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Dive brief:
- A strong construction division, a large portfolio of work and improved performance in commercial and residential development contributed to a profitable third quarter for Swedish-based construction and developer Skanska.
- The company on Wednesday announced third-quarter profits of 1.3 billion crowns ($120.1 million), up 130 percent from the same period a year ago. In construction alone, Skanska posted a profit of 1.5 billion kroner, while its commercial and residential development sectors continued to lose money.
- When it came to the day’s biggest global story, the results of the 2024 presidential election, acting CFO Pontus Winqvist told Construction Dive that the company is “pretty neutral” on the results at the moment.
Diving knowledge:
Winqvist said the main factors contributing to Skanska’s business in the United States will not change when Donald Trump returns to the Oval Office in January. He noted that a Republican president will almost certainly bring a tax cut for businesses, which would benefit the company’s bottom line.
“The infrastructure bill is still there. There will be many investments in infrastructure. Also in the segment of large buildings with data centers,” said Winqvist.
CEO Anders Danielsson also singled out the “booming” U.S. data center and infrastructure markets as major contributors to Skanska’s success during an earnings call with investors on Wednesday.
“We don’t expect any change in it [U.S.] market, we think it’s going to be a strong market for at least 12 months,” Danielsson said on the call.
Indeed, the company’s construction work in the United States is strong. Skanska reported order books in the United States of 32 billion crowns, more than half of the company’s total books. This is a delay of 25 months, according to the report.
“So I would say we’re able to be relatively selective in what we focus on,” Winqvist said. “The [U.S.] market is good We know where we have our core competencies and will focus on those projects where we have a match. We don’t have to chase it everywhere. And I think that gives us some kind of comfort.”
Development game plan change
Skanska’s strong construction performance continues to boost earnings, but the company has faced sluggish commercial and residential development markets.
In the residential sector, the firm reported a loss of 154 million kroner, an improvement on the loss of 494 million kroner in the same quarter last year.
Skanska pointed to two main reasons for the loss: property and impairment charges and the poor performance of BoKlok, the company’s homebuilding arm that operates in Sweden and the UK.
BoKlok will close its operations in Sweden in 2025 and merge with Skanska’s residential development unit. It still has homes under construction in the U.K., Winqvist said, but there are no further plans to continue work once it has delivered those projects.
The company believes these changes will help the residential development arm, as without BoKlok and impairments, it says it would have an operating margin of 7.9%.
“This really shows that we’ve worked to adapt the organization to current market conditions,” Winqvist said on the call.
In terms of commercial development and leasing, return-to-office rates have been stronger in Europe than in the U.S., Winqvist said, but the company sees more opportunity in the United States. The game plan remains as before: modern, high-quality offices in prime locations, Winqvist said.
The company is in the midst of a shakeup with its CFO position, after Magnus Persson left the company earlier this year. Jonas Rickberg will take over as CFO no later than January 31. Rickberg is currently the CFO and Executive Vice President of Scania Group, a heavy commercial vehicle subsidiary of German manufacturer Volkswagen in Södertälje, Sweden.
