What's going on?

On Friday, Sweden’s Skanska � one of the world�s largest construction firms � cut its dividend after its fourth-quarter profit rose less than expected. Nedrans!

What does this mean?

The company�s quarterly profit of $257 million was lower than analysts expected amid weak performance in the US � where, according to FactSet, around 40% of its yearly sales arise � and an overhaul of its Polish business. Skanska also said the dividend with which it rewards investors would be slashed, while analysts were expecting it to grow.


Skanska�s sales were, however, better than expected � which, together with its profit miss, suggests that the company has more customer demand but its costs are rising. Companies typically have two options in this case: make their customers pay more or swallow higher costs. It looks like Skanska�s opted for the latter, squeezing its profit margin.

Why should I care?

For markets: Saving for a rainy day.

Skanska�s shares deconstructed 7% � likely due to its lower dividend, as investors will get a smaller slice of the company�s profit. But by giving away less money, Skanska can absorb some of the potential costs of political and economic �uncertainties� that it expects to face this year. In the UK, for example, Brexit anxiety has pushed construction activity to a 10-month low � but Skanska will have some extra cash to cover any fines as it cuts back on British construction.

The bigger picture: Making America build again.

Skanska has high hopes for its American business in 2019: US construction is steaming ahead with homebuilders feeling more confident in January and infrastructure spending rising by 6% last year. Demand for new buildings is so high that US construction companies are struggling to find skilled workers to complete projects on time and on budget � leading contractors to turn to wearable tech, augmented and virtual reality, and drones to boost productivity. But over in Europe the picture is quite the opposite: construction in major economies like Germany and Italy is slumping.