Dive Brief:
- Swedish construction firm Skanska reported Thursday that fourth-quarter profit tumbled 40% to $334 million (3.08 billion Swedish krona), or 81 cents a share, as divestitures and weak residential development swamped gains in its construction business.
- Skanska, which is currently revamping and modernizing New York's LaGuardia Airport (pictured above), said the pandemic continues to weigh on its construction business, driving up material prices and creating supply chain bottlenecks across its markets. Commercial construction has been most impacted, while residential construction is stable.
- The company also warned government budgets, strained by the pandemic, could create funding challenges and delay infrastructure projects.
Dive Insight:
Skanska's operating income in the quarter fell 45% to $393.9 million, but still beat analysts' average forecast.
"U.S. operations are back on track, and it's encouraging to see we are successful in the market," CEO Anders Danielsson told investors on a conference call.
Skanska ended the year with U.S. construction order bookings of $7.2 billion versus $5.5 billion a year ago, a book-to-build ratio of 120% and 20 months of production.
However, Danielsson warned rising unemployment and interest rates globally are potential risks this year. The U.S. Federal Reserve has indicated it will raise interest rates to bring inflation under control, as price increases reach multi-decade highs. On Thursday, the Bank of England raised its key interest rate for a second consecutive meeting.
Still, with $196 million in its coffers, "We have plenty of firepower available for us to continue to expand our property operations and to build up the investment property portfolio," said CFO Magnus Persson. "We are in a very stable financial position in this company."
The company rewarded investors with an extra dividend of 33 cents a share, on top of its basic dividend of 71 cents. For the full year, profit fell 12% to $888.5 million, or $2.15 a share compared to 2020 results. Revenue slipped 7% from the prior year to $16.01 billion.
The company reported flat revenue for the year-end quarter at $4.8 billion, but construction revenue climbed 10%.
Skanska is among the first of major global contractors to report year-end results. Many American builders are expected to share results in the coming weeks.
Skanska's construction business was strong with operating income climbing 42% in the fourth quarter to $172 million. But operating income from residential development fell 12% to $45.5 million, while commercial development was basically flat (rising 2%).
