Skanska three month report January-March 2001

SKANSKA THREE MONTH REPORT JANUARY-MARCH 2001 Groupwide order bookings doubled - order backlog up 85 percent · Order bookings rose by 102 percent to SEK 49,008 M Strong performance in Skanska's main markets; for comparable units, order bookings rose by 42 percent · Order backlog rose by 85 percent to SEK 185,560 M · Net sales rose by 87 percent to SEK 34,818 M · Operating income of the Group's core business decreased to SEK -307 M (576) Restructuring expenses and loss provisions of SEK 700 M, mainly in Danish operations, adversely affected earnings · Income after financial items fell to SEK -445 M (3,047) The process of increasing the Group's focus on its core business is nearly completed; first quarter results thus included no capital gains on the sale of shares or businesses, unlike the same period last year · Outlook for the full year 2001 unchanged - higher than 2000 Operating income in Skanska's core business is expected to be higher than in 2000 · Total project development gains of SEK 1.5 bn were announced after the close of the report period Claes Björk, President and CEO of Skanska, commented on the Three Month Report: "Our report shows continued good growth in most of our main markets, which further strengthens the order situation in the Group. It is also gratifying to see the fine performance of our newly acquired companies in the U.S. and Europe. "We have named a new CEO and a new management team in Denmark. They are taking vigorous actions to turn around the negative earnings trend in Denmark." "The rest of the businesses show profitable growth." "The good order situation and ample profitability potential in our own project development operations and in previously acquired businesses support the assessment that Skanska will report higher operating income in its core business for 2001 as a whole than in 2000, despite the restructuring expenses and provisions we made during the first quarter." Stockholm, April 26, 2001 For further information, please contact: Hans Biörck, Executive Vice President and CFO, +46 (0)8 - 753 88 00 Peter Wallin, Senior Vice President, Investor Relations, +46 (0)8 - 753 88 00 [REMOVED GRAPHICS] SKANSKA THREE MONTH REPORT, JANUARY-MARCH 2001 The first quarter represented continued strong order bookings in Skanska's main markets, which further strengthened the order situation. Construction in the geographic markets and segments in which Skanska is active has not yet demonstrated any signs of slowdown. The United States is among areas that are showing a sharp increase. The growth rate in private as well as public capital investments in the U.S. is strong. A new CEO and management team have been appointed in Denmark and have carried out a review of the operations since taking over the responsibility. This review has led to a strengthened action plan, and as a consequence, restructuring expenses and provisions have been made. The action plan includes a more restrictive bidding process, a reduction of overhead and an implementation of more prudent control systems. The undertaken measures are expected to turn around the negative earnings trend in Denmark The trend of strong earnings improvements in the Skanska Sweden and Skanska USA business areas continued. Newly acquired businesses performed well. Overall, due to seasonal variations, the first quarter of the year is always weak. After the close of the report period, properties and projects of SEK 3.8 bn were sold. The total profits amounts to SEK 1.5 bn. The pace of divestments will remain high, although it may vary from quarter to quarter. ORDER BOOKINGS AND BACKLOG The Group's order bookings for January-March 2001 totaled SEK 49,008 M (24,206), for a 102 percent increase. On a rolling twelve month basis, the increase was 19 percent. The pace of the increase on a rolling twelve month basis in Skanska's core business - construction-related services and project development - was 21 percent. On March 31, 2001, Skanska's order backlog totaled SEK 185,560 M (100,383), which represented an 85 percent increase. Order backlog in relation to net sales on an annual basis was equivalent to 1.5 years of construction work and thus strengthened the Group's position compared to year-end 2000. Operations outside Sweden accounted for 91 (87) percent of order backlog. During 2000, Skanska acquired a number of businesses. None of them is included in the comparative figures for the first quarter of last year. The effects of acquisitions thus explain much of the increase rate for the first quarter. For comparable units, the increase in order bookings amounted to 42 percent, while order backlog rose by 28 percent. Growth factors - Change, January-March 2001 compared to January-March 2000 Order Order Net sales bookings backlog Organic growth 31% 12% 19% Acquisitions 60% 57% 58% Currency rate 11% 16% 10% effects Total 102% 85% 87% NET SALES AND EARNINGS Net sales rose by 87 percent to SEK 34,818 M (18,595). On an annual basis, this was equivalent to an increase of 15 percent. For comparable units, the increase was 29 percent for the first quarter. [REMOVED GRAPHICS] Operating income in Skanska's core business decreased to SEK -307 M (576). With the exception of Denmark, the operations has continued to show strong profitability and growth figures. Newly acquired businesses performed favorably overall. The task of integrating acquired businesses into the Group has intensified since the change in Skanska's organizational structure was implemented on March 1 and is proceeded as planned. Activity was lower in terms of divestments of Skanska-developed projects in construction operations. To some extent, this lower activity level can be linked to a slowdown in certain markets, especially Denmark and Norway. For the year as a whole, the volume of project divestments is expected to rise. The volume of property sales was substantially lower, amounting to SEK 2 M (245) for the report period. The main reason for the deterioration in earnings is that Skanska incurred restructuring expenses and made loss provisions totaling SEK 700 M during the report period. This is mainly an effect of the review made by the new management in Denmark. Operating income amounted to SEK -317 M (1,336). The process of focusing on the Group's core business by divesting non-core shareholdings and businesses is nearly completed. As a result, capital gains on divestments did not affect earnings during the first quarter of 2001. Aside from the reasons already described, this was the main reason for the decrease in operating income compared to the same period of last year. Items affecting comparability amounted to SEK 0 M (646) during the period. Income after financial items totaled SEK -445 M (3,047). Net financial items amounted to SEK -128 M (1,711). In the first quarter of 2000, the gain on the sale of Skanska's shareholding in the industrial bearings group SKF was included in net financial items. Net profit for the first quarter of 2001 was SEK -295 M (1,986). The average tax rate is expected to rise to about 36 percent, compared to 34 percent for 2000 as a whole. The reason for the increase is that a larger proportion of Group profit is projected to come from Skanska's American operations than last year. U.S. corporate tax rates are higher than the average in other countries where Skanska operates. Twelve month rolling financial ratios Net profit per share totaled SEK 29.90 (51.40). Return on capital employed amounted to 19.3 (38.6) percent. Adjusted for items affecting comparability and gains on the sale of shares, return on capital employed totaled 13.8 (16.2) percent. Return on shareholders' equity totaled 17.2 (35.2) percent. INVESTMENTS AND DIVESTMENTS The Group's net investments totaled SEK -2,739 M (2,803). Investments in ongoing project development and in other fixed assets rose to SEK -3,567 M (-2,249) during the period. The increase in the volume of investments in other fixed assets was primarily connected to the Build-Own-Transfer (BOT) project in Chile. During the first quarter of 2001, Skanska carried out no acquisitions of companies, unlike the same period of last year. Due to its lower sell-off volume of projects, shares and businesses, Skanska reported a lower level of divestments, totaling SEK 828 M (5,052). [REMOVED GRAPHICS] The Group's investments in projects developed for its own account are continuing to increase. During the report period, gross investments in project development totaled SEK 2,285 M (1,210). The turnover rate in the project development portfolio was lower than in the same period of last year. During the first quarter of 2001, projects worth SEK 782 M (1,523) were sold at a capital gain totaling SEK 1 M (301). During the rest of 2001, the level of divestments is expected to be substantially higher, especially in connection with sell-offs of projects. For this reason, there will be a balance between investments and divestments. This does not include the effects of any acquisitions of companies. CASH FLOW AND FINANCIAL POSITION The Group's cash flow from business operations was better during January- March 2001, because its business volume grew both organically and due to the acquisitions of companies implemented last year. This positive flow was also a consequence of higher invoicing compared to accrued expenses than during the same period of 2000. Higher net investment volume, tax payments and buy-backs of Skanska's own shares together resulted in a negative cash flow. Cash flow for the report period totaled SEK -418 M (708). [REMOVED GRAPHICS] Liquid assets and interest-bearing receivables decreased by SEK 92 M to SEK 10,027 M (10,119). Interest-bearing liabilities and provisions rose by SEK 3,778 M to SEK 17,575 M (13,797). This represented an overall increase in net interest-bearing liabilities of SEK 3,870 M to SEK 7,548 M (3,678). The main reasons for this increase were higher net investment volume, buy-backs of Skanska's own shares and tax payments. The visible equity/assets ratio amounted to 21.9 (23.4) percent. The debt/equity ratio amounted to 0.4 (0.2). Buy-backs of Skanska's own shares During the first quarter of 2001, Skanska continued its share buy-back program, shares, acquiring an additional 1,898,000 shares. This signified that Skanska had repurchased a total of 9,216,700 shares at an average price of SEK 364, or 8 percent lower than the April 25 price of a Skanska share, SEK 395. The Board of Directors has proposed that the Annual Meeting of Shareholders, which takes place after the publication of this report, approve a reduction in Skanska's share capital by canceling the repurchased shares. Changes in accounting principles This report complies with recommendations RR 9 on income taxes and RR 10 on contracting and similar assignments of the Swedish Financial Accounting Standards Council. Both recommendations are being applied effective from January 1, 2001. Comparative figures have been recalculated in keeping with these changes in accounting principles. RR 9 means, among other things, that a time difference between the treatment of a transaction for tax purposes and for accounting purposes is reported as a deferred tax claim or alternatively as a deferred tax liability. The value of a loss carry-forward may be offset if it will probably be utilized. The application of RR 10 means that the settlement balance (receivable or liability) that arises as the difference between accrued project revenue and the invoiced amount in each individual project is reported on a gross basis. Otherwise the same accounting principles and calculation methods are used as in the latest Annual Report. [REMOVED GRAPHICS] SKANSKA SHARE DATA The market price of a Skanska share was SEK 395 on April 25. This represented an increase of 1 percent since year-end 2000. The Stockholmsbörsen (formerly Stockholm Stock Exchange) General Index declined by 14 percent during the same period. The Dow Jones Heavy Construction Industry Group Index, which includes the largest listed European construction and building material companies, rose by 3 percent between January 1 and April 25, 2001. During the period, the highest quotation for a Skanska share was SEK 430 and the lowest was SEK 348. PERSONNEL The number of employees in the Group was 82,643 (43,853), measured as the average number of employees during the first quarter. The increase was primarily due to the acquisitions of companies that the Group carried out during 2000. COMMENTS BY BUSINESS AREA Skanska USA During 2000, Skanska acquired the U.S.-based construction management companies Barclay White Inc. and Baugh Enterprises, which were included in its accounts from July 1 and November 1, respectively. Order bookings at Skanska USA totaled SEK 21,546 M (10,982), which represented an increase of 96 percent. On a rolling twelve month basis, this was equivalent to an increase of 18 percent. For comparable units, the increase was 79 percent for the first quarter. Order backlog rose by 53 percent to SEK 107,598 M (70,426) during the report period. Net sales amounted to SEK 16,747 M (9,053), an increase of 85 percent. On a rolling twelve month basis, the increase was 16 percent. For the first quarter, the increase for comparable units was 51 percent. Operating income rose by 77 percent to SEK 285 M (161). On an annual basis, operating income rose by 12 percent. Operating margin for the first quarter amounted to 1.7 (1.8) percent. Operating income included SEK 24 M (5) in realized project development gains. Skanska USA continues to enjoy a strong position among clients in the pharmaceutical and biotechnology sector. The federal budget bill introduced by the Bush administration supports a continued increase in educational, infrastructure and energy sector investments. Overall American construction investments are expected to rise by 5 percent during 2001. In light of the favorable trends for client categories and in geographic markets in the United States in which Skanska has a strong position, Skanska USA is expected to show a higher rate of growth than the market as a whole. Skanska Sweden Order bookings rose by 6 percent to SEK 7,569 M (7,119). Order backlog amounted to SEK 20,397 M (15,834), an increase of 29 percent. On a rolling twelve month basis, the corresponding increases were 1 and 4 percent, respectively, compared to the situation at year-end 2000. Net sales rose by 27 percent to SEK 6,072 M (4,788). On a rolling 12 month basis, the corresponding increase was 5 percent. Operating income rose by 22 percent to SEK 138 M (113). Operating income for the first quarter of 2000 included a capital gain of SEK 50 M from the sale of Skanska's dredging operations. Adjusted for this capital gain, the Skanska Sweden business area thus shows a good underlying trend of earnings. Operating margin amounted to 2.3 (2.4) percent. Realized project development gains amounted to SEK -34 M (50). Loss provisions related to the Hammarby Sjöstad residential project in Stockholm adversely affected earnings in the first quarter. After the close of the report period, Skanska Sweden was awarded a contract to build Stockholm's largest hotel, the Clarion Hotel Scandinavia - an assignment worth SEK 370 M. Skanska Europe The business area acquired a number of businesses during 2000. Exbud, based in Poland, was included in its accounts from May 1. The Czech company IPS and the Norwegian company Selmer were included from July 1 and Kvaerner Construction (renamed Skanska Construction UK Ltd) was included from November 1. Order bookings rose by 320 percent to SEK 19,119 M (4,555). Order backlog amounted to SEK 57,290 M (13,441). For comparable units, order bookings increased by 7 percent, while order backlog rose by 20 percent for the first quarter. On a rolling twelve month basis, the increase in order bookings was 46 percent and order backlog rose by 21 percent. Net sales rose by 266 percent to SEK 11,549 M (3,157). For comparable units, net sales decreased by 10 percent for the first quarter. Operating income amounted to SEK -742 M (6). Newly acquired businesses performed well. Restructuring expenses and loss provisions, which are mainly attributable to Danish operations, had a highly adverse impact on earnings during the first quarter of 2001. Civil construction accounts for a larger proportion of Skanska Europe's operations than last year. For this reason, seasonal variations were larger during this quarter. Realized project development gains totaled SEK 9 M (1). Finnish operations had a lower project development volume during the report period. For 2001 as a whole, activity is expected to be at a higher level than during the first quarter. The divestment of Skanska Europe's building component businesses was largely completed last year. These businesses reported net sales of SEK 82 M (1,442) and an operating income of SEK -3 M (25) for the first quarter. Skanska Project Development and Real Estate This business area has 28 projects underway, 21 of them in Sweden. Their book value is expected to total SEK 6.5 billion upon completion. At the close of the report period, the book value of these projects was about SEK 3.6 billion. Ongoing projects encompass leasable space of 406,000 sq. m (nearly 4.4 million sq. ft). At the end of the report period, about 63 percent of the space in these projects had been pre-leased. The advance occupancy rate is about 80 percent in projects located in the Stockholm region. Projects in Stockholm account for more than 60 percent of projected investment volume. The expected yield on book value of ongoing projects is nearly 11.5 percent. Taking into account the existing return requirements in each respective real estate market, this indicates substantial surplus value in the business area's ongoing projects. The target is that newly developed projects should generate a development gain of at least 25 percent. During the report period, the Project Development and Real Estate business area showed an operating income of SEK 139 M (390), including SEK 2 M (243) in capital gains on the sale of properties. After the close of the report period, Skanska carried out a number of large property divestments, which are described in more detail under "Events After the Close of the Report Period." Some of the properties sold were acquired and developed over the past two years and were sold with a development gain of more than 50 percent. The target is for the turnover rate in Skanska's real estate operations to remain at a high level. Skanska Services Skanska Services was established during March 2000 after the acquisition of the Real Estate and Services (REM) unit of Ericsson, the telecommunications group. For this reason, comparisons with the first quarter of 2000 are misleading. Skanska Services reported net sales of SEK 692 M (20) and an operating income of SEK 15 M (-8), resulting in an operating margin of 2.4 percent. The target is for the operating margin to exceed 5 percent over time. During the first quarter, the business area obtained a number of new assignments, both from Ericsson and other clients. EVENTS AFTER THE CLOSE OF THE REPORT PERIOD Skanska sells investments and project properties and meanwhile strengthens its development portfolio of residential properties and commercial building rights These divestment encompass a total value of about SEK 2.5 bn. The profit will amount to approximately SEK 1 billion. In addition, there is earnings potential in the development of the building rights that are part of the transaction. Skanska sold four large investment properties to the Vasakronan real estate company - Lilla Bommen and Inom Vallgraven 16:6 in Gothenburg, Järnplåten in Stockholm and Sirius in Malmö. Skanska is also selling the Kistaentré (Knarrnäs 2) site leasehold, which encompasses a total of 41,000 sq. m (over 441,000 sq. ft.) in building rights and where an ongoing 23,000 sq. m (247,600 sq. ft.) project is currently underway. The project is being sold as a contracting assignment. For this reason, the gain on the sale will be reported in stages until the completion of the project in 2003. Payment for these transactions consists of SEK 2.1 billion in cash plus half-ownership of a development company that will utilize future building rights. Development of the area is expected to encompass about 350,000 sq. m (3.77 million sq ft.) of residential and commercial space in Västjärva, north of central Stockholm. Skanska sells its property holdings in Great Britain After the close of the report period, Skanska sold its last remaining properties in London - Thomas Moore Square and 55, King William Street - at a sale price of SEK 1,350 M. The divestment resulted in a capital gain of SEK 500 M, which will be reported during the second quarter. OUTLOOK FOR 2001 The good order bookings during the first quarter further improved the Skanska Group's order situation. Operations in Sweden and U.S., two of the Group's large main markets, are expected to show a continued favorable trend of earnings. Skanska expects to end the negative trend of earnings in Denmark during the year by means of the remedial steps that it has taken. The integration of acquired businesses into the Group is proceeding as planned and is expected to generate continued favorable earnings. Skanska's project development for its own account also has substantial profitability potential. Altogether, this supports the assessment that the operating income of Skanska's core business will be higher than last year. Stockholm, April 26, 2001 Claes Björk President and CEO . This report has not been subjected to separate examination by the Company's auditors. The Skanska Group's next financial report, covering the first six months of 2001, will be published on August 30. As a result of the change in the Group's organizational structure, its external reports will also change. [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] ------------------------------------------------------------ This information was brought to you by BIT The following files are available for download:

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Skanska is one of the world’s leading construction and project development companies, focused on selected home markets in the Nordic region, Europe and USA. Supported by global trends in urbanization and demographics, and by being at the forefront in sustainability, Skanska offers competitive solutions for both simple and the most complex assignments, helping to build a sustainable future for customers and communities. The Group has about 40,000 employees. Skanska's sales in 2017 totaled SEK 161 billion.