To safeguard quick and efficient access to land on which to build, Älvsbyhus started a land company during the year, which acquires land in attractive locations.
“In many municipalities, plots for single-family homes are not prioritized when drawing up detailed development plans, or single-family homes are handed over entirely to the open market. With our own land company, we improve conditions for our house sales,” says Kent Johansson.
Mellby Gård supports Älvsbyhus in its Board work, contributing knowledge on financial matters, currency and general economic matters, and sharing a broad contact network. Kent Johansson is one of three siblings who currently own half of the company alongside Mellby Gård.