Solid first quarter performance

Skanska group’s solid performance continued in the first quarter, with overall operating income increasing to $99.8 million, up 18 percent year-over-year adjusted for currency effects and the highest first-quarter operating income in five years. Revenue increased to $4.1 billion, an 8 percent rise on the same basis.

USA Building and USA Civil both significantly grew revenue, by 10.4 percent and 9.6 percent, respectively. However, tough winter conditions in this January-to-March period and a larger share of projects in the early stages – when less profit is recognized – helped drag down U.S. construction margins: USA Building’s operating margin was 0.5 percent, while USA Civil had a margin of 4.4 percent. The first quarter is traditionally the weakest quarter of the year, given the winter weather that hampers construction operations.

Rich Cavallaro, Skanska USA president and CEO, said such Building and Civil numbers don’t reflect the inherent strengths of our U.S. business.

“It was a challenging quarter financially for USA Building and USA Civil,” Cavallaro said. “But we’re taking the right steps to improve, especially increasing our focus on execution. Even more, our strong values in safety, ethics, sustainability and diversity and inclusion differentiate us in our markets while providing the strong foundation we need for long-term success.”

Overall, Skanska has positive expectations throughout 2015 for construction and development work in the U.S., and in most of our other markets. We face tough competition for construction and public-private partnership projects in the U.S., but we can approach those opportunities from a position of strength: for instance, USA Civil’s backlog is equivalent to 28 months of work, while the backlog for USA Building represents 16 months’ production.

Development streams

The Commercial Development business stream continues to flourish, said Peter Wallin, Group chief financial officer. The “very good quality” of CD’s projects are attracting much attention from tenants and institutional owners, he said. Worldwide, CD has 43 ongoing projects, including three projects that started during the first quarter.

With Infrastructure Development, a major first quarter event was the financial close of the New Papworth Hospital public-private partnership project in Cambridge, UK. The Skanska consortium is providing design, construction, finance and operation and maintenance responsibilities. It’s important that Skanska wins one to two PPP projects per year, said John Karlstrom, Group president and CEO.

For additional details on our first quarter performance, click here to view the Skanska Three Month Report, and associated slide deck and webinar.

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