Manufacturer Skanska posts profit jump but signals pressure on supply chain

STOCKHOLM, July 23 (Reuters) – Sweden’s Skanska (SKAb.ST) on Friday reported a jump in second-quarter profits as construction activity rebounded, raising shares despite warning of mounting pressure on its Supply Chain.

The largest automaker in the Nordic region and one of the largest in the United States posted operating profit of Kroner 2.34 billion ($ 269.5 million) from 845 million a year earlier when the pandemic shut down much of the industry.

The result fell behind before the 2019 pandemic, when Skanska posted a second quarter profit of Kroner 2.74 billion, but investors applauded the performance, with Skanska shares up 6% at 08:00 GMT.

“Overall, market uncertainty is starting to abate and activity is picking up in our markets,” the company said in a statement.

“With higher levels of activity, we are noticing bottlenecks and shortages of certain materials in the supply chain, causing price increases and increased price volatility. “

CEO Anders Danielsson told Reuters the biggest increases were in steel and wood and, to some extent, plastic products.

“Here we have seen higher prices, bottlenecks and also big price changes. I think this will continue for a while,” he said in an interview.

“Our approach to managing these risks is that before bidding on a contract, we set as much price as possible and as much delivery capacity as possible.”

The growth in results was driven by its Construction division, which is refocusing on higher margin projects, and by high activity and profitability from its residential property development activity.

Skanska’s commercial real estate development activity had a relatively modest quarter, although investor interest remained strong. Uncertainty has always hampered the leasing market, but activity is picking up, he said.

Construction orders, which accounts for most of the group’s turnover, jumped 35% to 49.8 billion crowns while its operating margin widened to 4.7% from 2.2%.

Swedish forestry group SCA (SCAb.ST) said on Friday that demand for solid wood products continued to strengthen, supported by the building materials and construction sectors.

($ 1 = 8.6829 Swedish kronor)

Reporting by Anna Ringstrom; edited by Niklas Pollard and Jason Neely

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