Release Date: February 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skanska AB (SKBSY, Financial) reported a strong fourth quarter with a record high order backlog of SEK285 billion, indicating robust future business.
- The construction segment achieved an operating margin of 4.5% in the fourth quarter, slightly up from 4.4% the previous year, showcasing improved efficiency.
- The company has significantly reduced its carbon emissions by 61% compared to the baseline year 2015, aligning with its sustainability goals.
- Skanska AB (SKBSY) has proposed a dividend of SEK8 per share, reflecting confidence in its financial stability and commitment to returning value to shareholders.
- The US market remains particularly strong for Skanska AB (SKBSY), with a book-to-build ratio of 152%, providing a solid pipeline for future projects.
Negative Points
- The return on capital employed in project development, including residential and commercial, is at 2.6%, below the company's target level.
- The residential development segment's operating margin is at 8%, which is below the target of 10%, indicating room for improvement.
- The commercial property development segment has a leasing ratio of 65% for completed projects, which is a decrease from previous levels.
- The investment properties segment reported a stable but low operating income of SEK74 million, with a leasing ratio of 87%, suggesting challenges in occupancy.
- The market outlook for residential development in the Nordics remains weak, with expectations of a slow recovery to normal levels.
Q & A Highlights
Q: Stefan from Danske Bank asked about the significant order intake in Q1, which is much higher than the average. Is this a temporary situation or indicative of a strong start to 2025?
A: Anders Danielsson, CEO, explained that the majority of the order intake is from the US, where larger projects are prevalent, indicating a continued strong market.
Q: Stefan also inquired about construction margins, noting a slight decrease in the US and an increase in Sweden. Is there pressure in the Nordics, and is the US margin affected by cautious profit-taking at the start of projects?
A: Anders Danielsson stated that the Swedish market remains stable with no significant pressure. In the US, they are conservative with profit-taking at the start of large projects, which is a standard practice.
Q: Keivan Shirvanpour from SEB asked if the provisions in Residential Development (RD) are recurring or specific to Q4.
A: Anders Danielsson clarified that these provisions are not recurring. They were released due to a better-than-expected market, but such releases should not be expected regularly.
Q: Keivan also questioned the outlook for BoKlok, which incurred losses this quarter.
A: Anders Danielsson mentioned that BoKlok will be integrated into the Swedish business, and costs related to this transition are temporary. BoKlok will no longer be reported separately.
Q: Graham Hunt from Jefferies asked about future investment types, particularly if commercial office space remains a focus.
A: Anders Danielsson confirmed a continued belief in the office market long-term, with diversification into life sciences and residential for rental yields, especially in the US.
Q: Graham also inquired about Skanska's position in the data center market, particularly in the US.
A: Anders Danielsson stated that Skanska is well-positioned in the data center segment, with a strong organization and repeat clients, expecting continued growth in this area.
Q: Arnaud Lehmann from Bank of America asked if there have been any disruptions in US federal projects due to the new administration.
A: Anders Danielsson assured that Skanska has stable operations with no disruptions in contracts or payments from US federal projects.
Q: Arnaud also questioned the normalized development margins for future commercial projects.
A: Anders Danielsson reiterated that Skanska's target is a return of at least 10% on capital employed, with no changes to this target, and projects will be started selectively based on financial fundamentals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
