Interim Report January-September 2007
STRABAG SE posts strong increase in earnings in 9M 2007 as well as in Q3- Profitable growth: output volume in the first nine months of 2007 rose +5 %, EBIT +28 %
- Order backlog above € 10.8 billion - Russia’s share already at 11 %, plus of € 300 million to € 1,180 million.
- Outlook 2007: modest growth of construction output to nearly € 11 billion, expectation of improved earnings
Vienna, 30 November 2007
STRABAG SE, the largest construction company in Central and Eastern Europe, posted a strong increase in earnings in the first month of 2007 as well as in the third quarter 2007.
Construction output and Revenue
The output volume in the first nine months of 2007 compared to the same period last year grew by around 5 % to € 7,615.0 million. With a plus of 8.6 %, the output volume in the Central and Eastern European countries grew at a faster pace than that of the group as a whole. The absolute changes in Germany (€ -44.8 million) and Austria (€ +45.3 million) balanced one another out. In Hungary, there was a significant decline in the amount of € -141.8 million to report, due largely to the completion of several major infrastructure projects in the Road Construction segment. The consolidated group revenue in the first nine months of 2007 stood at € 6,860.9 million, compared to € 6,352.8 million in the first three quarters of 2006. This increase of +8 % can be explained among others by the additional initial consolidations in the Building Construction & Civil Engineering and Road Construction segments.
In the third quarter 2007 the segment Tunnelling & Services posted an extraordinarily high output volume. In this segment the business development is traditionally volatile due to the high project volume of the orders. Therefore, counter to the trend of the first nine months as a whole, both Group output volume (-1 %) and Group revenue (-4 %) fell in the third quarter 2007. In contrast to that, the Building Construction & Civil Engineering segment exhibited a positive trend of output volume and revenue.
Order Backlog and Projects
The order backlog as of 30 September 2007 gained 23 % year on year to reach a new record of € 10,806.3 million. This amount covers the projected twelve-month calculation of € 11 billion. The increase in the group order backlog was due mainly to positive developments in the Building Construction and Civil Engineering segment, especially in Russia. Order backlog in this market quadruplicated from € 300.4 million one year ago to € 1,179.6 million this year. Of this amount, € 1,145.0 million can be ascribed to the Building Construction and Civil Engineering segment.
Earnings, Financial Position and Net Worth
The limited capacity for construction in winter results in significant seasonal effects on the development of earnings and other financial figures of STRABAG SE. The first two quarters of the year typically have a negative effect on results, which is then overcompensated by results in the second half of the year. As a result of the seasonal effects, a quarterly comparison (to Q2) makes little sense. Furthermore, a higher business volume results in a more pronounced effect of seasonality on the earnings development.
While a negative EBIT (Earnings before interest and taxes) had to be reported in the first six months of the year, the group returned to the profit zone in the third quarter. EBIT in the first nine months of 2007 reached € 128.3 million, +28 %* over the same period last year. The profit for the period was up +51 %* to € 69.7 million. The net income after minority interest was € 66.3 million.
EBIT in the third quarter 2007 grew by +25 %* year on year to € 149.9 million. The year-on-year profit growth for the quarter amounted to € 102.1 million, a plus of around 31 %.*
The balance sheet total compared to 31 December 2006 grew by +11 % to € 6,463.3 million. With the addition of new core shareholder Rasperia Trading Ltd., indirectly owned by Russian industrialist Oleg Deripaska, in the third quarter, STRABAG SE’s equity ratio improved to around 32 %, while net debt fell by -60 % to € 273.1 million. Not yet included in the equity as of 30 September 2007 was the capital increase from the IPO. In the medium term, STRABAG SE forecasts an equity ratio of 20-25 %.
At € -147.8 million, cash-flow from operating activities was significantly less negative than in the same period last year (for comparison: € -349.7 million), particularly as the group was able to significantly reduce accounts receivable. The cash-flow from investing activities fell significantly from € -97.5 million to € -401.7 million due to changes in the scope of consolidation as well as the strong growth of the operating activities. The cash-flow from financing activities grew by +180 % to € 702.0 million above all due to the entry of the new core shareholder.
* adjusted for the one time result of the DEUTAG sale in 2006
Employees
As a result of the rising construction activity, the group’s average level of employment rose to 59,287 employees. This corresponds to an increase of about 14 % compared to the first nine months of 2006. STRABAG reported the strongest growth in its workforce in the Middle East, Poland and Russia. In Russia, the workforce grew by around +82 % to 1,585.
Outlook
In the first nine months of 2007, the STRABAG Group laid the solid foundations for further growth. The proceeds from the IPO, which are not yet included in the accounts here present, are to be used among other things to expand the market presence in Central and Eastern Europe and to strengthen the group’s raw materials base. The profitable growth trend of the first nine months is to be continued in the fourth quarter 2007. One focus is the Russian market, with an emphasis on projects in Moscow, St. Petersburg, Yekaterinburg and, in the medium term, in Sochi, the site of the 2014 Winter Olympics. Studies are currently being conducted to determine which construction projects in the region around Sochi to place bids for. No effect on output volume or results for the full year 2007 is expected in this regard. In the Hungarian market STRABAG SE expects a recovering due to the acceptance for its bid for the construction of the highway M6. If business proceeds as planned, STRABAG currently expects to report growth in construction output for the full year 2007 to nearly € 11 billion. Furthermore, the profit (adjusted for special items resulting from the sale of the stake in DEUTAG KG in 2006) is forecast to surpass last year’s levels.
Statement CEO Hans Peter Haselsteiner
Hans Peter Haselsteiner, CEO of STRABAG SE: “In October 2007, STRABAG SE began trading in the Prime Market Segment of the Vienna Stock Exchange (Wiener Börse) and was selected for listing in the ATX index. We plan to use the proceeds from the IPO to continue to grow. It is a particular pleasure for me, in our first interim report as a listed company, to be able to report that in the first nine months of the financial year our profitability grew significantly more strongly than our output volume. A plus of 28 % in EBIT speaks for itself.
We were able to raise our margins by strategically shifting our activities to more profitable growth markets and by applying a strict risk management policy. We are currently working on greatly expanding our market presence. This is particularly true for Russia, as the margins in that country are significantly higher than those of the group average. Russia already contributes 11 % to the group’s order backlog and will contribute even more in the future. The effects on the 2007 full-year results will be low, but we expect significant positive effects from this strategy in the years to come.”