Germany: HOCHTIEF Releases H1 Results
HOCHTIEF generated profit before taxes of EUR 166.1 million in the second quarter of 2012 after incurring a loss in the first three months of the year. The HOCHTIEF Asia Pacific division returned to the black.
The troubled Airport Link project, a toll road in Brisbane, was opened to traffic and handed over. The desalination plant in Victoria reached the all-important “first water” milestone. First-half new orders grew by 25.3 percent year on year and work done by almost 20 percent.
The HOCHTIEF Europe division and US infrastructure subsidiary Flatiron were plagued by the market environment, however: Both operated at lower capacity. In Germany, provisions had to be recognized in the accounts for a longer construction period on the Elbe Philharmonic Hall project. The Group is to claim reimbursement of these costs.
“This nonrecurring item is the reason why we do not yet have a consolidated net profit in the Group at the half-year point,” says Dr. Frank Stieler, Chairman of the HOCHTIEF Executive Board. “We expect the already-transacted sale of shares in the company responsible for the operation of the Vespucio Norte Express toll highway in Santiago de Chile to be able to largely offset the negative impacts at the Elbe Philharmonic Hall.” This transaction, including obtaining the outstanding approvals, is due to close by the end of this year.
Key figures for the first half of 2012
At EUR 13.88 billion, work done as of June 30, 2012 exceeded the prior-year figure by 19.5 percent (H1 2011: EUR 11.61 billion). This mainly reflects the HOCHTIEF Asia Pacific division continuously working through its large order backlog. HOCHTIEF Americas likewise outperformed the prior-year figure. HOCHTIEF Europe came in below the first six months of 2011 due to a fall in new orders.
New orders in the first half of the year were 25.3 percent up on the prior-year level to EUR 16.34 billion (H1 2011: EUR 13.05 billion). The main drivers were the HOCHTIEF Americas division with major transportation infrastructure orders and HOCHTIEF Asia Pacific with large-scale orders in the resources and infrastructure markets. HOCHTIEF Europe was down on the prior-year figure. Besides a particularly strong second quarter in 2011, this was due to delays in contract awards in Eastern Europe and the Gulf region.
The order backlog climbed by 12.8 percent year on year to reach an all-time high of EUR 52.97 billion (H1 2011: EUR 46.97 billion). Key factors in the increase were the large opening order backlog at the beginning of the year, positive exchange rate effects, the Group’s new orders in excess of work done, and the initial consolidation of Canadian subsidiary Clark Builders. Even with work done at a sustained high level, this order backlog represents a forward order book of around 23 months.
The further increase in sales in the first half of 2012 mirrors HOCHTIEF’s very strong overall orders position. With sales of EUR 12.01 billion, the Group achieved growth of 15.8 percent (H1 2011: EUR 10.37 billion).
HOCHTIEF returned to the black in the second quarter and reports profit before taxes of EUR 75.2 million for the period January to June 2012 (H1 2011: loss of EUR 434.6 million). The good results from its operating activities more than offset the provisions for the Victorian Desalination Plant and Elbe Philharmonic Hall projects and the smaller volumes of work done in US infrastructure construction and in European operations outside Germany.
The consolidated net loss of EUR 49.1 million (H1 2011: loss of EUR 155.6 million) is attributable to the fact that a large proportion of the losses occurred in the parts of the Group in which there is little or no minority stake.
For the Elbe Philharmonic Hall, HOCHTIEF and the City of Hamburg were able to pave the way for a fresh start. The Group is investing considerable upfront resources in its contribution towards the completion of this prestigious project. “Ultimately, we do not see any other responsible way of completing this project,” says Dr. Frank Stieler. HOCHTIEF will insist on being reimbursed for all additional costs resulting from obstacles or delays.
Strategic growth areas
The second quarter of 2012 saw HOCHTIEF grow in its four strategic growth areas: The HOCHTIEF Asia Pacific division won some large contract mining contracts, securing EUR 5.35 billion worth of new orders in this sector in the first seven months. Leighton is also benefiting substantially from the energy sector, for example through projects from Australia’s liquid natural gas business.
In North America in mid-June, the consortium including HOCHTIEF PPP Solutions reached financial close on a new approach to the Golden Gate Bridge in San Francisco. The Group is to design, build, operate, and partly finance the transportation infrastructure project together with its partners in a public-private partnership project. In addition, US subsidiary Flatiron is to carry out the construction work in its capacity as design-build lead.
In Canada in May, HOCHTIEF PPP Solutions and ACS reached financial close on the Northeast Anthony Henday Drive road construction project, which will likewise be undertaken by a public-private partnership. Again, Flatiron is part of a joint venture carrying out the construction work. Both projects exemplify the potential available to HOCHTIEF in the North American market: Studies indicate that USD 2.2 trillion of investment will be needed to bring US transportation infrastructure to a good condition by 2017.
In line with its strategy of reducing committed capital and increasing asset turnover, the Group sold off some concessions that are in the operating phase: In July, HOCHTIEF sold its 45.45 percent stake in the company responsible for the operation of the Vespucio Norte Express toll highway in Santiago de Chile. The transaction is worth approximately EUR 230 million and is due to close by the end of the year. The Australian company Leighton, meanwhile, divested itself of its subsidiary Thiess Waste Management in order to refocus more on its core business. Both transactions help to further reduce the Group’s committed capital.
HOCHTIEF confirms its guidance for the order backlog and sales for fiscal year 2012. Both key figures will normalize below the 2011 record. New orders are now expected to be on a par with the previous year’s high level, however.
The Group continues to anticipate a pretax profit from operating activities of just under EUR 550 million and consolidated net profit of just under EUR 180 million. After the provisions recognized in Europe in the first half of the year, though, it will be much more difficult for HOCHTIEF to achieve these targets. The guidance does not include any nonrecurring items.
Offshore WIND staff, August 14, 2012; Image: Hochtief