Swedish contractor announces "one-off" losses on joint ventures with Mowlem and Costain.
Swedish contractor Skanska has been forced to take a £13m hit on joint venture projects with British contractors Mowlem and Costain.

The group declined to identify the contracts, but it is understood they include the £124m A2/M2 road-widening scheme for the Highways Agency, a joint venture between all three contractors.

A Skanksa spokesperson stressed that the problems were on projects Skanska took on before it acquired Kvaerner last summer for £358m. The spokesperson said the £13m loss was a one-off and would not lead to further provisions.

President and chief executive Claes Björk said the group had taken immediate action.

He said: "We are making large provisions as we want to deal with the problems when they occur."

The hit was part of a £66m restructuring and project loss provision taken by the contractor. This led the firm to issue a profit warning on the Swedish stock exchange.

We’re making provisions to deal with the problems

Claes Björk, Skanska

The group earlier this year told the market that it expected a profit rise during the year to the end of 2001. Last week it conceded that this will not be achieved. Instead, it predicted that operating income for the full year will be in line with last year's at about £290m. The warning led to an 11.5% slip in Skanska's share price to £5.09.

Announcing its interim results yesterday, the group reported a drop in operating profit of 62% to £100m.

Björk remained upbeat, however, saying that the group's order book had continued to show a good rate of growth despite increasing signs of a slowdown in the world economy.

Orders rose 71% during the first six months of the year to SKr93,600m (£6.2bn), which equates to about 16 months' net sales.

Björk said the group would see a strengthened profit performance in the future after the sale of its CDK Contracting business in the USA and a restructuring process that is under way across all its international operations.