STOCKHOLM (Reuters) - Swedish builder Skanska surprised investors with a proposal to cut its dividend on Friday, sending its shares lower despite a jump in fourth quarter operating profit.
The dividend cut will help fund further expansion of the company’s residential and commercial property development operations, which have grown at a rapid rate in recent years to account for more than three quarters of profit, it said.
Property development involves a greater risk for the builder, but offers higher profits than construction ordered by a client.
The Nordic region’s biggest builder, and one of the largest in the United States, proposed lowering its dividend to 6.00 crowns per share from 8.25 crowns. Analysts polled by Reuters had expected an increase to 8.35 crowns.
The company also cautioned that it expected political and macroeconomic uncertainties to increase. “In many of our home geographies and sectors, the markets are levelling out and it is difficult to predict how long this relatively favourable environment will last,” CEO Anders Danielsson said.
Operating profit jumped to 2.4 billion crowns (£198.5 million) from 738 million crowns but missed a mean analyst forecast of 2.6 billion crowns, adding to market disappointment. The construction division swung to a profit but the operating margin was lower than expected.
Danielsson said the construction division was starting to see the impact of restructuring measures launched a year ago, aimed at restoring profitability after a disappointing year with weak performance on two projects in the USA and a major restructuring in Poland.
“We expect these strategic initiatives to further improve profitability during 2019,” he said.
Order intake at the construction division, which accounts for the bulk of group sales, grew to 49.1 billion crowns from 33.2 billion.
Skanska’s shares were down 7 percent at 0900 GMT, trimming their year-to-date rise to 6 percent.
Skanska predicted overall construction market activity would remain high in the next 12 months but level out.
It gave a slightly more downbeat market outlook than three months ago for Swedish and Central European residential development markets, but raised its outlook on Swedish commercial property development.
Reporting by Anna Ringstrom, editing by Helena Soderpalm and Jason Neely and Kirsten Donovan