Dive Brief:
- Even as Sweden-based general contractor Skanska today reported a 14% increase in Q1 revenue compared to the same period last year, CEO Anders Danielsson warned that the company's outlook for the rest of 2020 will be severely impacted by the effects of the coronavirus pandemic.
- In an earnings call Tuesday morning, Danielsson said that 370 of the company's projects have been affected so far by government shutdowns, supply chain disruptions and lowered demand from clients. These delays, he said, "will impact us negatively for some time ahead."
- The company reported Q1 revenue of Swedish krona 41.2 billion (U.S. $4.2 billion) and operating income of SEK 2.9 billion (U.S. $294 million), which was partly the result of major sales of office buildings in Poland and Sweden earlier this year that totaled SEK 4.3 billion. "Our first quarter was strong but we are in a rapidly deteriorating and uncertain situation here related to the pandemic," he said.
Dive Insight:
Danielsson said the effects of the pandemic will negatively influence the company’s 2020 outlook in every segment and region in which it operates. The company's construction segment is feeling the effects of extensive lockdown measures, especially in the U.S. and U.K., and disruption to the supply chain of equipment, materials and subcontractors.
For instance, Skanska and JV partner the Walsh Group temporarily halted work at LaGuardia Airport's Terminal B after a worker there tested positive for the coronavirus late last month, according to the Real Deal. The job re-opened after a deep cleaning.
In addition, while the company has seen some postponement of new order approvals from construction clients, this is likely temporary, Danielsson said.
In residential construction, the company is seeing declining consumer confidence impacted by rising unemployment and Danielsson said he expects this will lead to weakening demand and lowered housing prices.
Uncertainties in financial markets are making investors more risk-averse and more likely to limit access to credit for commercial development projects. The company is also preparing for decreases in leasing activity and lowered rent levels.
Danielsson said company leaders are hopeful that infrastructure investment, low interest rates and government stimulus programs will help lessen the virus' impact. The company is helping to build the HS2 high-speed rail project in the U.K., which received government approval earlier this month to begin construction despite the pandemic.
The company has already taken measures to help mitigate the outbreak's effects on corporate earnings. Last month, Skanska announced it would not increase fees for its board of directors and would hold off on paying a dividend so that it can carry its 2019 profit plus retained earnings forward. Danielsson said the board would reconsider the dividend in the fall.
"The future will look different and we will adapt to that new future, but in that adaption we will still have our long-term ambition of what we want to achieve," he said.
