Review of 2010 – USD version - Skanska

Construction in conjunction with the financial close of New Karolinska
Solna added USD 7.8 M to income. In Finland, a goodwill impairment
loss of USD 15.1 M in civil construction operations was charged to earnings.
In Skanska USA Civil, a provision for estimated costs in conjunction
with ongoing litigation was charged to earnings.
Residential Development
In Residential Development, operating income totaled USD 77.6 M
(–2.1). The operating margin in the business stream amounted to
7.4 (neg) percent. The number of project start-ups also developed
satisfactorily, though at a somewhat slower pace than project start-ups.
Impairment losses on current assets (land) were charged to earnings in
the amount of USD 4.9 M (3.7).
Commercial Property Development
Operating income in Commercial Property Development totaled
USD 127.6 M (101.9). During the year, the business stream carried out
divestments worth USD 546.9 M (465.0). Its operating income included
capital gains from property divestments amounting USD 109.7 M (98.5).
Infrastructure Development
Operating income in Infrastructure Development totaled USD 41.2 M
(24.4). Income was favorably affected in the amount of USD 13.5 M by the
business stream’s divestment of its stake in the Orkdalsvegen E39 road in
Norway. The financial close of New Karolinska Solna had an impact on
earnings, in the form of recovered bidding costs totaling USD 1.7 M. Additional
earnings from divestments in previous years totaled USD 11.9 M.
Central
Central expenses including businesses that are being closed down
totaled USD –109.9 M (–88.9). Units being closed down were charged to
earnings in the amount of USD –18.0 M (–2.4). Of this, USD 14.4 M was
related to closing-down expenses, mainly impairment losses on land for
Skanska’s previous residential operations in Denmark.
Eliminations of intra-Group profits
Eliminations of intra-Group profits amounted to USD –4.6 M (4.1). At
the Group level, this included elimination of profits in Construction
operations related to property projects. Eliminations are reversed when
the projects are divested.
Income according to IFRSs
Income according to IFRSs
USD M 2010 2009
Revenue 16,956.7 18,179.0
Cost of sales –15,229.5 –16,388.0
Gross income 1,727.2 1,791.1
Selling and administrative expenses –1,045.1 –1,055.5
Income from joint ventures and associated companies 75.1 52.8
Operating income 757.2 788.3
Gross income was USD 1,727.2 M (1,791.1). Gross income encompassed
income from operating activities, including gains on divestments in
Residential Development and Commercial Property Development. It
also included impairment losses on project development operations and
on property, plant and equipment totaling USD 18.6 M (20.6), most of it
related to impairment losses on land.
Divestments of current-asset properties resulted in a capital gain of
USD 318.8 M (306.7).
Selling and administrative expenses decreased to USD 1,045.1 M
(1,055.5), which was equivalent to 6.2 (5.8) percent of revenue.
Income from joint ventures and associated companies, USD 75.1 M
(52.8), mainly encompassed holdings reported in the Infrastructure
Development business stream and also included gains on divestments of
projects.
Income after financial items
Income after financial items
USD M 2010 2009
Operating income 757.2 788.3
Interest income 30.2 32.9
Pension interest 8.2 –4.7
Interest expenses –36.2 –54.5
Capitalized interest expenses 6.4 24.6
Net interest income 8.6 –1.7
Change in fair value –5.0 –11.8
Other financial items –8.5 –17.0
Income after financial items 752.4 757.9
Net financial items amounted to USD –4.9 M (–30.4).
Net interest income improved to USD 8.6 M (–1.7). Interest income
decreased to USD 30.2 M (32.9), among other things due to a certain
downturn in interest-bearing assets and somewhat lower short-term
interest rates, measured as annual averages, in most currencies in which
Skanska was a net investor. Interest expenses decreased to USD –36.2 M
(–54.5), which is explained primarily by a downturn in interest-bearing
liabilities.
Capitalization of interest expenses in ongoing projects for Skanska’s
own account decreased because a relatively large share of projects were
in their early stages and totaled USD 6.4 M (24.6).
Net interest on pensions, which refers to the estimated net amount of
interest expenses related to pension obligations and return on pension
plan assets on January 1, 2010, based on final figures for 2009, increased
to USD 8.2 M (–4.7).
Change in fair value of financial instruments amounted to
USD –5.0 M (–11.8). This was based primarily on negative interest rate
differences in currency hedging of investments in Skanska’s development
operations, as well as currency hedging of Skanska’s equity denominated
mainly in Norwegian kroner and Polish zloty.
Other financial items totaled USD –8.5 M (–17.0) and mainly consisted
of currency rate differences and various fees for credit facilities
and bank guarantees.
Profit for the year
Profit for the year
USD M 2010 2009
Income after financial items 752.4 757.9
Taxes –193.5 –206.3
Profit for the year 558.8 551.5
Profit for the year attributable to:
Equity holders 558.0 550.9
Non-controlling interests 0.8 0.7
The year’s earnings per share after repurchases and
conversion, USD 1.35 1.33
After subtracting the year’s tax expense, USD –193.5 M (–206.3),
equivalent to a tax rate of 26 (27) percent, profit for the year attributable
to equity holders amounted to USD 558.0 M (550.9). Taxes paid for the
year amounted to USD 227.0 M (128.8). Earnings per share amounted to
USD 1.35 (1.33).
72 Report of the Directors Skanska Review of 2010 – USD version