UK project difficulties hit Skanska’s Q1 construction profit

A Skanska location in Sweden. (Image: Adobe Stock)

In a trading update, the company said that revenue in its construction business was down by 4% to 36.2 billion (US$3.3 billion). Adjusted for currency effects, revenue was down 3%.

Operating income was down 35% to SEK 669 million (US$61.4 million). Adjusted for currency effects it decreased by 33%.

Skanska did not name the project that incurred the charge but said it was won more than 10 years ago and “carries a risk profile that is not in line with the current bidding strategy”.

Skanska’s operating margin on a rolling 12-month basis was 3.3%, compared to 3.5% as at 31 December 2023.

Its order backlog for January to March 2024 now stands at SEK 251.4 billion (US$23.1 billion), up from SEK 217.9 billion (US$20 billion) in the same period a year before.

Skanska said order intake was strong in the USA and Norway, while weak markets impacted order bookings in the UK and Finland.

Looking ahead to the next 12 months, the company predicted a weak market for all of the Nordics as well as the UK. In central Europe, it forecast a stable market, with a strong market in the coming 12 months for the US.

In its civils division, it forecast a strong performance for the USA and Norway, a stable market in Sweden and central Europe, and a weak market in Finland and the UK.

Skanska ‘prepared for slow property market recovery’

Revenue in Skanska’s residential property development business for Q1 2024 increased to SEK 2,027 million (US$186.1 million) up from just SEK 586 million (US$53.8 million) in the same period a year before.

It noted that sales in the most recent quarter were still weak in comparison to a normal market. Operating income was SEK 23 million (US$2.1 million), compared to a SEK 314 million loss (US$28.8 million) in Q1 2023. The company said the weak operating income was mainly as a result of low volumes and losses in its low-price BoKlok modular homes venture.

The business sold a total of 511 homes in Q1 2024, compared to 132 in the same period a year before. It started 459, compared to 288 in Q1 2023.

Skanska president and chief executive officer Anders Danielsson said, “We are encouraged by the potential for recovery of the property market but are prepared for it to be a slow process.”

Commercial property market remains tough

Skanska also saw continued weakness in the commercial property development segment. Its revenue in this business stream was SEK 363 million (US$33.3 million), compared to SEK 267 million in the same period a year before.

During the first quarter, Skanska did not start any new commercial development projects and one project was completed. The estimated market value at completion for its commercial property development portfolio was SEK 57.8 billion at the end of Q1 2024, which amounted to an unrealized gain of SEK 5.4 million (US$500 million).