Vinci Drops as Weaker Outlook Adds to Profit Estimate Miss

Vinci SA (DG), Europe’s biggest builder, declined in Paris trading after reducing its 2014 sales forecast amid falling demand in France while first-half earnings missed analysts’ estimates.

Vinci, based in Rueil-Malmaison near Paris, said yesterday it would deliver a “slight” drop in 2014 revenue, compared with a previous forecast of steady sales. The shares fell as much as 12 percent, the most in almost six years, and traded 5.3 percent lower at 48.88 euros as of 3:51 p.m. in the French capital.

“We’re expecting a slight drop in activity and order intake” for French building and roadworks in the second half, Chief Executive Officer Xavier Huillard said at a press conference in Paris today. “We may have to adapt.”

Vinci has cut costs to counter a slowdown in infrastructure spending in Europe and is seeking to expand in faster-growing markets. It sold 75 percent of its parking unit in June having earlier completed the purchase of airport operator ANA-Aeroportos de Portugal SA.

First-half earnings before interest and taxes rose 3.6 percent to 1.54 billion euros ($2.07 billion) from a year earlier, Vinci said. That missed the average estimate of 1.63 billion euros in a Bloomberg survey of four analysts. Sales fell 1.3 percent to 18.5 billion euros.

Weaker Finances

It’s too early to say whether the second-quarter order drop was due to French municipal elections in March or to weaker finances of local authorities, Huillard said.

An ebit decline at Vinci’s construction unit was mostly related to a tramway construction in Nottingham, England, the CEO said. Vinci has changed local management and will try to recoup some of the losses, he added. It’s “hard to extract value” from U.K. construction, Huillard said.

“We’re entering a period when we must be able to slow down and restructure where necessary, and to accelerate in growing businesses and countries,” Huillard said. Vinci is considering acquisitions for its energy and road businesses, he said.

Vinci is also looking at airports in Greece, Chile, Slovenia and Toulouse, France, he said. It’s examining concessions and public-private partnerships in Columbia, Peru and the U.S., and highways in India, he added.

Net income rose 77 percent to 1.32 billion euros, helped by a 690-million euro capital gain on the sale of 75 percent of Vinci Park. The company expects a “strong increase” in full-year net income, and will pay an interim dividend of 1 euro per share, including 45 cents of “exceptional” dividend.

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

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net John Bowker, Robert Valpuesta

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