Dive Brief:
- Skanska announced FY 2019 operating income today in its Construction division of $3.8 billion Swedish krona (U.S. $394 million) which includes a one-off charge in its European operations in the fourth quarter. With operating margin of 2.4%, the earnings represent a 245% increase from the kr 1.1 billion the year before.
- The goodwill impairment charges totaling kr $467 million related to Skanska’s British construction business and Norwegian residential development operation, Reuters reported.
- Construction revenue for the Sweden-based construction and development multinational remained flat at kr 159.6 billion last year compared to just shy of kr 158 billion in 2018, CFO Magnus Persson said on the company's 2019 earnings call this morning. He also reported a 1.5% rise in the Construction division's operating margin in the U.S. and said that order bookings in the Construction division overall decreased 8% to kr 145.8 billion.
Dive Insight:
Company leaders reiterated their commitment to bidding only on construction projects with low risk and the potential for high profitability. In October 2018, Skanska USA announced it would no longer pursue design-build P3s in which it has an equity stake.
"We are more selective, that’s our plan going forward," President and CEO Anders Danielsson said on today's call. "We want to continue to improve our profitability in construction."
To that end, the company only bids on projects that meet certain criteria including the location and concept and whether the company has a competitive advantage and the right teams in place, he said.
Danielsson said acquisitions are not a priority. "We want to invest more in project development and by growing organically," he said.
Danielsson said that the U.S. will continue to be a strong market for Skanska, thanks to its "positive economic growth" and ongoing infrastructure investments. Skanska USA is ranked seventh on ENR's 2019 list of the Top 400 contractors in the U.S. by revenue.
In addition, "funding on the state level is healthy in our markets ... for the types of projects we're interested in," he said.
Nevertheless, the U.S. construction market presents challenges as well, including "fierce competition," high construction costs and long zoning processes, he added.
Late last year, Skanska USA announced that it signed a $778 million contract with the Central Puget Sound Regional Transit Authority for construction of the Lynnwood Link Extension light-rail project. The company will build almost 4 miles of new guideway, and the project will include more than 2 miles of aerial guideway, two elevated stations and a five-story parking garage.
The project is scheduled for completion in 2024.
