Skanska sees Brexit toll on non-housing construction

Bloomberg

Skanska AB, the Swedish construction company that built the City of London’s landmark Gherkin building, lowered its outlook for U.K. non-residential construction after the country voted to leave the European Union.
“Ahead of the Brexit vote, private developers were in a wait-and-see mode and refrained from starting projects — that cautiousness has continued after the referendum,” Chief Executive Officer Johan Karlstroem said in a phone interview on Friday. “The worst case scenario is a continued prolonged uncertainty.”
Skanska, which derives about 13 percent of its construction revenue from the UK, said second-quarter operating profit was 1.66 billion kronor ($193 million), in line with a year earlier. Revenue fell 7.6 percent to 37.3 billion kronor. Profitability was hit by the weak performance of certain projects in Poland and costly design changes to U.S. sites, Karlstroem said in an earnings statement.
The shares traded 5.4 percent lower at 176.10 kronor in Stockholm, on track for the biggest decline in a month. That pared gains for the year to 6.9 percent, valuing the company at 74 billion kronor.
The comments from the Swedish builder echo those of other European companies, including Swiss engineering giant ABB Ltd. and British retailer AO World Plc, who have cited uncertainty as the biggest concern following the U.K. vote to leave the EU. Skanska has reached out to U.K. subcontractors to gauge the consequences of a labor shortage in case it becomes more difficult for foreign workers to enter the country, Karlstroem said.
“No one can quantify that risk, but we need to keep our eyes on it,” Karlstroem said. “In a few years it could potentially be a problem to get foreign labor.” The Swedish company doesn’t yet plan to reduce staff in the UK as none of its projects have been halted. Skanska could even benefit from any exodus of businesses from the country, the CEO said. “If companies move operations from London to other parts of Europe, cities like Warsaw and Prague could be well placed,” Karlstroem said. “An increased demand for property there would be good for us.”
Skanska AB is a multinational construction and development company based in Sweden. This firm is the fifth largest construction company in the world according to the Construction Global magazine.
Notable Skanska projects include the World Trade Center Transportation Hub project, 30 St Mary Axe, MetLife Stadium, Mater Dei Hospital, among others.
Skanska was the number one “Green Builder” in the US in 2007 and was ranked number three “Green Contractor” in the US in 2008. In 2011, it was ranked the greenest company in the UK despite belonging to an industry with a generally high environmental impact.