Skanska reports record backlog, Q2 profit drop

Dive Brief:

  • Swedish developer and builder Skanska reported 1.3 billion Swedish Krona ($128 million) in operating profit for Q2 2023, a 44% decrease from the same period a year ago, largely due to sluggishness in the residential and commercial property development sectors.
  • Despite the profit drop, the company reported a record high order backlog, CEO Anders Danielsson said during an earnings call Friday. With 250.3 billion SEK in order backlog and 63.2 billion SEK in new order bookings for the quarter, “We continue to have a strong financial position,” Danielsson told stockholders. 
  • Continued strength in construction, largely thanks to U.S. and Norway civil construction work, continues to buoy confidence for the contractor, CFO Magnus Persson told Construction Dive during a post-earnings interview.

Dive Insight:

Persson remains bullish on the U.S. infrastructure market, largely thanks to the $1.2 trillion Infrastructure Investment and Jobs Act. 

“It’s a very strong civil market in the U.S. at the moment, and we have a pretty good event horizon into the future in that market because we can see the bid pipeline, and we expect the market to continue to be this strong at least 12 months out ahead,” Persson said.

Civil U.S. projects won last quarter include the $1.24 billion design-build contract to improve roadways around JFK Airport in Queens, New York. Skanska won the contract as part of a joint venture with New York-based Halmar International.

But Persson added he’s also happy with how the overall construction arm has performed in the U.S. and beyond for the last two years, outside of just infrastructure.

“We have the biggest order backlog we’ve ever had in the history of Skanska,” Persson said. “And so the future looks very bright in that sense.”

Leasing business

Skanska reported a 15 million SEK loss in operating income from commercial property development in Q2, a massive drop from the 834 million SEK it reported from the same period the previous year.

Office workers’ presence in the U.S., especially the West Coast, has remained limited since the COVID-19 pandemic, Persson said. But the lack of workers in-office is a uniquely American issue, as the pendulum has swung back in Europe.

“In Central Europe, in the U.K. and in the Nordics, the pendulum has shifted back,” he said. “So people are maybe not a hundred percent back, but close to it, in many cases.” 

Nevertheless, there has been a strategy shift in the office environment — as with anything else real estate, location, location, location is key to leasing success, Persson said. But Skanska also pursues construction design to fit end use; aiming for greener buildings that cost less to operate. 

But even in the face of a weaker property development market, Persson voiced confidence.

“I just want to emphasize the strength we have here on our balance sheet, which is key to sort of seeing this through to up until the market improves a bit,” Persson said. “We have plenty of staying power in our balance sheet.”

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