Skanska books flat quarterly profit, says building activity picking up

Sweden’s Skanska (SKAb.ST) reported flat operating profit for the third-quarter but said construction market activity was gradually picking up as economies rebound from pandemic-induced slumps.

Skanska, the Nordic region’s largest builder and one of the biggest in the United States, said operating profit for the July-September quarter came in at 1.5 billion crowns ($179 million), mostly unchanged from a year earlier. It noted that while sales had slowed, profit margins had improved.

“The negative impact from the pandemic is still present in our markets but the activity is picking up as uncertainty is starting to decrease,” it said in its 12-month outlook.

CEO Anders Danielsson said that Skanska’s projects had been little delayed by global supply chain bottlenecks, and margins had not been too affected by higher prices for steel, wood products and other building materials.

To tackle shortages in land transport capacity, and in the case of Britain lengthier administration processes due to Brexit, Skanska has been making purchases earlier and has secured some storage facilities of its own to ensure vital materials are readily at hand, Danielsson said.

“We’ve had to work harder to get materials to the construction sites on time.”

To minimize the blow from higher prices for materials, Skanska tries to ink those costs before bidding for a project, he added.

Skanska generates roughy half of its profits from property development. While investor demand to buy Skanska’s commercial properties has held up, the leasing market stalled as the use of offices slumped.

Danielsson said the number of office showings to potential tenants had increased dramatically after the summer.

“Offices are summoning their employees back to the offices – it’s very clear in the United states and Britain. I’m personally convinced that offices will continue to play an important role,” he said.

Skanska’s shares were down 1% in mid-morning trade.

($1 = 8.5867 Swedish crowns)