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Bilfinger Profit Slips on Slow European Economy and Harsh Winter

Bilfinger SE (GBF) posted a 31 percent drop in first-quarter profit as Europe’s harsh winter and stuttering economy stunted earnings at Germany’s second-largest builder.

Adjusted net income slipped to 29 million euros ($37.7 million) from 42 million euros a year earlier, the Mannheim-based company said in a statement today. Output volume fell 3.9 percent to 1.87 billion euros.

“In all business segments, the continued lack of economic impetus in Europe –- where Bilfinger generates 80 percent of its output volume –- is leading to hesitation on the part of clients,” Bilfinger said. “This results in delays in contract awards, with primarily larger-volume and high-margin projects affected.”

Hochtief AG (HOT), Germany’s largest builder, and HeidelbergCement AG (HEI) both reported rising quarterly profit last week as growth in the U.S. offset a European construction slump exacerbated by the long, cold winter. Bilfinger Chief Executive Officer Roland Koch has said he may use some of the 850 million euros available for acquisitions for the services units Hochtief is divesting.

Acquisitions are a key tenet of Koch’s plan to turn Bilfinger from a construction company into a services provider with net income of about 400 million euros in 2016. Part of the strategy is to reduce exposure to higher-risk, lower-margin construction projects.

Engineering Work

Bilfinger shares were down 0.2 percent at 76.05 euros as of 11:00 a.m. in Frankfurt. Before today, the stock had climbed 4.4 percent this year, valuing the company at 3.5 billion euros, while Hochtief has gained 29 percent and HeidelbergCement is up 27 percent.

Bilfinger reiterated its forecast of an increase in 2013 profit, helped by a savings program and rising demand for engineering work and services in the power industry.

Adjusted earnings before interest, taxes and amortization declined 18 percent to 56 million euros in the quarter, dragged down by a 38 percent fall in earnings at the building and facilities division.

“In contrast to generally moderate development in Europe, Bilfinger is experiencing satisfactory demand in Scandinavia and the United Kingdom,” the company said. “Outside Europe, this applies to the United States in particular.”

To contact the reporter on this story: Alex Webb in Munich at awebb25@bloomberg.net

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

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