Skanska Q2 Beats with 3.9% Margin as Residential Sales Climb 12% Despite Order Slip

Skanska AB (STO: SKAb) delivered a sturdy Q2 performance, fueled by a better-than-expected showing in its residential development business. The Swedish construction heavyweight posted an operating margin of 3.9% in its construction unit, nudging past analyst forecasts that hovered around 3.6%.

Order intake clocked in at roughly SEK 56.7 billion, keeping pace with analyst projections, although this figure marks a 7% slip compared to the same period last year. The company's rolling 12-month book-to-build ratio slipped slightly to 1.13x from 1.15x recorded in Q1, suggesting steady but cautious demand for upcoming projects.

The residential segment emerged as the standout star this quarter. Skanska sold 409 homes, up by 44 units from the first quarter, despite trailing the 515 homes moved last year during the same span. Meanwhile, housing starts surged to 420 units, more than doubling the 203 starts reported in Q1 and a huge leap over just 37 units in Q2 2024. Production sales ratio ticked up too, hitting 52%, improving from 49% the previous quarter, although completed unsold homes rose to 516 from 457.

On the commercial front, divestments jumped to SEK 672 million from a mere SEK 25 million in Q1, but this was still a far cry from the hefty SEK 5,969 million seen a year earlier. Skanska's portfolio now includes 23 finished commercial properties with occupancy climbing to 74%, a notch above last quarter's 71%. The investment properties side reported an economic occupancy of 83%, down slightly from the previous quarter's 84%, with total assets carrying a value around SEK 8.17 billion.

Cash-wise, Skanska ended the quarter with SEK 9.65 billion in adjusted net cash, dipping from SEK 11.6 billion in Q1 but outperforming expectations due to lower working capital needs and an uptick in divestment inflows.

Beyond the headline numbers, the company tweaked its outlook upward for European residential development as well as Swedish civil construction. That's a modest bright spot given the persistent challenges swirling around the development environment in Europe.