Eiffage Shares Jump After Profit Boost on State Contracts
Concessions gets boost from motorway traffic, cost controls
Net debt falls to 11.9 billion euros; cash position improves
Eiffage SA shares rose to the highest in almost nine years as the French construction company said government-highway contracts helped boost profit and net debt fell.
The stock rose as much as 3.7 percent to 72.77 euros, the highest since December 2007, and traded at 71.16 euros as of 12:56 p.m. in Paris. That extended gains for the year to 20 percent, valuing the company at 7 billion euros ($7.8 billion).
Operating profit before non-recurring items jumped 14 percent to 677 million euros, the Velizy-Villacoublay, France-based company said in a statement after the market closed on Wednesday. Revenue fell 1.6 percent to 6.5 billion euros, in line with the average estimate of analysts surveyed by Bloomberg.
“It’s all good, the equity story is on track,” Natixis analysts Gregoire Thibault and Sven Edelfelt wrote in a note.
Eiffage Chief Executive Officer Benoit de Ruffray is expanding in international markets to lower reliance on a sluggish economy in France, which accounted for 82 percent of revenue last year and where public investments in infrastructure remain weak. The company said last week it’s acquiring Belgian construction company Chris Vuylsteke Groep NV. The builder is focused on countries where it already operates and can extend its range of activities, the CEO told reporters on Thursday.
Eiffage reiterated that it expects a slight decline in sales this year as projects to build and operate a solar power complex near Bordeaux and a high-speed train line in western France inflated revenue in 2015. Overall, it expects improved results for the year thanks to concessions, cost cuts in contracting and a drop in financial expenses, it said.
Eiffage’s order book rose 1.6 percent to 12.1 billion euros on July 1 compared with a year earlier. Net debt fell by 366 million euros to 11.9 billion euros and cash increased to 2.4 billion euros.
During the first half of the year, revenue from contracting fell 3.1 percent, driven by a 5.2 percent decline in France, while construction sales and housing reservations improved during the period. Sales from concessions grew by 5.3 percent, boosted by highway traffic and public contracts, with the operating margin widening to 51 percent.
The company has proposed a list of projects for its highway concessions to the French government after President Francois Hollande said he wanted a fresh wave of investments in the country’s autoroutes. Eiffage and other companies operating French highways won
2 1/2 more years on their concessions in 2015 in exchange for 3.2 billion euros of spending in renovation and extension works.