Dive Brief:
- Solid construction performance anchored Stockholm-based builder and developer Skanska’s third quarter earnings, but a weak commercial property development market weighed on income.
- Skanska’s operating income for Q3 was 1.36 billion Swedish crowns ($143 million USD), about 8% higher than the same period a year ago. For its construction business, the firm reported 1.76 billion crowns in operating income.
- Due to write-downs from its commercial property development unit, Skanska’s construction income was greater than its total income. The firm had charges of 700 million crowns to adjust the value of commercial assets in the U.S.
Dive Insight:
Skanska’s market outlook for the next 12 months remained unchanged in nearly every category and region, with the exception of its commercial property development unit. It raised its projection there from weak to stable in the coming year for Europe and the Nordics, while it rated U.S. construction as stable in the building sector and strong in infrastructure.
Construction backlog for the contractor remained historically elevated, though slightly down from the previous quarter. Skanska reported 264.4 billion crowns in construction backlog, down slightly from 267 billion crowns in the same quarter last year. The firm says it has 22 months of construction work on the books in the U.S.
“I think it’s important there to look at the rolling 12 months,” CEO Anders Danielsson said during an earnings call Nov. 6, “because when it comes to order bookings it can fluctuate quite a lot between a single quarter.”
Much of that backlog is in two major sectors that have performed exceptionally well of late: infrastructure and data centers. The demand in those markets, in part driven by massive investments in artificial intelligence, has still required adaptation, CFO Jonas Rickberg told Construction Dive.
“When it comes to data centers, we have done a huge work there, and we are following our customers very closely. But we are also then adapting to their needs,” he said. “Right now, we can see that there is little bit higher demand for more cooling capacity within these data centers and so of course, that we are adapting to.”
The weakest spot for Skanska's report remained commercial property development. The write-down is not its first: the contractor had to write off millions in January 2024 due to the weak office market, especially in the U.S.
Nonetheless, Rickberg said he feels confident in the builder’s portfolio of Class A office buildings, and he anticipates employers will continue to call workers back to the office.
