Dive Brief:
- A strong construction division, deep backlog and improved performance in commercial and residential development contributed to a profitable third quarter for Sweden-based builder and developer Skanska.
- The firm announced Q3 profits Wednesday of 1.3 billion crowns ($120.1 million USD), up 130% from the same period a year ago. In construction alone, Skanska reported 1.5 billion crowns in profit, while its commercial and residential development sectors continued to lose money.
- When it came to the biggest global story of the day — the results of the 2024 presidential election — acting CFO Pontus Winqvist told Construction Dive that the firm is “quite neutral” for the time being on the results.
Dive Insight:
Winqvist said the major factors contributing to Skanska’s business in the U.S. won’t change when Donald Trump returns to the Oval Office in January. He noted a Republican president will almost certainly mean lower taxes for businesses, which would benefit the firm’s bottom line.
“The infrastructure bill continues to be there. There will continue to be a lot of investments in the infrastructure. Also in the big building segment with data centers,” Winqvist said.
CEO Anders Danielsson also remarked on the “booming” U.S. data center and infrastructure markets as major contributors to Skanska’s success during an earnings call Wednesday with investors.
“We don’t expect any change in the [U.S.] market, we believe it’s going to be a strong market for at least 12 months,” Danielsson said during the call.
Indeed, the company’s construction work in the States is strong. Skanska reported U.S. order bookings of 32 billion crowns, more than half of the company’s total bookings. That accounts for a backlog of 25 months, per the report.
“So we are able, I would say, to be relatively selective in what we are focusing on,” Winqvist said. “The [U.S.] market is good. We know where we have our core competence and we will focus on those projects where we have a match. We don’t need to chase everything everywhere. And I think that gives us some kind of comfort.”
Development gameplan shift
Skanska’s strong construction performance continues to boost its earnings, but the firm has faced sluggish commercial and residential development markets.
On the residential side, the firm reported a loss of 154 million crowns, an improvement from the loss of 494 million crowns in the same quarter last year.
Skanska pointed to two main reasons for the loss: property and impairment charges and poor performance from BoKlok, the company’s home building arm that operates in Sweden and the U.K.
BoKlok will close its Swedish operations in 2025 and merge with Skanska’s residential development unit. It still has homes under construction in the U.K., Winqvist said, but there aren’t further plans to continue work once it has delivered those projects.
The company believes those changes will help the residential development arm, as without BoKlok and impairments, it claims it would have a 7.9% operating margin.
“This really shows that we have worked with adapting the organization to the current market conditions,” Winqvist said during the call.
On the commercial development and leasing side, return-to-office rates have been stronger in Europe than in the U.S., Winqvist said, but the firm sees more opportunity in the States. The game plan remains as it was before: high-quality, modern offices in prime locations, Winqvist said.
The firm is in the midst of a change with its CFO position, after Magnus Persson left the firm earlier this year. Jonas Rickberg will take over as CFO no later than Jan. 31. Currently, Rickberg is the CFO and executive vice president at Scania Group, a Södertälje, Sweden-based heavy commercial vehicle subsidiary of German automaker Volkswagen.
