Bouygues Profit Rises 10% After Cutting Costs at Phone Unit

Bouygues SA (EN), the French building, telecommunications and television company, said second-quarter profit rose 10 percent, beating analysts’ estimates, after cost cuts at its mobile-phone and broadcasting divisions.

Operating profit increased to 432 million euros ($577 million) from 394 million euros a year earlier, the Paris-based company said in a statement today. Analysts surveyed by Bloomberg had forecast 358 million euros, according to the average of three estimates. The stock rose as much as 8.8 percent in Paris, the biggest gain in six months.

Bouygues, which controls France’s third-largest mobile-phone operator and the country’s biggest television network, is paring jobs and cutting prices to respond to Iliad SA (ILD), which started a discount mobile service in January 2012. Bouygues Telecom also started talks in July with SFR, France’s second-largest phone operator, to share part of their mobile networks.

“The worst seems to be over,” said Josep Pujal, an analyst at Kepler Cheuvreux. “The recovery in telecom is going as expected: after a period of adaptation, the group is gaining clients again and ramping up the cost reductions.”

Low Point

Last year “should mark the low point” in the group’s profitability, the company reiterated today, saying that cost cuts since the start of 2012 at its phone unit will exceed a target set in May of 400 million euros. It repeated a goal to stabilize Bouygues Telecom’s earnings before interest, taxes, depreciation and amortization at 900 million euros in 2013.

Photographer: Antoine Antoniol/Bloomberg

An employee uses a tape measure to check detail on a Bouygues SA construction site in Amiens, France. Close

An employee uses a tape measure to check detail on a Bouygues SA construction site in Amiens, France.

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Photographer: Antoine Antoniol/Bloomberg

An employee uses a tape measure to check detail on a Bouygues SA construction site in Amiens, France.

Bouygues reduced its outlook for full-year sales because of weaker-than-expected phone revenue. The company said today that sales may fall as much as 1 percent or be stable at best at 33.4 billion euros, down from an earlier prediction that revenue would be little changed.

The group’s backlog in construction, road works and real estate fell 4.5 percent to 27.3 billion euros at the end of June as Europe’s economic situation remains “tough.” The order book doesn’t include a 1.15 billion-euro contract announced today to build an undersea road tunnel in Hong Kong, and an order to develop commercial and residential real estate in Miami. The company’s share of the Miami contract is about $260 million.

The stock traded 8 percent higher at 24.77 euros as of 3:44 p.m., valuing the company at 7.9 billion euros. The shares have risen 11 percent this year, while the CAC 40 index added 8.4 percent.

Total sales were unchanged at 8.51 billion euros in the second quarter as falling revenue at Bouygues Telecom and Television Francaise 1 offset rising construction and real estate billings. Net income fell 5 percent to 230 million euros.

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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