• Operating Margin in Construction: 4.5% in Q4, 3.5% for the full year.
• Return on Capital Employed in Project Development: 2.6% on a rolling 12 months.
• Return on Capital Employed in Investment Properties: 4.6% on a rolling 12 months.
• Return on Equity: 10% on a rolling 12 months.
• Dividend Proposed: SEK8 per share.
• Order Backlog: SEK285 billion, record high.
• Revenue in Construction: SEK47 billion in Q4, a 13% increase from last year.
• Operating Income in Construction: Over SEK2 billion in Q4.
• Residential Development Operating Margin: 8%.
• Commercial Property Development Operating Income: Over SEK300 million in Q4.
• Investment Properties Operating Income: SEK74 million in Q4.
• Operating Income for the Group: SEK2.7 billion in Q4.
• Tax Rate: 22% in Q4, 25% for the full year.
• Operating Cash Flow: SEK5.1 billion in Q4.
• Free Working Capital: SEK34.5 billion, record high.
• Liquidity: Available funds of SEK28.6 billion.
• Net Financial Receivable: Increased to SEK12 billion by the end of Q4.

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

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) 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.