Construction operations reported bookings that were higher than revenue both in the full year 2011 and in the fourth quarter. Bookings in 2011 were 7% higher than revenue during the year.
“Despite the economic uncertainty surrounding us, we were successful due to our focused efforts and secured new assignments for our operations,” said president and CEO Johan Karlström.
Construction operations were expanded with three company acquisitions during the fourth quarter of 2011: US-based Industrial Contractors, Soraset Yhtiöt Oy in Finland and PUDiZ Group in Poland. The acquired companies will represent a total of more than SEK5bn in annual revenue.
Order bookings totalled SEK123.6bn (£11.6bn). Order bookings in the fourth quarter totalled SEK41.0bn, an increase of 41% compared to the fourth quarter of 2010. The order bookings were 7% higher than revenue during the year and the order book increased 7% to SEK155.7bn. This was equivalent to 16 months of construction.
Profit for the year totaled SEK8,129m compared with SEK3,940m in 2010.
Revenue amounted to SEK122.5bn, with revenue in construction amounting to SEK115.0bn, an increase of 2% and an increase of 8% adjusted for currency rate effects. Sweden, Poland, the United States and the United Kingdom continued to deliver good earnings and margins, said the company. However, profitability was lower than in 2010, mainly because operations in Finland and Norway were adversely affected by further project write-downs and provisions. “This was the result of an in-depth analysis of our operations and the project portfolio, in order to resolve current situation and improve profitability,” said Karlström.
Operating income in construction totaled SEK3,467m. The operating margin amounted to 3.0, compared with 3.9% in 2010. Currency rate effects reduced income by SEK255m.
The residential development operations started up and sold homes at the same level as in the fourth quarter of 2010 and also started up its first British residential project. The decrease in the operating margin compared to 2010 was mainly due to low profitability in certain projects in the Swedish market, write-downs in the value of land in Estonia and Slovakia and costs for establishing a presence in new markets. “We will continue the task of adjusting our operations in order to create profitable Residential Development operation,” said Karlström.
During the fourth quarter, the commercial property development business continued to sell a number of properties, with good capital gains and at attractive yield levels, he added. Seven new projects were started, meaning that the company had 32 ongoing projects at the end of 2011, with an investment commitment of about SEK9bn.
During the fourth quarter, the infrastructure development business divested a school project in Scotland. Earlier in the year, Infrastructure Development also sold the Autopista Central highway project and 50% of the Antofagasta highway project in Chile. “These divestments, as well as our divestments in Commercial Property Development, are a good example of Skanska's business model, where capital generated in construction is invested in profitable development projects, which in turn generate construction assignments and future development gains and also make a stable dividend possible,” said Karlström. “The capital gain on the divestment of the Autopista Central enabled us to disburse an extra dividend of SEK6.25 per share in May 2011.”
The market in building construction remains stable, said the company. In the USA, there is continued good demand in certain building construction sectors such as healthcare, the pharmaceutical industry and facilities for the information technology (IT) industry. The Nordic markets are generally having a stable development but the residential construction market in Sweden and Finland is characterised by some uncertainty. The Czech and UK markets remain weak.
The civil construction market remains stable in most of its markets. The number of bidders is still high, and the company can see a large presence of international players in several of our markets, which means tight bidding margins. In the USA, the Czech Republic and the UK, the market is being affected by public sector austerity programs. In the USA, increased private construction investments in the energy sector, for example, may partly offset the decline in public sector construction investments, said Skanska. In Latin America, the market for energy sector facilities is good.
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