Skanska’s Q2 results reveal improving conditions globally

Skanska’s cover page for its 2024 second quarter report. (Image: Skanska)

Revenue for construction in the quarter was up over last year by around 7% to SEK 43.6 billion (US$4.1 billion).

“Construction had a good second quarter,” said Skanska president and CEO Anders Danielsson.

He added that strong activity in the US is fuelling the group’s present success.

“The US operations, currently half of sales, lead revenue growth and margin delivery for the business stream,” he said.

The market in Europe, while still a big region for Skanska, is requiring more observation, Danielsson noted.

“In the Nordics and Europe, we remain disciplined in bidding activities. Continuously monitoring pipelines, actively adjusting costs and rightsizing organisations facing weaker market conditions, enabled a solid margin deliver,” he said.

Construction’s order intake was “strong” he added, noting “a rolling 12-month book-to-build well above 100% and a record high order backlog.”

Danielsson said large infrastructure projects with longer execution periods are extending the maturity profile of the order backlog, which has been historically high for the company this year and last.

Looking at the big picture in Skanska’s Q2 report

Overall, the group recorded more than $4.4 billion in revenue, which is up 18% from the same period in 2023. The company reported a profit of just less than $200 million, up 60% from 2023’s second quarter.

On a rolling 12-month basis, the group missed several targets. Construction was expected to grow its operating margin by 3.5% or more, but landed at 3.3% in the second quarter at $144 million. Project development’s return on capital (ROC) employed fell 1.3%, also missing its target of 10%. ROC employed in investment properties increased 1.2% but missed the target of 6%.

The group’s reported 58% reduction of CO₂ emissions (compared to 2015) seems to be heading in the right direction, however. Skanska plans to reduce its CO₂ emissions by 70% by 2030.

Skanska’s 12-month outlook

Looking ahead, the group expects more success in construction and is remaining cautious on its residential development and commercial property development segments; both outlooks for the next 12 months in development are flat or anticipating decreasing returns.

“We expect recovery to take time and be difficult to predict, with supply in the second-hand market increasing as market returns and households remaining sensitive to adverse economic impacts,” said Skanska on the resiential sector. “Market conditions for the low-price segment is challenging.”

The company added that commercial development is not expected to fare much better (“We expect large local variations to remain with low demand for certain markets and segments,” said Skanska).

But construction should remain strong, the firm said.

“The construction market outlook is strong for the US, both for the building and civil infrastructure segments. The latter is boosted by federal funding programs directed to investments in infrastructure, such as rails, roads and bridges. In the Nordics and Europe, we maintain our view of a mostly stable civil market while our outlook for the building segment is more cautious. Sectors like energy, industry and defence provide opportunities while the private residential and commercial development markets continue to see low volumes of project starts,” said Skanska.

Skanska workers on-onsite. (Image: Skanska)