• Data Center Projects: Won projects worth nearly SEK10 million in Q3.
• Construction Operating Margin: 3.6% in Q3, up from 3.3% last year.
• Order Intake: Over SEK50 billion, a 60% increase compared to last year.
• Order Backlog: Record high of SEK267 billion.
• Residential Development Revenue: SEK1.7 billion, with 186 projects started in the quarter.
• BoKlok Losses: SEK241 million in Q3.
• Commercial Property Development Gain on Sale: SEK185 million in Q3.
• Investment Properties Operating Income: SEK79 million with an occupancy rate of 89%.
• Operating Cash Flow: SEK6.2 billion in Q3.
• Free Working Capital in Construction: SEK31 billion.
• Available Funds: Almost SEK25 billion.
• Adjusted Net Interest-Bearing Receivable: SEK6.5 billion.

• Warning! GuruFocus has detected 6 Warning Sign with SKBSY.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Skanska AB (SKBSY) reported a strong performance in the Construction segment with an operating margin of 3.6%, up from 3.3% last year.
• The company achieved a significant order intake of over SEK50 billion, with a 60% increase compared to the previous year, particularly strong in the US market.
• Skanska AB (SKBSY) has reduced carbon emissions in its operations by 57% compared to the base year 2015, highlighting its commitment to sustainability.
• The company maintains a robust financial position with available funds of almost SEK25 billion, providing a competitive advantage.
• Leasing activity in Commercial Property Development is improving, with a healthy leasing ratio of 75% in completed projects.

Negative Points

• Skanska AB (SKBSY) faced restructuring costs and impairment charges in its BoKlok low-cost segment due to a tough market environment.
• The Residential Development segment reported a negative operating income of SEK154 million, impacted by write-downs and BoKlok losses.
• Commercial Property Development saw a negative operating income of SEK113 million, with impairments predominantly in the US.
• The return on capital employed in Project Development remains negative due to large impairment charges from the previous year.
• The company anticipates a weak market outlook for Residential Development in the Nordics over the next 12 months.

Q & A Highlights

Q: Could you elaborate on the margin in the order backlog, especially between the US and Europe? A: Anders Danielsson, President and CEO, stated that the quality in the backlog is good, with a healthy gross margin. The company manages risks effectively, ensuring minimal margin fade in projects. While specific market differences aren't disclosed, the focus is on maintaining and pushing margins upwards in favorable markets.

Q: Are the write-downs in Residential Development, particularly in BoKlok, expected to continue? A: Anders Danielsson confirmed that all necessary charges have been taken this quarter after a thorough asset analysis. The BoKlok business will be restructured, merging with Skanska Sweden to reduce S&A levels. Pontus Winqvist, Acting CFO, added that while costs will persist, the aim is to minimize future losses.

Q: Can we expect any divestments in Commercial Development in Q4, given the current market conditions? A: Pontus Winqvist mentioned ongoing negotiations but couldn't confirm if transactions would close by year-end or early next year. However, there is activity in the market.

Q: With a strong balance sheet, does Skanska need all the allocated capital? A: Anders Danielsson emphasized the importance of maintaining a strong financial position, which provides a competitive advantage. The company plans to start projects in both residential and commercial development, leveraging its financial strength for strategic decisions.

Q: How does the order backlog translate into future revenues, particularly for 2025? A: Anders Danielsson noted the high level of the order backlog, with increased duration, especially in the US. While specific forecasts aren't provided, the company is in a strong position to be selective with new projects, ensuring quality and profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.