Dive Brief:
- Skanska is not taking big risks on projects, CEO Anders Danielsson said, and he believes the quality of projects in the Swedish company’s backlog have improved in the last five to six years.
- During the company’s Q1 2024 earnings call May 8, Danielsson said costs from an unspecified U.K. project it won a decade ago had negative impacts on the firm’s construction performance across broader Europe. But he expressed confidence that won’t happen again.
- “We are very disciplined. We do not take on projects where we don’t understand risk,” Danielsson said, referring to the types of jobs it has bid on recently and will continue to pursue going forward.
Dive Insight:
The company reported a profit of 525 million Swedish crowns ($48.3 million), up 21% year over year, on revenue of 36.4 billion crowns, which was up 4.3% year over year.
Skanska’s backlog remained historically elevated. The company counted 251.4 billion crowns of work in the backlog, up 15% compared to 217.9 billion crowns at the end of the same quarter in 2023.
“We have seen over time that the quality in the backlog has improved significantly,” Danielsson said during the call.
Rental market
Recent Skanska earnings have been impacted by the commercial and residential development markets, both of which have seen some unpredictability.
CFO Magnus Persson has continued to say low return-to-office rates in the U.S. have hurt that part of Skanska’s business. For example, in January, the company announced 2 billion crowns in impairment charges on its commercial property development, residential development and investment properties, reflected in its Q4 2023 earnings.
Nonetheless, in Q1, Skanska inked the largest lease in company history, when an undisclosed tenant leased 526,595 square feet at The Eight near Seattle.
“It really proves the value of having these Class A properties in the right location. Then we attract the best tenants and they’re willing to pay very competitive rents for these spaces,” Persson said at the time.
On the residential market side, the industry remains weak, but Skanska has seen it begin to get better.
“It’s not a super good market today either, but it’s quite clear that the market is improving. We are now selling units again at a slightly higher pace,” said Persson, who last month announced he’d step down as CFO once the company found a replacement.