- Swedish builder has no plan for change in U.S., investor says
- Skanska to expand U.S. development, be more choosy, CEO says
Skanska AB will remain committed to the U.S. market despite recent challenges in completing projects in that country, according to the Swedish construction company’s biggest shareholder.
“The U.S. is a large and expansive part of Skanska’s business and there are no plans to change that,” Helena Stjernholm, chief executive officer of Skanska’s largest investor Industrivaerden AB said in a phone interview on Wednesday. She was speaking following the proposal by the board’s nomination committee -- which she heads -- of Hans Biorck as Skanska’s chairman.
Biorck, 64, was Skanska’s CFO for a decade through 2011. Together with Chief Executive Officer Johan Karlstroem, he was an architect behind the Swedish company’s strategy to expand real-estate development in addition to construction and to grow the U.S. business. Biorck was nominated by Stjernholm’s committee to replace American Stuart Graham, who was Skanska’s CEO between 2002 and 2008 and became chairman in 2012, according to a statement Wednesday.
As Skanska prepares to unveil next month a new five-year strategy plan, “the U.S. is becoming more and more important for us,” Karlstroem said in an interview at the company’s headquarters in Stockholm on Nov. 19. The CEO dismissed local press reports that it could spin off its U.S. business, saying a change of the company’s structure has never been up for discussion.
“The current strategy on Skanska’s setup remains in place,” Karlstroem said. “That’s something that the entire management and the entire board supports.”
Skanska’s U.S. operations have hit turbulence. Productivity issues and client-requested changes to large projects led to a 630 million-krona ($72 million) write down in the third quarter. As the U.S. construction market becomes more competitive, squeezing building schedules and budgets, Karlstroem said the company will be more cautious about taking on new projects.
“What we should do in the U.S. is to make sure that we don’t go faster than what we have people and capabilities for,” Karlstroem said. “What you’ll see is a continued operation with both USA Civil and USA Building, and also further expansion in commercial development.”
No Appetite For Acquisitions
Skanska has used cash flow from construction operations to finance property development. Since entering the U.S. development market in 2009, it has developed office properties in Washington, Boston, Seattle and Houston, and could expand these operations to cities like Los Angeles, San Francisco, Miami, Denver or Dallas.
Skanska has become the third-largest heavy contractor in the U.S., according to industry publication ENR. The growth came mainly from existing businesses with the exception of the 2011 purchase for $135 million of Evansville, Indiana-based Industrial Contractors. Karlstroem’s appetite for acquisitions hasn’t increased.
“Rather the opposite,” the CEO said. “It’s very difficult to acquire companies in the construction industry.”
If that means lower revenue growth, Karlstroem said he can live with it.
“We don’t really look at the top line, we look at how we can expand the bottom line,” he said. “Top line growth is not the defining factor here.”