Hochtief New Orders Shrink as Asian Resources Investment SlowsAlex Webb
Hochtief AG, Germany’s largest construction company, posted a 30 percent decline in second-quarter new orders as investment in natural resources projects in Asia slowed.
Orders slipped to 6.1 billion euros ($8.1 billion) from 8.7 billion euros a year earlier, the Essen, Germany-based company said today in a statement. Pretax profit almost doubled to 328.2 million euros, beating the 157 million-euro average forecast of eight analysts surveyed by Bloomberg. Sales increased 10.4 percent to 7.1 billion euros.
Chief Executive Officer Marcelino Fernandez Verdes is focusing Hochtief, which is controlled by Spain’s Actividades de Construccion & Servicios SA, on its main building business, reversing a decade-long strategy of expanding into services. Verdes, who joined from ACS, secured a 1.5 billion-euro deal to sell the airports division in May and is offloading property development and facility management units. Hochtief Solutions was sold to SPIE SA for about 250 million euros in June.
New orders at Hochtief’s Asia Pacific division fell 48 percent while orders increased in North America and Europe. Leighton Holding Ltd., the Australian builder in which Hochtief has raised its stake to 56.4 percent, said work in hand fell 7.7 percent in the first six months to A$40.13 billion ($36.6 billion), the lowest level since December 2009.
“Leighton and the Asia-Pacific business disappointed,” Frankfurt-based Bankhaus Metzler analyst Stephan Bauer, who recommends selling Hochtief shares, said by telephone. “The order book was significantly lower at Leighton in particular, that’s the biggest negative.”
Hochtief said the year-earlier orders were boosted by large contracts in the coal and gas sector. The company is used to cycles of declining resource spending, Leighton Chief Executive Offier Hamish Tyrwhitt said in a telephone interview.
Hochtief shares fell as much as 2.3 percent or 1.33 euros to 56.63 euros, and were trading 0.8 percent lower as of 9:38 a.m. in Frankfurt. The stock has risen 30 percent this year, valuing the company at 4.4 billion euros.
Pretax losses in Europe narrowed in the second quarter to 5.8 million euros from 71.6 million euros a year earlier. In Asia, earnings jumped 45 percent to 299.9 million euros while in North America they more than doubled to 21.8 million euros.|
“We are well on course to implement our strategy and position Hochtief as a global infrastructure group,” Fernandez Verdes said in the statement. “To achieve this aim, various measures were decided, which we are now implementing systematically.”
Hochtief, which built Frankfurt’s Commerzbank Tower, is midway through a 260 million-euro share buyback program which will boost the voting rights held by Madrid-based ACS to 59.9 percent.
Hochtief predicts full-year pretax profit of 580 million euros to 660 million euros. The company said it expects net income of 160 million euros to 200 million euros, excluding earnings from the airports, service solutions and one-time reorganization costs.