Peab profit slips

By Helen Wright16 February 2012

Swedish contractor Peab reported operating profit of SEK1.5 billion (€169 million) for 2011, down from SEK1.6 billion (€178 million) in 2010, after expansion costs and lower construction returns took their toll.

The lower result came despite a +15% year-on-year increase in net sales to SEK44 billion (€5 billion), and a 5% increase in order backlog since the beginning of 2011 to SEK28 billion (€3.2 billion).

Peab said it was in a phase of expansion, which has had a negative effect on profitability in all its operations. In addition, the company's construction division has suffered a decline in profits due to downwardly adjusted project forecasts and weak revenue recognition in big projects.

Sales in the company's construction division rose 15% year-on-year to SEK28 billion (€3.2 billion), but operating profit sank to SEK599 million (€60.1 million) compared to SEK835 million (€95 million) in 2010.

Meanwhile, the civil engineering division reported net sales for 2011 of SEK11.5 billion (€1.3 billion), up 8% year-on-year, and operating profit edged up to SEK390 million (€44 million), compared to SEK356 million (€40 million) in 2010.

Mixed forecasts

Peab forecast that building construction in Sweden would drop by 9% in 2012, while the civil engineering market would increase by 2%, fuelled by the need to invest in energy and communication, particularly in the Stockholm and Gothenburg regions.

In Norway, the company forecast a 5% reduction in building construction this year, but civil engineering construction is forecast to rise by 8%, driven again by energy-related investments.

And in Finland, the building construction market is expected to drop by 2% over the next 12 months, while civil engineering is forecast to increase by a marginal 1%.

Peab CEO and president Jan Johansson said, "It is difficult to assess the future of markets in 2012. While we continue to see a good range of new projects we are on our guard about the effects the debt crisis may have on construction and civil engineering in our markets."

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