Annual Report 2011 - Skanska

Nordic countriesSwedenNorwayFinland and EstoniaThe biggest market for Skanska Residential Development is the Nordic countries. Operations take placeprimarily in nine selected metropolitan regions, but also in selected growth centers outside major urbanareas. In Sweden and Finland, sales occur largely in the form of ownership rights in cooperative housingassociations or via housing corporations, while in Norway homes are mainly sold as individually owned units.RevenueNordic countriesResidential Sweden, 45%Norway, 22%• Finland, 33%development in the Nordic countriesRevenue Operating income Operating margin, % Capital employed 1 capital employed,% 2Return onSEK M 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010Sweden 3,572 3,295 121 293 3.4 8.9 5,710 5,143 2.2 6.7Norway 1,762 1,401 100 51 5.7 3.6 3,140 2,233 3.7 2.4Finland 3 2,665 2,372 168 169 6.3 7.1 3,087 2,257 6.3 8.0Total 7,999 7,068 389 513 4.9 7.2 11,937 9,632 3.6 5.91 Capital employed according to IFRS.2 Return on capital employed based on operating income according to segment reporting.3 Including Estonia.CompetitorsJMNCCPEABVeidekkeLemminkäinenYITBWG HomesMajor eventsDuring 2011 the housing market cooled off somewhat,especially in Sweden and Finland. Expected volume willthus presumably decrease somewhat, and an adjustmentof the organization to these new volume expectationswas initiated during the year.In the Nordic countries, 2,747 homes were sold during2011. This was the same level as in 2010, despite a toughermarket situation. The number of homes started was3,131, or somewhat larger than the number sold. Duringthe year, Skanska carried out land investments, forexample by acquiring shares and participations in suchassociated companies as Täby Galopp and through thecontinued development of Västermalmsstrand, both inthe Stockholm area.MarketThe housing market in the Nordic countries slowedduring the year. Demand and home prices declinedsomewhat.In Sweden, operations were adversely affected byweaker demand, driven by uncertainty about developmentsin Europe and future economic growth. This, inturn, resulted in longer sales processes and fewer projectstart-ups.In Norway, demand was good and prices rose, butthe price of land also increased. In Finland, the markettrend was determined by uncertainty similar to that inSweden but was nevertheless more stable. At year-end,the supply of homes was at relatively high levels, especiallyin Sweden.The lowering of economic growth forecasts, above allin Sweden, created successive downward adjustmentsin the interest rate path, which was favorable for homebuyers, but lending conditions tightened.EarningsIn Sweden, earnings were adversely affected by projectcost increases and rising property development costs.An increasingly lengthy sales process led to volumereductions, which in turn generated higher overhead asa percentage of sales.In Finland, operations performed relatively welldespite a gradual market slowdown.The Norwegian market and operations there showedpositive growth, and the challenge has instead been todeliver enough volume to satisfy demand.OutlookThe underlying need for new homes remains largethroughout the Nordic countries and is driven, amongother things, by continued migration to growth regions.Interest rates and general expectations about the futureare always important parameters that affect the willingnessof customers to buy homes. In 2012, demand andprices for new homes are expected to continue rising inNorway. Demand and price trends in both Sweden andFinland are expected to fall somewhat in the short termand then rebound further ahead as economic uncertaintydiminishes.48 Residential Development Skanska Annual Report 2011