Bilfinger SE, the German builder transforming itself into an industrial services provider, fell the most in almost six years after saying full-year profit will decline as European investment in the oil and gas sector slows.
Adjusted net income will fall to 230 million euros ($314 million) to 245 million euros this year from 255 million euros in 2013, the Mannheim, Germany-based company said today. Bilfinger had expected profit to increase “significantly” this year. The shares fell as much as 17 percent.
“The main contributing factor is low volumes and margins in its highest-margin business, power,” Craig Abbott, a Kepler Cheuvreux analyst who has a hold rating on Bilfinger shares, said in a note. “We also expect the organic growth targets for both industrial and power to be adjusted down.”
Bilfinger, which is selling civil-engineering businesses with 800 million euros in revenue, has been seeking to stabilize earnings by concentrating on services including real-estate consulting. Chief Executive Officer Roland Koch has built up services with about 1 billion euros in acquisitions since taking the reins in 2011. Europe accounts for three-quarters of Bilfinger’s sales.
“Energy markets in Europe are further deteriorating,” Koch said in a conference call with analysts. “We are losing projects after being appointed as preferred bidder because the project is postponed or even canceled.”
The shares fell 16 percent to 69.91 euros as of 3:10 p.m. in Frankfurt, valuing the company at 3.2 billion euros.
Bilfinger will cut a “significant” number of jobs at its high-pressure piping unit in Germany as it targets cost savings in the “low to middle double-digit” million-euro range, Koch added. The division has a goal for revenue of 400 million euros as it cuts capacity in Germany by half.
The company is already seeking to trim 90 million euros from annual costs by next year by eliminating 1,250 administrative positions that were built up with the acquisitions. Bilfinger will evaluate whether it’s still possible to reach its goal for output volume of at least 11 billion euros by 2016, while the company still expects to boost profitability by then, it said today.