German Construction Company Expects Small Full-Year Profit

Despite the ongoing decline in the German construction market, diversified construction-based group Hochtief AG expects to show a net profit for full-year 2001, albeit one in the low two-digit millions of euro.

This will represent a continuation of the decline that has taken the Essen-based group's annual net profit from 205 million euro in 1999 to 127 million euro in 2000.

But Chief Executive Hans-Peter Keitel, speaking at the presentation of nine-month results on Monday, said that the company would still be able to issue a dividend in respect of this year, though he did not say how much.

For 2000, the company issued a record dividend of 0.85 euro per share. At the nine-month stage, the group's earnings picture is beginning to look more favorable than it did halfway through the year. This is because the group managed third-quarter operating earnings of 23.9 million euro, up from a loss of 6 million euro in the third quarter of 2000.

It had posted an operating profit of 10.4 million euro in the first quarter of 2001, and an operating loss of 47.1 million euro in the second. Nine-month sales rose 31% to 9.2 billion euro, thanks largely to the first-time consolidation of Australian company Leighton. The group also managed to lift its nine-month North American sales by 18%.

Overall, though, the group incurred a nine-month net loss of 59.138 million euro, after a net profit of 16.666 million euro in the first nine months of 2000. And the group's Hochtief Construction AG unit, which is responsible for its building construction and civil engineering business in Europe, posted a nine-month operating loss of 167.354 million euro, after a loss of 75.472 million euro in the year-ago period.

Still, Keitel pointed out that the construction unit is set to raise a further sum of up to 100 million euro from the re-negotiation of construction orders in Germany, and this should easily enable the Hochtief group to end the year with a net profit, especially since all non-construction divisions – Airports, Development, International and Services – are running at a profit.

But analysts are less upbeat. Several said that the group's complex structure made it difficult to get a handle on its business situation, but there was widespread disappointment at the nine-month result. Recommendations issued in respect of the share were mostly Hold or Underweigh.

The Hochtief share on Monday fell back slightly on the news. It closed down 2.09% at 15.46 euro.