Bilfinger Plunges After CEO Unexpectedly Scraps Dividendby
Company with activist shareholder Cevian plans reorganization
CEO Utnegaard says company needs funds to focus on investments
Bilfinger SE shares fell the most in nine months after Chief Executive Officer Per Utnegaard unexpectedly scrapped the dividend payment for 2015 following net losses that widened almost seven-fold.
Shareholder payouts will resume only when the Mannheim, Germany-based industrial and real estate services company achieves its goals, Utnegaard told reporters in the city on Wednesday, declining to say whether that was likely to happen in 2016. Bilfinger’s focus is instead on “making targeted investments” that would return the company to profitability, he said in an earlier statement.
Bilfinger shares fell 9.2 percent, the most since June 18, to 39.58 euros at the close in Frankfurt. They have declined more than 50 percent since their peak in April 2014, valuing the company at 1.8 billion euros ($2 billion).
Suspension of the payout is a “negative surprise,” DZ Bank said in a note. A Bloomberg forecast was for the dividend to be cut to 0.5 euros a share from 2 euros a share the previous year, when the company also made a loss. Bilfinger has paid a dividend since at least 1989, according to data compiled by Bloomberg.
The CEO is focusing the company on industrial and building management while shedding businesses such as the power unit, which has been hurt by Germany’s shift to renewable energy and a slowdown in the construction of new plants in Europe. Unsolicited offers for the building and facility unit announced in January could leave industrial services as the sole remaining business of a company that was once Germany’s second-biggest builder.
The review process for a potential sale of the building and facility unit will continue for “several weeks,” Utnegaard said, while a disposal of the power division is “well under way.” Bilfinger will be able to focus on growth rather than divestments in 2017, he said.
Bilfinger, which has activist investor Cevian Capital AB as its biggest shareholder, expects a “significant” drop in output and a “slight” increase in earnings in 2016, according to the statement, while first-quarter earnings will be about the same as last year. The 2015 net loss widened to 489 million euros ($543 million) from 71 million euros due to an impairment and power business operating losses.
Cevian has a track record of encouraging companies in which it invests to sell divisions to generate greater returns for shareholders.