Shares in Swedish contractor drop 5% after contract for National Grid Transco falls behind schedule
Swedish contractor Skanska has announced that its annual results will be worse than expected because of a £52.5m charge on a liquid natural gas contract in the UK.
It made the statement to the Stockholm stock exchange on Monday before its annual results on 16 February. Shares fell 5.5% to SEK 80.5 (£6.18) after the news.
Skanska refused to identify the contract but it is understood to be a liquid natural gas storage terminal on the Isle of Grain in the Thames estuary on behalf of National Grid Transco.
A spokesperson for Skanksa blamed the charge on delays to the project caused by engineering changes. He said: “There were a lot of changes in design, therefore it required more resources, with a bigger workforce working double shifts, and much higher costs.”
The project, which was won by Skanska in April 2003, was due to be completed at the end of last year. Skanska now expects to finish it this spring.
Stuart Graham, president and chief executive of Skanska, said that the contract was not part of its main construction business. “The situation further strengthens our belief in our core operations,” said Graham.
The liquid natural gas sector is no longer part of its core business. The firm sold Whessoe, a subsidiary of Skanska UK that specialised in liquid natural gas engineering, to Saudi Arabian company Al Rushaid in June last year.
The spokesperson said Al Rushaid had not wanted to take on the contract that had incurred the £52.5m costs because it was under construction at the time of the deal.
The Skanska statement said the one-off costs came to light in the final quarter of the 2004 financial year, when the project was at an advanced stage of construction.
The spokesperson said: “We try to be an open and transparent company so we had to announce it. To reduce speculation prior to the year-end results we chose to give some preliminary figures.”
The Skanska statement said the construction business in Europe and Latin America, as well as residential and commercial development businesses, continued to perform well. The company said it had an order book worth SEK 29bn (£2.2bn).
Skanska employs 3500 staff in the UK. Last year it won the £1bn Royal London Hospital PFI contract in east London, in a joint venture with Innisfree. David Fison, Skanska UK’s chief executive, was unavailable for comment.
Skanska said that it expected to report an operating profit of SEK 3.8bn (£290m), which is a 15.6% fall compared with the SEK 4.5bn (£340m) made in 2003. The company said that it would recover the costs from the natural gas project where possible.