Dive Brief:

• Swedish builder and developer Skanska reported 434 million Swedish Krona ($42.4 million) in profit for the first quarter of 2023, an 86% decrease from the previous three-month period and a 71% decrease from the same period in 2022.
• Construction revenue was a better metric for Skanska. It reported 37.5 billion SEK in revenue for its construction arm, which CFO Magnus Persson said makes up roughly 80% of its business. That revenue was up 12% from a year ago, but down 12% from Q4 2022.
• Persson pegged the company’s performance to a weak residential development market in the Nordic countries where it operates — Sweden, Finland and Norway — while reiterating confidence in its commercial and civil construction sectors, especially in the U.S.

Dive Insight: 

According to Persson, economic headwinds, such as inflation and increased mortgage rates, in the Nordic region has raised the cost of living and reduced borrowing capacity, especially for low-income buyers.

"The market of this specific segment of the residential market has more or less disappeared almost during the quarter,” Persson said. “Because of that, when we don't have the income, we eat the fixed costs, essentially.”

Despite the drop in profits, Persson said he isn’t concerned about the long-term effects of the downturn and said the contractor can weather the storm.

“We are not in a position where we will have to put assets to the market in order to preempt a liquidity situation or anything like that,” he said.

Civil outlook

Skanska’s construction portfolio remains stocked: Order backlog for Q1 was 217.9 billion SEK, down about 12 billion SEK from the previous quarter. That amounts to roughly 16 months of work, the contractor reported.

The company’s confidence in U.S. work continues to be high, largely spurred by infrastructure projects.

“I think you have an economy that's been surprisingly resilient to interest rate increases, to inflation, et cetera,” Persson told Construction Dive. The Infrastructure Investment and Jobs Act has buoyed that confidence, Persson said.

Skanska has recently announced wins in the infrastructure sector, including two highway interchange projects in California worth $267 million and $120 million.