Skanska 2020 earnings: Overall profit hits record high, construction revenue down 12%

Dive Brief:

Despite the challenges of the COVID-19 pandemic, Sweden-based contractor Skanska declared record profits for its overall business in 2020. Profit for the full year was 9.3 billion Swedish krona ($1.1 billion), up 46% from 2019 and fourth-quarter profit was 5.1 billion krona, up 163% from the same period in 2019, the company announced last week.
Profitability was largely driven by the company's 4.8 billion krona gain through divestment in commercial properties plus the 4.1 billion krona gain from the sale of Elizabeth River Crossings, which owned and maintained the Elizabeth River Tunnels in the South Hampton Roads region of Virginia.
Construction revenue for 2020 was down 12% to 140.5 billion krona and Skanska's fourth-quarter construction revenue was 34.2 billion krona, down 19% from the fourth quarter of 2019.

Dive Insight:

The company's construction backlog at the end of the fourth quarter totaled 178.9 billion krona, and major U.S. orders in the fourth quarter included the $392 million renovation of the Pennsylvania Station Long Island Rail Road Concourse in New York City and the $335 million Roadways, Utilities and Enabling (RUE) project for Los Angeles World Airports.

Skanska's outlook for its construction segment is that its private commercial and residential building units will continue to face pandemic-related challenges, while public spending on infrastructure looks steady even though some decisions have been postponed. Competition for civil projects in the U.S. has increased, the company said, and even though President Joe Biden's inauguration has made the federal infrastructure market more certain, Skanska expects long lead times for future projects.

One aspect of the past year that the company did not mention were the problems it has faced in its civil operations in Florida. Last year saw the company endured a construction and public relations setback after multiple barges broke loose from its Pensacola Bay Bridge project in Pensacola Florida, during a hurricane. The barges damaged a recently completed span of the project and traffic has been diverted to another bay crossing since the accident. While the company works to repair the damage, which is expected to be complete next month, local business owners have sued Skanska USA Civil for lost revenue due to traffic being diverted away. Skanska has asked a court to limit monetary awards in these cases based on maritime law.

Another Florida DOT project that keeps delivering challenges for the company is the Ultimate I-4 highway project in Orlando. One arm of Skanska holds an equity position in the project and the civil business is the construction lead in a joint venture with The Lane Construction Corp. and Granite Construction. Lane recently sued Skanska Civil for $132 million claiming that it put its affiliate's interests ahead of the joint venture’s when making decisions about whether to stay on the project and during negotiations over change orders with the Florida DOT.