Skanska reported third-quarter earnings below forecasts, with operating profit rising to SEK 1.3 billion, short of the SEK 1.67 billion expected. This was due to a slow property market recovery and SEK 0.3 billion in impairment charges. The company's construction order backlog hit a record high, reflecting a strong pipeline, though challenges remain in its BoKlok housing segment. Skanska plans to integrate BoKlok into its residential development by 2025. With central banks easing rates, future performance depends on market recovery and Skanska's ability to adapt, supported by robust growth in core construction activities and a high order intake.
Swedish construction giant Skanska reported lower-than-expected third-quarter earnings, attributing the results to a slow recovery in the property market alongside impairment charges in its project development arm. The company, which is the largest builder in the Nordic region, saw its operating profit increase to SEK 1.3 billion (USD 119.4 million), up from SEK 549 million the previous year. However, this fell short of the SEK 1.67 billion forecasted by analysts, as reported by LSEG.
Despite these challenges, Skanska noted that its construction order backlog reached a record high during the quarter, demonstrating a strong pipeline for future work. CEO Anders Danielsson remarked that "activity in the property market is gradually improving," although he acknowledged that the recovery remains slow. The sluggish pace is seen even as major central banks, including those in Skanska's key markets of Sweden and the United States, have started implementing rate cuts to stimulate economic growth.
The company reported property asset impairment charges amounting to SEK 0.3 billion for the quarter. In comparison, last year's third-quarter results were affected by SEK 0.9 billion in unexpected impairment charges, as Skanska reassessed asset values within its property development division due to challenging market conditions.
While Skanska's residential development arm observed some recovery in market activity, the BoKlok low-cost housing segment in Sweden continued to weigh on the company's profitability. Danielsson noted that BoKlok's performance remained weak, affecting overall financial outcomes. As a result, Skanska announced plans to integrate BoKlok into its residential development organisation by 2025, ending its status as a separate business unit.
Skanska's construction division, the company's largest segment, recorded a substantial increase in order intake, rising to SEK 50.8 billion in the third quarter from SEK 32.7 billion in the same period last year. This represented a 63% rise from the previous quarter on a currency-adjusted basis, highlighting ongoing demand within Skanska's primary construction operations.
With market conditions slowly recovering, Skanska's performance in the coming quarters will likely hinge on the broader economic outlook and how effectively it can adapt to lingering challenges in property development. Despite some improvement in residential development, the sluggish recovery in property markets underscores a cautious forecast for the sector. The decision to restructure BoKlok reflects Skanska's efforts to streamline operations, but this change will take time to yield tangible results.
Looking forward, Skanska's significant order backlog positions the company well for continued operations, though long-term profitability may be influenced by how quickly the property market regains momentum. The adjustments in central bank rates in key markets may create a more favourable environment, though the immediate benefits remain uncertain.
As Skanska navigates these economic conditions, its focus remains on growth within core construction segments, supported by a record order intake. With ongoing adjustments to its development strategies, the company aims to stabilise its position within the evolving property market landscape. The recent performance illustrates both the opportunities and challenges that Skanska, like many in the industry, faces in achieving sustainable growth amidst fluctuating market dynamics.
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