Profits drop at Skanska

By Helen Wright05 May 2011

Skanska reported a SEK 485 million (€ 53,7 million) drop in first quarter net income year-on-year to SEK 451 million (€ 49,9 million), while revenues for the period declined -4% to SEK 24,8 billion (€ 2,7 billion). The Swedish contractor said seasonally lower earnings in its construction division had impacted overall results.

The construction division - Skanska's largest business unit - reported a -2% decline in revenues to SEK 22,7 billion (€ 2,5 billion), while operating income dropped to SEK 325 million (€ 36 million) from SEK 558 million (€ 61,7 million) in the first three months of 2010.

The company described the market for building construction as developing "satisfactorily", with the Nordic markets in particular showing a stable trend. Offsetting this, Skanska said its market outlook for construction in the Czech Republic and the UK remained weak, while tough competition was leading to tight bidding margins in the US.

The market in all three countries has been affected by public sector austerity programs, resulting in reduced public construction investments in these markets. Skanska said this had been offset to some extent in the UK and US by increased private construction activity.

And the same dynamics are affecting the infrastructure market - the contractor said the supply of new public-private-partnership projects was falling in the UK, and was limited throughout Europe.

Skanska's order bookings during the first quarter decreased by -16% compared to the same period in 2010 to total SEK 21,6 billion (€ 2,4 billion). However, Skanska reported a +1% year-on-year increase in its order backlog to SEK 139,4 billion (€ 15,4 billion) - equivalent to 15 months of construction work.

Skanska president and CEO Johan Karlström said the company had been selective about the new projects it bid on as deals in Sweden involve an unusually long order backlog and high capacity utilisation.

"Because of this, together with decreased public sector construction investments in the UK, the Czech Republic and portions of the building construction market in the US, order bookings during the first quarter were lower than last year," he added.

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