Yahoo Finance UPDATE 3-Skanska profit lags forecast as charges sting construction arm
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Skanska Q1 operating profit 497 mln SEK vs forecast 873 mln
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Co says construction earnings hit by costs for British project
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Charge for U.S. project also weighs
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Construction order intake rises on strength in U.S., Norway
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CEO sees positive momentum in project development
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Shares fall 4.8%
(Adds shares in paragraph 4, CEO comment and background in paragraphs 5 and 9-12)
By Niklas Pollard
STOCKHOLM, May 8 (Reuters) - Swedish builder Skanska reported a smaller-than-expected rise in first-quarter operating profit on Wednesday as profits in its construction business fell hit by one-off costs.
The Nordic region's biggest construction group said operating earnings rose to 497 million crowns ($45.6 million) from 394 million, missing the 873 million expected by analysts in an LSEG compilation of forecasts.
Weakness in commercial and residential property development has weighed on earnings over the past year with Skanska booking impairments and scaling back dividends, despite robust performance for the bigger construction business.
The company said its European business had been hit by costs related to a decade-old project in Britain. Skanska shares were down 4.8% as of 0709 GMT.
"Underlying results in the operations are good ... and we have a super-strong, record-high order backlog that's driven by strong markets in the United States and for infrastructure in Norway," CEO Anders Danielsson told Reuters.
The company booked a 370 million crown charge for the British project, sending the margin in its construction arm down to 1.8% from 2.8% a year earlier.
"The project was won more than 10 years ago, and carries a risk profile that is not in line with the current bidding strategy," Skanska said.
Skanska also booked a one-off charge of 154 million crowns in its commercial property unit related to a U.S. project.
Order bookings at Skanska's construction arm, which accounts for the bulk of group revenue, rose to 46.9 billion crowns from 25.8 billion, lifting its backlog to a historic high, Danielsson said.
Property development has been dented by sluggish U.S. demand for office space following the pandemic while soaring interest rates have hit the real estate industry hard in many parts of Europe.
But with central banks in the United States, eurozone and Nordic region set to begin easing policy - Sweden's Riksbank likely to do so later on Wednesday - market sentiment has grown a bit less bearish.
"It will take time before it turns around," Danielsson said of development in residential property.
"We need to sell what we have before starting new projects, and that is true for both residential and commercial property."
($1 = 10.8929 Swedish crowns) (Reporting by Niklas Pollard; editing by Anna Ringstrom and Jason Neely)
