ANNUAL REPORT 2004 - Skanska

Non-residential building and civil construction,
as well as residential construction, are
the core of Skanska’s Construction business
stream, which also includes constructionrelated
and maintenance services. Non-residential
building construction accounts for
58 percent, civil construction 34 percent and
residential construction 4 percent of order
backlog for the business stream.
Skanska performs construction operations
in selected home markets: Sweden,
Norway, Denmark, Finland (and Estonia),
Poland, the Czech Republic (and Slovakia),
the United Kingdom, the United States
and Latin America. During 2004, Skanska
divested its partly owned construction businesses
in India, Hong Kong, South Africa
and Canada.
In its selected markets, the Group is
regarded as being the leader or as having the
potential to become the leader in terms of
size and profitability. Skanska also endeavors
to be the industry leader in sustainable
development, ethics, safety and environment.
By virtue of its size and leading position,
Skanska can undertake the largest, most
complex assignments for the most demanding
customers.
Working together with project
development
To a large extent, Skanska’s construction
units work together with the Group’s project
development business streams, which generate
construction assignments for commercial
space, residential projects and privately
financed infrastructure.
Some project opportunities are also created
by taking advantage of the Group’s
financial expertise. Skanska Financial Services
can help arrange financing solutions at
the customer’s request.
Customers that operate in more than one
market, such as Pfizer and Hydro, can be
offered the same service in all of the Group’s
home markets via the Skanska network.
Skanska’s construction operations also
carry out assignments of a service nature,
both construction-related services, repairs
and the like as well as operation and maintenance
of industrial and transportation
facilities.
Local conditions
Since conditions vary between home markets,
the operations of Skanska’s local units
differ. Some units specialize in selected
market segments, while others operate in a
broader spectrum.
The earnings at Skanska’s construction
units must be evaluated in light of the
changing conditions that characterize the
operations of each respective unit; these
units may deal with different types of products,
undertake different responsibilities and
work with varying contractual mechanisms,
regulations or customer demands.
Non-residential, civil and residential
construction
Non-residential building construction is
generally characterized by high capital
turnover, limited capital employed and low
margins.
Civil construction usually goes on for a
longer period, has a higher risk profile and
is more capital-intensive. This also justifies a
somewhat higher margin.
Specialized units
Construction operations in Sweden, Norway,
Denmark, Finland, Poland and the Czech
Republic comprise both building and civil
construction.
Skanska UK operates both in building and
civil construction. About 40 percent of its
operations consist of public-private partnerships,
with Skanska BOT participating as an
investor in privately financed infrastructure,
mainly hospitals, schools and correctional
facilities.
In the U.S. market, Skanska has two separate,
specialized business units. USA Building
constructs commercial space throughout
the United States in the pharmaceutical, biotechnology,
high technology and educational
sectors, as well as for public organizations
and agencies.
USA Civil builds transportation infrastructure
and facilities for energy and water
supply in the most heavily populated regions
of the eastern United States as well as in
Colorado and California.
In Latin America, Skanska primarily
builds infrastructure and performs construction
and related services in the energy sector.
Skanska Latin America provides technical
operation and maintenance services at
numerous oil and gas extraction facilities for
international energy companies. Its operations
focus on the markets in Argentina,
Brazil, Chile, Mexico and Peru.
In several Skanska home markets, the
Group’s construction units deliver construction
services to Commercial Project
Development business units. This is true in
Sweden, Denmark, Poland and the Czech
Republic.
In Sweden, Norway, Finland and the
Czech Republic, these units also provide
construction services to the Residential Project
Development business stream.
In Norway, Finland, the United Kingdom,
Poland and Latin America, the Group’s construction
units work together with Skanska
BOT, which invests in public-private partnerships.
Skanska’s home markets
GDP/ Construction/ Construction
USD capita capita as % of GDP
United States 38,819 3,219 8.4
Sweden 31,662 3,146 9.9
United Kingdom 29,921 3,092 10.3
Norway 48,433 4,966 10.3
Finland 30,955 3,722 12.0
Czech Republic 8,825 801 10.7
Denmark 39,342 4,544 11.5
Poland 5,428 368 6.8
Argentina 10,653 219 2.1
Sources: The Swedish Construction Federation, EcoWin
The largest global construction companies 1
Total sales 2003
Company Country USD bn
Vinci France 20.5
Bouygues France 17.2
Skanska AB Sweden 14.1
Bechtel United States 13.2
Grupo ACS Spain 12.2
Hochtief AG Germany 12.0
Centex, Dallas United States 9.0
Royal BAM Groep The Netherlands 8.6
1 Excluding Japanese construction companies
Source: Engineering News Record
Skanska Annual Report 2004 – Construction business stream
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