Author: Niklas Pollard
STOCKHOLM (Reuters) – Swedish construction company Skanska reported third-quarter earnings on Wednesday well below market expectations as weak real estate markets took their toll with asset write-downs and goodwill impairments, sending its shares down 12 %.
The largest construction company in the Nordic region, which is also one of the biggest players in the United States, said operating profit fell to 549 million kroner ($49 million) from 1.52 billion a year ago, below its forecast of 1.58 billion , according to LSEG estimates.
According to the company, one-off fees that were not included in the estimates amounted to CZK 0.9 billion.
“Based on recent market events, we have reassessed the value of assets in our development business and recognized impairment of some of them,” Skanska CEO Anders Danielsson said in a statement.
A series of interest rate increases around the world to tamp down rising inflation last year hit residential and commercial companies, while construction activity remains strong mainly in the United States.
Skanska said order volumes in its construction business, which accounts for most of the group’s revenues, fell 29% quarter-on-quarter on a currency-adjusted basis, after reaching its highest adoption level in more than a decade in the previous quarter years.
In particular, heavily indebted developers in Skanska’s home market in Sweden are struggling with increasing problems, and although the collapse in the housing market in this country has slowed down, construction activity in both sectors has declined.
“I think we need to see a stabilization of inflation in our markets and a stabilization of interest rates,” Danielsson said when asked when a recovery in property development could occur. “There is too much uncertainty today,” he told Reuters.
Skanska forecasts weak residential and commercial real estate markets in the Nordic countries for the coming year, but still expects strong construction activity in the key U.S. market, where state and federal investment is driving demand.
“We will all be focused on real estate today, where we remain cautious given current interest rates,” Jefferies analysts said in a research note. “We would expect share prices to weaken today.”
($1 = 11.1827 Swedish krona)
(Reporting by Niklas Pollard, editing by Anna Ringstrom, Sonia Cheema and Tomasz Janowski)
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