Skanska takes a SEK 500 M charge in LA, operating income for the total construction stream 2012 expected to SEK 3.2-3.4 billion

Skanska will take a SEK 500 M charge in its construction operations in Latin America in the fourth quarter of 2012, mainly related to write-downs in one ongoing project and write-downs of claims in two completed projects with fixed price contracts. It is the same projects in which Skanska has taken write-downs earlier this year.

After the charge of SEK 500 M, the operating income for the total construction stream for the full year 2012 is expected to range between SEK 3.2 to 3.4 billion.

In the ongoing infrastructure project, unexpected ground conditions and utility issues have lead to substantially higher costs. The project is expected to be completed in the third quarter 2013.

With regard to the now completed projects with fixed price contracts, the project scope changed during the production period, which leads to substantial increases in the cost to complete the projects on schedule. Recent changes in the management in the client’s organization have made it very difficult to achieve reasonable compensation for the increased project cost. The uncertainty of the timing and amount of any settlement means that Skanska now has made substantial reserves against these claims.

 “We are now working intensively to enhance and deepen the risk management in large and complex projects in Latin America,” says Skanska’s president and CEO, Johan Karlström.