Interim Report January–September 2013
STRABAG SE SIGNIFICANTLY INCREASED EARNINGS IN NINE MONTHS 2013- EBIT up manifold to € 40 million after the first nine months of 2013 (9M/2012: € 2 million) – non-recurring items had been a burden in the previous year
- Output volume 5 % lower at € 9.6 billion: weather-related effects from the first two quarters nearly made up, though Poland shows the expected, strong, market-related decline
- Order books well filled at € 14.0 billion
- 2013 outlook confirmed: output volume of nearly € 14.0 billion, EBIT of at least € 260 million expected
Vienna, 29 November 2013
Today, Friday, STRABAG SE, Central and Eastern Europe’s largest construction company, announced its figures for the first nine months of the financial year 2013. The company managed to significantly increase its earnings despite a slightly lower output volume.
“We were able to nearly make up for the weather-related decline in output volume from the first two quarters of 2013. We are confident: In our home markets of Germany and Austria, there is plenty of building construction work to be done at this time. Our books are also well padded for the future, with an order backlog of € 14.0 billion – especially satisfying were the awards of several new large building construction orders in Germany. And in Poland, which recorded the greatest decline in output volume, we can see the first signs of a slight improvement of the climate in the Polish construction sector”, comments Thomas Birtel, CEO of STRABAG SE.
Output volume and revenue
The output volume in the first nine months of 2013 fell by 5 % versus the same period of the previous year to € 9,609.21 million. More than half of the decrease was accounted for by the expected, market-related decline in Poland following the end of the construction boom. On the other hand, it was possible to almost fully make up for the weather-related declines that had occurred in several countries during the first two quarters. The consolidated group revenue amounted to € 8,891.19 million, 4 % below the level of the comparison period in the previous year. In the third quarter of 2013, the output volume fell by 3 % versus the same quarter of the previous year to € 3,966.21 million, while the revenue grew by 4 % to € 3,732.04 million.
Order backlog
The company completed several large projects, such as the Olympic Village in the RANC region (Russia and Neighbouring Countries), and worked off orders in the markets of Canada and Benelux in these past months. Nevertheless, the order backlog fell by just 4 % compared to the end of September of the previous year to € 13,999.05 million, as a number of new building construction orders in Germany bolstered the order backlog by more than € 750 million.
Financial performance
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 makes little sense.
Despite the somewhat lower revenue, the earnings before interest, taxes, depreciation and amortisation (EBITDA) increased in the first nine months of 2013 by 19 % to € 328.85 million. In the previous year, damage compensation payments related to an arbitration ruling on a failed acquisition had distorted results in the second quarter and transportation infrastructures projects caused losses in Poland. At the same time, the cost development among large projects in hydraulic engineering, a transportation infrastructures project in the Netherlands and the competitive pressure in railway construction were a burden both in the period under report as well as in the previous year.
For the international business, the company had invested in specialty equipment that is now being depreciated over just a few years of construction. Depreciation and amortisation therefore increased by 5 % in the nine-month period. The earnings before interest and taxes (EBIT) improved from € 1.71 million to € 39.63 million. At € 260.38 million, the EBITDA remained nearly unchanged in the third quarter; the EBIT was down by 4 %.
The negative interest income decreased significantly after the first nine months of 2013: While the € -45.32 million of the comparison period had included approx. € -28 million in negative currency exchange rate differences, 2013 has so far seen exchange rate gains in the amount of a little more than € 5 million so that the interest income reached € -18.61 million. Below the line, this resulted in a positive profit before tax of € 21.02 million after € -43.62 million the year before. Correspondingly, the income tax was calculated at € 12.46 million – during the same period of the previous year, by comparison, the result had been negative and the taxes had provided some relief. This left net income of € 8.56 million. Non-controlling interests accounted for a result of € 10.74 million, resulting in a net income after minorities of € -2.18 million.
Due to the – now concluded – share buyback programme, the number of weighted outstanding shares was down from 104,365,968 to 102,756,227. The result per share in the first nine months of the 2013 financial year thus amounted to € -0.02 after € -0.66. The third quarter yielded a result per share of € 0.97, compared to € 0.86 in the same period of the previous year.
Financial position and cash flows
The balance sheet total reached € 10,299.28 million, showing little change versus 31 December 2012. The same can be said for the equity ratio, which settled at 30.2 % after 31.2 % at year’s end. In view of the financing need for operating activities during the period, among other things, the net debt position was up from € 154.55 million at year’s end to € 605.37 million after the first nine months of 2013.
The cash flow from profits grew by 60 % to € 248.06 million. Project financing in associated companies was replaced with bank financing. As a result, the cash flow from operating activities, which reached € -117.32 million, was 62 % less deeply in negative territory. The cash flow from investing activities could be contained by 20 % and therefore amounted to € -256.92 million. The purchase of property, plant and equipment and intangible assets was handled even more restrictively than previously and enterprise acquisitions took place to only a minor extent. The cash flow from financing activities transitioned into positive territory, from € -128.12 million to € 76.16 million. The comparison period from the previous year had been characterised by a significant repayment of bank borrowings.
Employees
The number of employees fell by only 1 % to 72,904. Large changes in several entities nearly balanced each other out here: on the one hand, the workforce in Poland was scaled back for market reasons; on the other hand, new large projects in non-European markets and in Germany resulted in the addition of more than 1,600 jobs.
Outlook
Based on the balanced business in terms of regions and segments, STRABAG SE expects to nearly reach the previous year’s output volume of about € 14.0 billion in the 2013 financial year. The reduction in Poland is expected to be countered by increases in building construction in Austria and Hungary, for example.
While STRABAG sees another slight worsening of the business environment in the European construction sector in 2013, and an intensified competition on the price as a result, it continues to believe that larger negative non-recurring items will not burden the result to the same degree as in 2012. The company therefore continues to expect the group’s EBIT to grow to at least € 260 million in the 2013 financial year.