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By Niklas Pollard
STOCKHOLM (Reuters) – Swedish builder Skanska reported third-quarter earnings far below market expectations on Wednesday as weak property markets took a toll in the shape of asset writedowns and goodwill impairment charges, sending its shares down 12%.
The Nordic region’s largest builder, which is also one of the biggest players in the United States, said operating profit fell to 549 million crowns ($49 million) from 1.52 billion a year ago, below a forecast of 1.58 billion, according to LSEG estimates.
The one-off charges, which were not included in estimates, amounted to 0.9 billion crowns, the company said.
“Based on recent market developments, we have reassessed the value of assets in our Property Development operations and recognized impairments of some of these,” Skanska CEO Anders Danielsson said in a statement.
A series of interest rate hikes across the world to tame surging inflation has pummelled residential and commercial property businesses over the past year, while construction activity has held up well, above all, in the United States.
Skanska said order bookings at its construction business, which accounts for the bulk of group revenue, fell 29% quarter-on-quarter adjusted for currency swings after it chalked up its best intake in more than a decade in the preceding quarter.
Heavily indebted property developers in Skanska’s home market Sweden in particular have faced growing problems and while a plunge in the housing market there has levelled out, construction activity related to both sectors has tumbled.
“I think we need to see inflation stabilising in our markets and that interest rates stabilise,” Danielsson said when asked when a recovery for the development businesses might kick in. “There is too much uncertainty today,” he told Reuters.
Skanska forecast weak residential and commercial property markets in the Nordics over the coming year but said it still expected strong construction activity in the key U.S. market, where state and federal investment is driving demand.
“Focus today will all be on Property, where we remain cautious amid the current rates environment,” analysts at Jefferies said in a research note. “We would expect to see share price weakness today.”
($1 = 11.1827 Swedish crowns)
(Reporting by Niklas Pollard, editing by Anna Ringstrom, Sonia Cheema and Tomasz Janowski)
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