Skanska's profit plummets 69% in Q2

Dive Brief:

Sweden-based general contractor Skanska Thursday reported a 2020 second quarter operating profit of Swedish krona (SEK) 845 million (U.S. $95.4 million), down 69% from a year earlier.
For the first six months of 2020, it still managed to post a worldwide operating profit of SEK 3.7 billion (U.S. $407 million), compared with SEK 3.2 billion during the same period last year. Skanksa's total revenue was SEK 76.7 billion ($8.67 billion) for January through June as compared with SEK 80.9 billion during the same period in 2019.
Specifically, construction revenue for the six months totaled SEK 71.9 billion (U.S. $8.13 billion) compared with SEK 76.2 billion last year. Construction operating income was SEK 1.4 billion ($158 million) compared with SEK 1.6 billion in 2019. The firm said it had a strong first quarter, but that the second quarter was "disrupted" by the pandemic, and that its construction projects in Europe and U.S. were impacted.

Dive Insight:

While the hit to its second quarter profits reflects the initial shock of the world-wide coronavirus pandemic, in its six-month report, Skanska said coronavirus shutdowns are easing in Europe and the U.S, even though social distancing will continue to negatively impact productivity and that it is experiencing lower demand from private clients. It also said that public infrastructure investments will stimulate economies, but government funding is uncertain.

CEO Anders Danielsson said during an earnings call yesterday that the company anticipates more impacts from the pandemic. "We did have disruption due to the COVID-19 in the second quarter, and I expect that to continue during the pandemic during the fall," he said. "The number of impacted product has decreased, which is a good sign, but we do see that the productivity is decreasing due to the social distancing and other resources as well."

But, he added, "the underlying profitability is solid."

Danielsson also said the company's strategy continues to include selective bidding, greater focus on its commercial business and increased cost efficiency to improve construction profitability.

In April, Skanska reported a 14% increase in Q1 revenue compared to the same period last year. But at the time, Danielsson warned that the company's outlook for the rest of 2020 would be severely impacted by the effects of the coronavirus pandemic. During an earnings call April 27, he said that 370 of its projects had been affected by government shutdowns, supply chain disruptions and lowered demand from clients.