Hochtief Looks at Divestments to Add to Airports Disposal
Stock Chart for Hochtief AG (HOT)
Hochtief AG (HOT), the German builder controlled by Spain’s Actividades de Construccion & Servicios SA, may sell facility and energy-management, project and real- estate development units to focus on higher-margin divisions.
The sales would be in addition to plans to offload the airports division, with proceeds dedicated to repaying debt, investing in the infrastructure division and entering new industries, the Essen-based company said today in a statement.
“With these measures we can return Hochtief to a sustainable growth trajectory, become more profitable and deliver on our guidance,” Chief Executive Officer Marcelino Fernandez Verdes, who assumed the role in November, said in the statement.
Fernandez Verdes, who joined Madrid-based ACS in 1987 before moving to Hochtief initially as chief operating officer last March, is working on increasing margins at the company, Germany’s largest builder. Hochtief scrapped the sale of its airports unit in early 2012, the second time in a little more than a year that the disposal was abandoned, after failing to get its target price.
During the second auction, bidders including Vinci SA (DG), Europe’s biggest builder, and China’s HNA Group, offered more than 1 billion euros ($1.3 billion) for the unit, while Hochtief valued it at as much as 1.6 billion euros, people familiar with the process said at the time.
Hochtief fell as much as 8 percent to 51.12 euros, the biggest intraday drop since March 27, and was trading 7.1 percent lower 10:34 a.m. in Frankfurt. That pared the stock’s gain this year to 17 percent, valuing the company at 3.97 billion euros.
Pretax profit last year was 546 million euros compared with a 127 million-euro loss in 2011, Hochtief said. Earnings were in line with the 550 million-euro average estimate of 12 analysts surveyed by Bloomberg. Revenue climbed 9.6 percent to 25.5 billion euros. Hochtief plans a dividend of 1 euro a share.
The builder of Frankfurt’s Commerzbank Tower also said it’s starting a cost-efficiency program to reduce the effects of unprofitable projects. Hochtief didn’t specify a time frame or target for the program, which will streamline the organization and diversify financing sources.
New orders in 2013 will probably decline, Hochtief said. Pretax profit and net income will rise 10 percent to 20 percent, excluding one-time items such as restructuring costs and unit sales. The company said it anticipates achieving a net cash position by the end of 2014. Fernandez Verdes said at a press conference in Dusseldorf, Germany, today that Hochtief doesn’t have further earnings target for next year.
The 2013 forecast “does not live up to expectations,” Ingbert Faust, a Frankfurt-based analyst at Equinet who recommends buying Hochtief stock, said in a note to clients. “However, the strategic market statements fulfill market expectations.”
The company valued assets held for sale at the end of December, which included the airports and its Leighton division’s telecommunications unit, at 1.9 billion euros. Hochtief owns stakes in six airports serving cities including Hamburg, Dusseldorf, Budapest and Tirana, Albania. Fraport AG, the owner of Frankfurt airport, said in August 2011 that it and RREEF had submitted a bid for Hochtief’s non-German airport assets. Bloomberg reported plans last week to restart the airport-division sale.
Hochtief wants to sell the airports business, excluding assets in Athens that would be disposed of separately, as a single unit, though it wouldn’t rule out breaking up the division into two or three operations, Financial Officer Peter Sassenfeld said at the press conference.
The facility and energy-management operations, which comprise Hochtief’s European solutions divisions, would be sold in their entirety, while “strategic alliances” are an option for the real-estate development units, which “currently tie up considerable amounts of capital,” Hochtief said. It still plans to sell its entire 50 percent holding in the Aurelis property- management business.
The service solutions division reported net income for 2012 of 16 million euros on 700 million euros of work completed.
Hochtief may pay a special dividend following its disposals, Fernandez Verdes said today.
New U.S. home sales increased by 8.9 percent in 2012, according to the Department of Commerce and the U.S. Department of Housing and Urban Development. Construction confidence in the European Union meanwhile fell to its lowest in 19 months in November before recovering in December, according to the European Commission.
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