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Hochtief still hit by Leighton problems

18 Aug 11 Problems at subsidiary Leighton have continued to take their toll on Hochtief’s earnings.

Hochtief’s had an operating loss of €350.3m (£306.6m) in the first six months of 2011, significantly down on previous year’s operating earnings of €391.2m in the equivalent period. The consolidated net loss was €155.6m, from a  net profit of €88.1m. The order situation nonetheless remained stable, with the order book growing 11.1% to nearly €47bn, translating into a forward order book of about two years.

Chairman of the group executive board Dr. Frank Stieler said: “Of course we are not satisfied with these results. Except for Hochtief Asia Pacific, however, all divisions performed strongly in the first half-year. Transforming energy supplies and the challenges in urban development and transportation present us with many new opportunities.” He said that the group is fundamentally on the right track and in the current year will attain consolidated net profit above the level recorded in the prior year.  

Group orders and work done held a stable trend in the second quarter of 2011. New orders, at €13.04bbn, were 1% higher in the first half of 2011 than in the same period a year earlier. Adjusted for exchange rate effects, new orders were 2.1 percent down on the comparative prior-year figure.

Work done came to €11.61bn as of 30 June, an increase of 9.3% on the first half of 2010. On an exchange rate adjusted basis, work done increased by 6.5%. The order backlog gained 11.1% percent to € 46.97 billion.  

Earnings performance in the first half of 2011 was heavily impacted by the steep drop in earnings at Hochtief Asia Pacific. As a result, the Hochtief Group negative operating earnings figure of €350.3m fell far short of the prior-year figure of €391.2m. Major effects here included losses from two major infrastructure projects - Airport Link in Brisbane and the Victorian Desalination Plant in Melbourne. Leighton additionally took a charge against earnings in the first quarter for provisioning to cover outstanding receivables at the Habtoor Leighton Group. “The trend in orders and work done and the positive outlook for the 12 months ahead show for Leighton, however, that our Australian subsidiary is on a very stable trend. Leighton will quickly return to the accustomed good performance,” said Dr Stieler. Profit before taxes showed a significant fall compared with the prior-year period, largely as a result of the impact on earnings at Leighton. In total, the figure for the months January to June 2011 was a loss of €434.6m. The resulting consolidated net loss amounted to €155.6m for the first half of 2011. The corresponding period of the prior year brought a consolidated net profit of EUR 88.1 million.

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Hochtief is directing its focus on three strategic growth areas: transforming energy supplies, transportation infrastructure, and shaping major cities. In the process, the company aims for streamlined structures and a global culture of cooperation within the Group. Hochtief also intends to make its portfolio less capital intensive and increase asset turnover, firstly by plans to unlock value in the portfolio, and secondly by raising asset turnover in the public-private partnerships and real estate development businesses. A wide range of action has been taken to improve risk management at Leighton.

For the current fiscal year, the sale of the Group’s airport business is fully under way.  

After adjusting its guidance after the first quarter, Hochtief now still expects new orders, work done, and the order backlog for 2011 to normalize at a level below the record figures of 2010 and sales to be broadly on a par with 2010. Depending on the size and outcome of the sale of interests at Hochtief Concessions, the Group continues to expect profit before taxes to be about half of the prior-year figure, and consolidated net profit to be above the level recorded in the prior year.

The guidance for 2012 and 2013 remains unchanged. For 2012, the Group anticipates a pretax profit of approximately €1bn and consolidated net profit of some €500m. In 2013, Hochtief plans to attain pretax profit in excess of €1bn and consolidated net profit of about €450m excluding non-recurring income.

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