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Skanska to fall below construction margin targets

Skanska 3to2

Swedish construction giant Skanska has said it expects to fall short of its 3.5% construction operating margins target this year or next.

“Based on expected performance in current order backlog, Skanska will unlikely be able to reach the operating margin target in construction for 2019 and 2020.”

The admission comes as it is restructuring its construction division due to weak profitability and project write-downs which have predominantly taken place in Poland and the United States.

Last year, the firm vowed to restructure its Polish construction business after its poor performance led to project write downs of around £36M for the fourth quarter of 2017.

Skanska’ construction division, which earns most of its group revenue, last achieved its 3.5% operating margin level target in 2014.

In 2018, the firm’s construction division had an operating margin of only 0.7%.

Following Skanka’s admission that it would not hit the 3.5% target in 2019 or 2020, its share price fell by 2.7% yesterday morning despite having risen on Wednesday to it highest level in five months.

In March last year, in an internal document seen by New Civil Engineer, Skanska UK president and chief executive Gregor Craig said that over recent years, the company had delivered an “unacceptable level of financial performance”, leading to project write-downs in July 2017.

He said to address the root causes of poor project performance, a “laser focus plan” to restructure the company’s UK operation had been formulated.

As part of the plan, he said a sector review of the business had been carried out. He also proposed that the business be restructured subject to consultation with employee representatives.

Three months later, it was revealed that 125 Skanska UK employees were set to lose their jobs in a round of redundancies.

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