By Anna Ringstrom
STOCKHOLM (Reuters) -Sweden’s Skanska on Friday reported a jump in second-quarter profit as building activity rebounds, boosting its shares despite warning of rising pressure on its supply chain.
The Nordic region’s largest builder and one of the biggest in the United States posted an operating profit of 2.34 billion crowns ($269.5 million) versus 845 million a year earlier when the pandemic halted much of the industry.
The result lagged pre-pandemic 2019, when Skanska posted a second-quarter profit of 2.74 billion crowns, but investors cheered the performance, with Skanska’s shares up 6% at 0800 GMT.
“Overall, market uncertainty is starting to decrease, and activity is picking up in our markets,” the company said in a statement.
“With higher activity levels, we are noticing bottlenecks and shortages of certain materials in the supply chain, causing price increases and increased price volatility.”
CEO Anders Danielsson told Reuters the biggest increases had been for steel and wood, and to some extent plastic products.
“Here we have seen higher prices, some bottlenecks, and also big variations in price. I believe this will continue for some time,” he said in an interview.
“Our approach to managing these risks is that before we bid for a contract we nail down as many prices as possible, and as much delivery capacity.”
Profit growth was powered by its Construction division which is refocusing on higher-margin projects, and by high activity and profitability at its residential property development business.
Skanska’s commercial property development business had a relatively muted quarter although investor interest remained strong. Uncertainty still hampered the leasing market but activity is picking up, it said.
Orders at Construction, which books the bulk of group revenue, jumped 35% to 49.8 billion crowns while its operating margin widened to 4.7% from 2.2%.
Swedish forestry group SCA said on Friday demand for solid wood products continued to strengthen supported by the building materials and construction sectors.
($1 = 8.6829 Swedish crowns)
(Reporting by Anna Ringstrom; editing by Niklas Pollard and Jason Neely)