Germany: HOCHTIEF Expects Brighter Future After Setbacks in 2011
HOCHTIEF went through many challenges in 2011: The Group’s strong operating business with a new record order backlog of almost EUR 49 billion was countered by severe setbacks in two projects and its Habtoor Leighton joint venture (Dubai).
The Group was unable to offset them in full and incurred an overall consolidated net loss of EUR 160 million. The two projects caused additional losses in the first quarter of 2012.
The Group is making considerable effort to resolve these difficulties: “Building on our operational strength, we aim to quickly get back to sustainable profits,” said Dr. Frank Stieler, Chairman of the Executive Board of HOCHTIEF. At General Shareholders‘ Meeting, the Executive Board confirmed the positive outlook for the current fiscal year.
Key figures for 2011
In the past year, HOCHTIEF generated its highest level of work done in the history of the company, increasing the total by 11 percent to EUR 25.79 billion (2010: EUR 23.23 billion). New orders reached the second highest level ever: New projects worth EUR 25.37 billion were acquired (2010: EUR 29.63 billion).
The order backlog also rose to a new high of EUR 48.67 billion (2010: EUR 47.49 billion), up 2.5 percent against the prior year. Thus the Group has a forward order book of more than 22 months. Sales increased to EUR 23.28 billion (2010: EUR 20.16 billion).
This was contrasted by the earnings performance: The Group was burdened by serious problems on two major infrastructure projects in Australia, impairment losses and risk provisioning in respect of toll road projects, losses at a Group company in Dubai, an impairment loss on the investment in the Australian operating company BrisConnections, and expenditure for departed HOCHTIEF Executive Board members.
Profit before taxes fell well below the prior-year level to a loss of EUR 127 million (2010: profit of EUR 756.6 million). As a result, HOCHTIEF reported a consolidated net loss of EUR 160.3 million (2010: consolidated net profit of EUR 288.0 million).
Trend in the first months of 2012
At the start of fiscal year 2012, the problem projects in Australia once again created further impacts on earnings: The Group had to revise its profit forecast.
“We will not stand by and watch while the results of our work are affected,” said Dr. Frank Stieler, Chairman of the Executive Board of HOCHTIEF.
“We will address all areas to bring Leighton back on course. Since August, we have had new management on board in Australia that has its primary focus on optimizing risk management.”
Creating advanced energy infrastructure
According to estimates by the Central Federation of the German Construction Industry, construction investments of EUR 25 billion to EUR 30 billion will be made in wind farms off the German coast alone in the next few years. Across Europe, the market has a volume of around EUR 100 billion.
HOCHTIEF is one of the most significant providers in this segment and is currently preparing to enter the US market too: With its US subsidiary Flatiron and partners, and with the involvement of HOCHTIEF Solutions, the Group has been named the preferred bidder for the first US offshore wind farm. It is the flagship project in this region and the Group has excellent chances of winning the attractive contract.
In addition, HOCHTIEF recently entered the offshore development business: The Group acquires undeveloped concessions, develops them, applies its expertise in preparation of the respective work package up to the preconstruction stage, obtains the construction permit and then sells them on before construction begins.
On land, HOCHTIEF‘s focus is on the construction of power lines: The energy generated by offshore wind farms must be transported from the place where it is generated to the consumer. In Germany alone, several thousand kilometers of power lines are to be constructed for this purpose.
Large-scale projects are also coming up all over the world: For example, US subsidiary Flatiron is currently building a 250-kilometer transmission line and Thiess in Australia a power tunnel – a tunnel to install underground power lines – right through Sydney.
At the start of 2012, HOCHTIEF also established a joint venture with the ACS subsidiary COBRA, which is to install power lines in Germany and Europe.
In 2011, HOCHTIEF recorded total work done of around EUR 4.9 billion in the advanced energy infrastructure growth area. In view of the momentum on the market and the excellent starting position, the Group expects to be able to increase this by around 40 percent to some EUR 6.8 billion by 2016.
The Executive Board reaffirms its expectations for the current fiscal year, last published in March 2012. This means that HOCHTIEF will return to positive results in 2012. For 2013, the Group expects earnings to continue improving.
Offshore WIND staff, May 4, 2012; Image: HOCHTIEF