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Nov 25, 2008

Skanska to Cut 3,400 Nordic Jobs

Sweden’s biggest builder, will cut about 3,400 jobs in Nordic countries as a slump in the European housing market spreads to commercial and civil building.

Orders in the region will probably decline about 15 percent next year, Stockholm-based Skanska said today in a statement. The cuts amount to 17 percent of employees in Scandinavia and 5.7 percent of the total.

The company, which gets just 4 percent of its construction orders from housing, has followed homebuilders and building materials companies down as a credit crunch chilled property markets. Last year Skanska got more than 40 percent of its revenue in Scandinavia, where it also maintains back-office departments whose costs have outpaced revenue growth.

“Skanska is doing this restructuring later in the cycle than other construction companies, and it will see an upturn later as well,” Andrew Gardner, a London-based analyst at MF Global Securities Ltd., said in an interview.

Skanska closed up 1.2 percent at 61.75 kronor after dropping by 9.8 percent in Stockholm trading earlier in the day.

About 2,000 workers in Sweden, 800 in Norway and 600 in Finland will lose their jobs, the company said. Skanska said it will take a 600 million-kronor ($75 million) charge in the fourth quarter because of the program.

“Once projects finish, it’s unlikely Skanska will renew contracts with all their temporary workers,” Gardner said. “We also expect to see some more writedowns.”

More Cuts Possible

Skanska said this month it would cut jobs in response to falling orders. Its latest forecast for orders comes even as the Swedish government plans to increase infrastructure spending next year. Skanska today predicted a “significantly” smaller volume decline in markets outside the Nordic region.

“It’s mainly the residential building that has decreased dramatically, and we also see a continuing slowdown on other building,” Chief Executive Officer Johan Karlstroem said in an interview. “Depending on how the markets will go, I won’t exclude that we will have to take a new round of cuts.”

Most of the job cuts will take place in the first half of next year, spokeswoman Karin Lepasoon said. About half the cuts in Sweden will affect white-collar positions, Skanska said.

Public-Private Projects

As building markets slump, Skanska has tried to widen margins by investing in public-private development projects where it jointly owns or maintains public facilities such as hospitals and highways. Its projects include highways in Finland and Norway, hospitals in the U.K., and power plants in Brazil.

“Public spending is by and large still there, but anything that’s a public-private project has a question mark because of the private funding component,” Gardner said. MF has a “trading sell” recommendation on Skanska.

The company has written down 120 million kronor this year on construction projects and 570 million kronor on U.K. public- private partnerships where costs rose on fixed-price contracts.

Skanska joins other global builders and construction- materials suppliers in retreating as demand deteriorates. Wolseley Plc, the world’s No. 1 plumbing-gear supplier, said Nov. 18 it will cut 380 jobs in the Nordic region. YIT Oyj, Finland’s biggest builder, replaced its CEO and is in talks to cut 350 jobs as its stock of unsold apartments grows in Finland and the Baltics. NCC AB, Skanska’s next biggest rival in Sweden, plans to make additional job cuts in 2009, beyond the 1,700 targeted for this year, as housing markets slump in the Nordic countries and Germany. Swedish homebuilder JM AB has also given notice to 600 employees since June.


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