Swedish construction company Skanska reported lower-than-expected Q2 operating earnings, primarily due to a significant downturn in its property development ventures. The company's operating profit declined to 1.33 billion Swedish crowns, falling short of both last year's figure and analysts' forecasts. Surging inflation and multiple interest rate increases have strained the residential and commercial property markets in Sweden, impacting Skanska's overall performance. However, the construction segment showed strong growth, with the United States remaining a resilient market. Skanska projects a weakening in the residential and commercial property markets in the upcoming months but anticipates robust activity in the construction sector in the US.
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Last week, Skanska, the Swedish construction company, announced that its second-quarter operating earnings declined more than anticipated. This was primarily due to a significant downturn in its property development ventures, which overshadowed the stronger growth in its larger construction division. As the biggest builder in the Nordic region and one of the largest in the U.S., Skanska reported a drop in operating profit to 1.33 billion Swedish crowns ($129 million) for the three months ending on June 30. This figure was notably lower than the 2.40 billion crowns earned during the same period the previous year and also fell short of the Refinitiv analysts’ forecast of 1.50 billion crowns.
Over the past year, surging inflation and multiple interest rate increases have significantly impacted both residential and commercial property markets, particularly in Skanska’s primary market, Sweden. Economists believe that these factors have put a strain on the construction sector in the country.
Skanska’s CEO, Anders Danielsson, stated that the company’s overall performance during the period was positively influenced by the strong showing in the construction segment. However, the contribution from the residential and commercial development divisions was minimal due to the limited activity in the market.
Skanska’s projections indicate that the residential and commercial property markets are anticipated to experience a general weakening in the upcoming months. However, the construction sector is expected to maintain robust activity in the United States, while in Sweden, there is a predicted decline in building projects.
According to the company, the United States remains the most resilient market, both in civil engineering and building construction. This is due to factors such as pent-up demand, the need for investment in various sectors, and access to federal funding, which continue to support growth.
As for Skanska’s construction business, the order bookings, accounting for revenues and factoring in currency fluctuations, are projected to amount to 63.2 billion crowns. During the quarter, the backlog of construction orders reached an unprecedented peak.
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