Review of 2010 – USD version - Skanska

North America and Latin America
During 2010 Skanska USA Civil was awarded assignments that included
port renovations at the U.S. Navy facility in Portsmouth, Virginia, with
a contract amount of about USD 0.2 billion. Skanska USA Building
received two construction management assignments in Ontario, Canada
with a total contract value of about USD 0.4 billion; two construction
management assignments related to a hospital in Florida and a large
industrial facility in Arizona, with a total contract amount of about
USD 0.2 billion; and two major healthcare projects in California with a
total contract amount of about USD 0.3 billion. During 2010 Skanska’s
two American construction business areas received a joint contract
related to the new PATH commuter train station in the World Trade
Center area of New York City, where Skanska’s share of the total order
amount was about USD 0.4 billion. In Latin America, Skanska Latin
America’s orders included an assignment at an oil refinery in Brazil,
where Skanska’s share of the total contract amount is about USD 0.2 billion.
Skanska Latin America also received the assignment to carry out a
highway project in Antofagasta, Chile with a contract amount of about
USD 0.2 billion. The project is being carried out as a public-private partnership,
in which Skanska Infrastructure Development owns the concession
and is responsible for financing.
Order bookings and backlog
Order bookings Order backlog
USD M 2010 2009 2010 2009
Business unit
Sweden 5,623.2 2,850.8 4,852.0 2,147.6
Norway 1,798.0 1,473.1 1,499.2 1,268.9
Finland 1,204.9 821.2 867.7 659.4
Poland 950.9 1,823.9 1,317.4 1,680.4
Czech Republic 941.5 1,170.8 1,234.6 1,544.8
United Kingdom 2,074.1 2,641.1 3,456.1 3,407.9
USA Building 3,548.3 3,890.0 4,505.2 4,123.4
USA Civil 989.0 1,548.9 3,059.2 3,667.8
Latin America 1,104.5 608.0 828.0 493.6
Total 18,234.3 16,827.8 21,619.4 18,993.9
Order backlog
Order backlog increased by 14 percent and totaled USD 21.6 (19.0) billion
at the end of 2010. Adjusted for currency rate effects, order backlog
increased by 14 percent. Order backlog was equivalent to about 16 (13)
months of construction.
North American and Latin American, Nordic and other European
operations accounted for 39, 33 and 28 percent of order backlog,
respectively.
The portion of order backlog that is planned for execution during
2011 was equivalent to USD 11.5 billion at closing day exchange rates.
Segment and IFRS reporting
Effective from January 1, 2010, the Group is reporting its Residential
Development and Commercial Property Development segments
according to a new segment reporting method. The new segment
reporting method recognizes sales revenue and gains on the divestment
of properties, residential as well as commercial, when binding
sales contracts are signed. When reporting in compliance with IFRIC
15, revenue and gains on divestment of properties are recognized when
the purchaser takes possession of the property or home. The differences
between the two methods, with regard to revenue and operating income,
are summarized in the tables below.
Revenue
Revenue by business stream according to segment reporting
USD M 2010 2009
Construction 15,706.6 17,037.5
Residential Development 1,051.7 855.1
Commercial Property Development 644.8 594.0
Infrastructure Development 44.3 19.7
Central and eliminations –568.5 –759.0
Total revenue according to segment reporting 16,878.9 17,747.3
Reconciliation with IFRSs 77.8 431.7
Total revenue according to IFRSs 16,956.7 18,179.0
Revenue according to segment reporting declined by 5 percent to
USD 16.9 (17.7) billion, primarily due to decreased revenue in
Construction. In local currencies, the revenue decline was 8 percent. In
the Construction business stream, revenue declined in USD by 8 percent
and in local currencies by 9 percent. Revenue in Residential Development
and Commercial Property Development increased due to more
signed sales contracts during 2010 compared to 2009. USD 1.4 (1.3) billion
of revenue in Construction, equivalent to 8.9 (7.6) percent, was generated
by Skanska’s project development operations. To reconcile with
IFRSs, add the revenue from the homes and properties that were sold
during prior periods but were handed over during the year. Then subtract
the homes and properties that were sold during the year but where
the purchaser had not yet taken possession.
Operating income
Operating income by business stream according to segment reporting
USD M 2010 2009
Construction 608.8 636.4
Residential Development 77.6 –2.1
Commercial Property Development 127.6 101.9
Infrastructure Development 41.2 24.4
Central –109.9 –88.9
Eliminations –4.6 4.1
Operating income according to segment reporting 740.7 675.8
Reconciliation with IFRSs 16.5 112.5
Operating income according to IFRSs 757.2 788.3
Operating income according to segment reporting amounted to
USD 740.7 M (675.8), with Residential Development accounting for
the largest improvement compared to the preceding year. Earnings in
Commercial Property Development and Infrastructure Development
also improved compared to the preceding year. Earnings in Construction
decreased somewhat less than the pace of the downturn in revenue. Currency
rate effects increased the Group’s operating income by USD 22.3 M.
Impairment losses on current and non-current assets including
goodwill were charged to operating income in the amount of
USD 34.7 M (57.2). To reconcile with IFRSs, add the revenue from the
homes and properties that were sold during prior periods but were
handed over during the year. Then subtract the homes and properties
that were sold during the year but where the purchaser had not yet taken
possession.
Construction
In the Construction business stream, operating income decreased by
4 percent and amounted to USD 608.8 M (636.4). The operating margin
improved compared to the preceding year and amounted to 3.9
(3.7) percent. The margin was positively affected because there was a
relatively larger share of projects at the end of the project cycle than at
the beginning. Net project revaluations occurred primarily in Skanska
Sweden, Skanska USA Civil, Skanska USA Building, Skanska UK and
Skanska Poland, while net project impairment losses occurred primarily
in Skanska Finland and Skanska Norway. In Norway, earnings
were affected by a positive nonrecurring effect of USD 14.2 M due to
changes in the Norwegian pension system. Recovered bidding costs in
Skanska Review of 2010 – USD version Report of the Directors 71