Hochtief reaffirms 2006 forecast
Marked gain in consolidated net profit: HOCHTIEF reaffirms 2006 forecast
- First-half new orders strong both in quantity and quality
- Like-for-like earnings growth
- New earnings record at Asia Pacific division
- Value growth in concessions portfolio despite risk provisioning
Essen, Germany – HOCHTIEF met its profit growth targets in the first half of 2006. All earnings measures matched or exceeded the first-half 2005 figures adjusted for the exceptional gain from the airport investment partnership. Strong new orders and ongoing gains in the quality of accepted contracts confirm the Group’s outlook for 2006: “We will attain the targets we set at the start of the year,” said Dr. Hans-Peter Keitel, Chairman of the HOCHTIEF Executive Board. HOCHTIEF’s medium-term target is consolidated net profit of EUR 100 million. “We will progress substantially closer to this target in 2006,” said Keitel. Further growth in the value of the HOCHTIEF concessions portfolio is a major step in the right direction. Keitel: “In the public-private partnership (PPP) segment and in our airport interests, we are laying the groundwork now to secure future earnings.”
HOCHTIEF’s first-half 2006 operating earnings, at EUR 147.3 million, matched the figure for the prior-year period adjusted for the exceptional gain from the investment partnership (H1 2005 excluding the exceptional gain: EUR 147.3 million). A healthy improvement in net investment and interest income delivered an extra boost to profit before taxes, which at EUR 143 million was 11.5 percent up on the prior-year figure (H1 2005 minus exceptional gain: EUR 128.3 million). Consolidated net profit was also well above the adjusted prior-year figure, climbing by 25.7 percent to EUR 29.8 million (H1 2005 less the exceptional gain: EUR 23.7 million).
New orders for the year to June 30, 2006 increased by 20 percent to EUR 7.91 billion (H1 2005: EUR 6.59 billion). This growth was achieved despite continued rigorous quality focus in contract selection. Work done grew very strongly to EUR 7.83 billion, bettering the first half of 2005 by 20.7 percent (H1 2005: EUR 6.49 billion). The order backlog mirrored this trend and matched the first quarter’s record level with EUR 21.53 billion—a rise of 5.6 percent despite adverse exchange rate effects diminishing the total as of June 30 by EUR 1.07 billion. In the first half of 2006, external sales showed another strong increase to EUR 7.13 billion, up 17.1 percent on the first-half 2005 figure (H1 2005: EUR 6.09 billion).
The HOCHTIEF Asia Pacific division accounts for a particularly large share of the positive results. The division continued to trace its upward curve, boosting sales by 32.3 percent with sustained strong demand for transport infrastructure projects and in mining. The HOCHTIEF Americas division reported healthy 15.5 percent sales growth. The Europe division reported external sales below the first-half 2005 figure after operating below capacity in the first quarter due to poor weather, but anticipates that sales for the year as a whole will make up lost ground. The Development division benefited from HOCHTIEF’s involvement in the growth markets of public-private partnership and integrated facility management, increasing sales by 16 percent.
As the latest appraisal of the HOCHTIEF concessions portfolio as of June 30, 2006 shows, airport projects undertaken by HOCHTIEF AirPort and PPP contracts awarded to HOCHTIEF PPP Solutions now total a net present value of EUR 945.3 million. This marks growth of EUR 72.2 million since December 31, 2005. These two sectors offer HOCHTIEF strong prospects for further growth. Planned airport privatizations and PPP projects around the world open up long-term business opportunities. While high bidding and project startup costs give rise to temporary added burdens, these reflect investments in HOCHTIEF’s future and are eliminated in due course.
Traffic for the Herren Tunnel in Lübeck is below the budgeted figures. Despite the fact that the PPP project is still in the ramp-up phase and the operating company anticipates an increase in capacity utilization, HOCHTIEF has decided to take the precaution in the second quarter of making accounting provision for its equity stake, which originally amounted to EUR 11 million. The Group still aims to achieve the return on investment originally planned for the project. All other projects are on or above target. “In light of this, we can readily reaffirm our commitment to our successful PPP strategy,” said Keitel.
With the second quarter on target, HOCHTIEF has reaffirmed its forecast for fiscal 2006. Assuming (especially in view of the current conflict in the Middle East) there will be no crisis-scale slowdown in the economy, no turbulence affecting the international financial markets and no worsening of the situation in other political flashpoints, the Group’s forecast for the current fiscal year is as follows:
- New orders of the same magnitude as the 2004 and 2005 records.
- By HOCHTIEF’s estimation, an order backlog of about EUR 21 billion by the end of 2006—again of similar magnitude to the 2005 record.
- Group sales of EUR 13-14 billion.
- With the Group’s operational earnings power further improving during 2006, profit before taxes above the previous year’s pretax profit adjusted for effects of the investment partnership.
- In line with the extra earnings power in HOCHTIEF’s operating business, further growth in consolidated net profit. In 2006, the Group will progress substantially closer to its medium-term target of EUR 100 million.
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