By Joel Scanlon
Skanska, a modern and innovative developer and contractor, announced that it is restructuring the residential development businesses in the Czech Republic, Slovakia and the Nordics.
The initiative results in a one-off charge of SEK 380 million in the 2Q of 2012 and in addition, it will help achieve an annual savings of SEK 180 millions. The company is also implementing efficiency measures in the manufacturing process, which will help increase profitability over time.
The residential development business has produced weak results in the past few years. Hence, to achieve long-term acceptable profitability in the business, a study was conducted during the last few months. It revealed that an elaborate restructuring of the business needs to be made immediately to reach the expected strategy. All the Nordics’ residential development operations will be merged into the construction businesses of Finland, Norway and Sweden. The main objective of the reorganization is to maintain and further reinforce their market status in major cities in the region, stated Johan Karlström, Skanska’s President and CEO.
The reorganization of the residential development business in the Nordics leads to a one-off cost of SEK 300 million in the 2Q of 2012. Similarly, restructuring of the residential development business in the Czech Republic and Slovakia results in write-downs of SEK 80 million worth land. The average return of capital targeted by Skanska for the project development operations, including residential development, ranges from 10% to 15% annually.
The UK and Poland residential development businesses of the company are not affected by the reorganization programs.