Skanska, a Swedish construction company, reported disappointing third-quarter earnings due to property market challenges, resulting in asset write-downs and goodwill impairment charges. Skanska’s shares dropped by 12% as the operating profit fell from 1.52 billion crowns to 549 million crowns, missing the estimated 1.58 billion crowns. The company attributed these issues to changing property values and interest rate hikes globally. They expect weak property markets in the Nordics but anticipate strong construction activity in the U.S. Despite concerns about a recovery in the development businesses, Skanska’s CEO, Anders Danielsson, emphasized the need for stability in inflation and interest rates.
Swedish construction company Skanska disappointed investors in the third quarter with earnings significantly lower than what the market had anticipated. This was primarily due to the impact of declining property markets, resulting in the need for asset write-downs and goodwill impairment charges. As a consequence, Skanska’s stock price dropped by 12%. Despite being one of the major players in the United States, the company’s operating profit for the quarter dropped to 549 million crowns ($49 million) from 1.52 billion crowns the previous year, falling short of the expected 1.58 billion crowns, according to estimates from LSEG.
The unexpected charges, totalling 0.9 billion crowns, were not accounted for in previous forecasts, as stated by the company. Skanska’s CEO, Anders Danielsson, explained that they re-evaluated the worth of assets in their Property Development division due to recent market conditions, resulting in the recognition of impairments on certain assets.
In the last year, a global series of interest rate increases aimed at controlling inflation has negatively impacted the residential and commercial real estate sectors, while the construction industry, especially in the United States, has remained relatively robust.
Skanska reported a 29% decline in order bookings in its construction division, which is the primary source of the company’s revenue. This drop came after the division achieved its highest intake in over ten years in the previous quarter.
The property development industry in Sweden, where Skanska is based, has been grappling with significant debt issues. Although the housing market’s decline in the country has stabilized, construction activities linked to both residential and commercial sectors have significantly decreased.
Skanska’s outlook indicates a projection of sluggish residential and commercial property markets in the Nordic region in the coming year. However, the company anticipates robust construction activity in the crucial U.S. market, driven by government investments at both state and federal levels.
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