In a bid to shed non-profitable operations, Stockholm-based contracting giant Skanska AB will reduce its global workforce by 3,000, new CEO Anders Danielsson said on Feb. 2. In a quarterly results call, he told investors he was “not satisfied” with last year’s 33% drop in group operating profit and described the 0.8% operating margin in construction activities—2.7% below target—as “unacceptable.”
Skanska’s group sales last year grew 6%, to $20.5 billion, while operating profit fell to $700 million. Construction revenue in the U.S. and northern Europe rose 9%, to $19.1 billion, but caused a 66% fall in operating income, to $159 million, Group results were hit by $191 million in project write-downs, including $51 million in Poland. Of an additional $127 million in impairment charges, about $72 million relates to worker-layoff costs.
While Skanska’s Nordic markets remain “very strong,” Andersson said, prospects are less certain in the Czech Republic and Poland. About 2,500 layoffs are planned in Poland. The firm is set to take over an estimated $28-million roadbuilding contract in England from U.K. giant Carillion, following that firm’s bankruptcy filing last month, the government said on Feb. 5. Although the U.K.’s planned departure from the European Union next year has not yet made a big impact, Europe’s project pipeline is “very thin,” Danielsson noted.
Danielsson is optimistic about the U.S. market, but competition is “fierce,” he said. He told analysts the firm had “a very good year” in commercial development, noting that Skanska “actually started as many as 24 projects during 2017.”
Skanska will focus on its public-private-partnership business in the U.S., where “there is a tremendous need for infrastructure investment,” he said, although the firm is set to exit the U.S. power market. “We do perform well in the Nordics [and] in the majority of the U.S. operation, but we have isolated units [where] we need to improve profitability,” said the CEO.
Danielsson also realigned management, naming Richard Kennedy as executive vice president of Skanska AB and president and CEO of Skanska USA, overseeing all U.S. construction operations and infrastructure development. Kennedy was CEO of Skanska USA’s building unit and, before that, operations chief in New York and New Jersey. Paul Hewins, Skanska Building COO, will succeed him. Danielsson also replaced Skanska Chief Financial Officer Peter Wallins, naming Magnus Persson to the role. “The group leadership team will work much closer to the operating units,” Danielsson said.