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Dive Brief:
- Solid construction performance anchored by the Stockholm-based builder and developer Skanska’s third quarter earningsbut a weak commercial real estate development market weighed on revenue.
- Skanska’s operating income for the third quarter was 1.36 billion Swedish kroner ($143 million), up about 8% from the same period a year ago. For its construction business, the company reported 1.76 billion kroner in operating income.
- Due to markdowns in its commercial real estate development unit, Skanska’s construction revenue was higher than its total revenue. The company had charges of 700 million kroner to adjust the value of commercial assets in the US
Diving knowledge:
Skanska’s market outlook for the next 12 months remained unchanged in almost all categories and regions, with the exception of its commercial real estate development unit. It raised its outlook there from weak to stable next year for Europe and the Nordics, while rating US construction as stable in the construction sector and strong in infrastructure.
Contractor construction backlog remained historically high, although slightly lower than the previous quarter. Skanska reported 264.4 billion kroner in construction backlog, down slightly from 267 billion kroner in the same quarter last year. The company says it has 22 months of construction work about books in the US
“I think it’s important to look at the 12 months here,” CEO Anders Danielsson said during an earnings call on Nov. 6, “because when it comes to order bookings it can fluctuate a lot between a single quarter.”
Much of this lag is in two main sectors that have performed exceptionally well of late: infrastructure and data centers. The demand in these marketsdriven in part by massive investments in artificial intelligence, has still required adaptation, CFO Jonas Rickberg told Construction Dive.
“When it comes to data centers, we’ve done a great job there and we follow our customers very closely, but we also adapt to their needs,” he said. “Right now, we can see that there’s a little bit more demand for more cooling capacity within these data centers, and of course we’re accommodating that.”
The weakest point for Skanska’s report was commercial property development. The termination is not the first: the contractor had to do it write off millions in January 2024 due to the weak office market, especially in the US
Still, Rickberg said he feels confident in the Class A office building builder’s portfolio and anticipates employers will continue to call workers to the office.
