Bouygues Forecasts Improved Margins After 2012 Profit Drops

Bouygues SA (EN), France’s second-largest building company, forecast margins will widen this year after reporting a 41 percent drop in 2012 profit as its phone unit business suffered from competition.

Net income fell to 633 million euros ($837 million) from 1.07 billion euros a year earlier, the Paris-based company said today in a statement, beating an average estimate of 584 million euros from nine analysts surveyed by Bloomberg. Bouygues will pay a dividend of 1.60 euros per share in 2013, unchanged from last year.

“Results reflected the upheaval on the mobile telecoms market and a challenging economic environment,” Bouygues said. “2012 should mark the low point in Bouygues group’s profitability.”

Bouygues’s phone unit last year cut prices and introduced new services to respond to Iliad SA (ILD), which started a discount mobile phone service. At the same time, Bouygues’s broadcasting unit TF1 was hurt by a rise in programing costs, and its road building unit Colas suffered from higher raw-material prices.

To mitigate the drop in phone revenue, which is also due for a cut in so-called call-termination rates, Bouygues Telecom, France’s third-largest mobile-phone operator, has been cutting jobs and paring marketing spending.

Bouygues said it aims to “stabilize” the unit’s earnings before interest, taxes, depreciation and amortization, and “improve the Ebitda minus capex item from 2013.”

Bouygues sales, which rose by 3 percent to 33.5 billion euros in 2012, may be little changed this year as revenue at Bouygues Telecom is expected to drop 7 percent to 4.85 billion euros, Bouygues said.

Bouygues’s construction backlog rose 8 percent from a year earlier to 26.8 billion euros at the end of 2012.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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