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Skanska cuts 150 jobs in residential operations

15 Jun 12 Skanska is restructuring its residential development operations in the Nordics region, the Czech Republic and Slovakia in response to weak results, particularly in Sweden.

The reorganisation will lead to 150 job losses, primarily in Sweden.

Skanska’s residential development businesses in Poland and the UK are not affected by the changes.

The restructuring leads to a one-off charge of SEK380m in the second quarter of this year but is due to bring annual savings of SEK180m on an ongoing basis. In addition, efficiency measures in the production process are being implemented, which Skanska said will lead to increased profitability over time.

The residential development business stream has generated weak results for some time, particularly in Sweden. The organisation is designed for larger production volumes than it has been possible to achieve.

An analysis of the market, strategy and organization was undertaken during the past few months in order to reach acceptable long-term profitability in the sector. As a result of the analysis, an extensive restructuring of the business will be made effective immediately.

All residential development operations in the Nordics will now be integrated into the construction units of Sweden, Norway and Finland under the leadership of the respective business unit presidents. The Residential development Nordic business unit will cease to exist. As a result of the reorganisation the number of employees will be reduced by about 150, out of which 110 in Sweden.

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"Long-term we see a strong demand for homes in the Nordics,” said Skanska AB president and CEO of Johan Karlström. “Residential development is an important part of Skanska’s core business and we have untapped synergies between the construction and residential development operations. The purpose of the restructuring is to keep and strengthen our market position in the main cities in the Nordics."

The restructuring of the Nordic residential development business results in a one-off cost of SEK 300m in the second quarter 2012, of which SEK150m are related to redundancies of employees and SEK150m are write-downs in ongoing projects where the previously anticipated profit levels are not expected to be realised.

No need for write-downs in land has been identified in the review of Skanska’s residential land bank in the Nordics. However, the size of the residential land bank in the Nordics will be adjusted to current volumes in order to reach a sustainable return on capital employed. The adjustment will be made over time through, for instance, divestments, combination deals and exchanges for land for development of commercial properties, in order to create value for Skanska.

In the Czech Republic and Slovakia the residential development business will focus on the Prague area. This leads to write-downs of land of SEK 80 M. The background is the weak market outside of Prague, which is not expected to improve in the near term.

Skanska’s financial targets remain unchanged.

Richard Hultin, executive vice president at Skanska AB and member of Skanska’s senior executive team, has managed the development of the restructuring programme. He will also continue to be responsible for Skanska’s commercial development business in Central and Eastern Europe and residential development in Poland, the Czech Republic and the UK.

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