WRAPUP 2-Dutch builders suffer from weak housing market

Thu May 19, 2011 6:29am EDT

Related Topics

* BAM Q1 pre-tax profit 25.9 mln euros (Rtrs poll 28.3 mln)

* Heijmans says Q1 revenue increased slightly

* Dutch housing market still weighs on performance

* BAM shares down 3.4 pct, Heijmans down 0.5 pct

(Adds analyst comment, detail, shares)

By Greg Roumeliotis

AMSTERDAM, May 19 (Reuters) - The two largest listed construction groups in the Netherlands, Royal BAM (BAMN.AS) and Heijmans (HEIJ.AS) are still battling a subdued domestic housing market that is hampered by stricter mortgage-lending requirements and tax uncertainties.

But the two firms have benefited from a pick-up in non-residential construction, spurred partly by government cash injections.

BAM said on Thursday uncertainty caused by stricter requirements from banks asked to provide mortgages was an important obstacle to the Dutch housing market's recovery.

Both BAM and Heijmans have suffered from a protracted property downturn but have seen a recovery in infrastructure projects, thanks to government investment which rose 10.6 percent in the first quarter in the euro zone's fifth-largest economy.

Shares in BAM and Heijmans were down 3.4 percent and 0.5 percent respectively by 0828 GMT, underperforming a flat Amsterdam midcap index .AMX.

This reflected fears over their exposure to the residential construction market, mainly because of uncertainty over mortgage lending and tax treatment.

"The provision of mortgages is an issue, but so is uncertainty over tax deductibility on mortgages and low overall consumer confidence," said Rabobank analyst Michel Aupers.

BAM said it made a small first-quarter profit of 2 million euros in property after an 18.3 million euro loss a year ago.

Its Dutch stock of finished, unsold and unlet property increased to 279 homes from 111 homes three months ago. But BAM managed to break even by selling 662 homes from its own Dutch development projects, compared to 553 homes a year ago.

Heijmans sold 355 homes in the first four months of the year, compared to 400 in the same period in 2010.

"Looking ahead, we maintain our expectation of a net profit level of 120 million euros for 2011, taking account of increased pressures on margins for new orders," BAM Chief Executive Nico de Vries said in a statement.

PENSION JOINT-VENTURE

BAM more than doubled its first-quarter result before tax and impairment to 25.9 million euros on revenues of 1.675 billion. Analysts in a Reuters poll had forecast 28.3 million and 1.639 billion euros respectively.

In a trading update, Heijmans said its first-quarter order book rose by 3 percent to 2.3 billion euros and that revenue from continued operations in that period increased slightly compared to the previous year.

BAM said the value of the work in its order book at the end of March fell by 1 percent to 11.9 billion euros compared to three months ago. Results at its construction and civil engineering segments were similar to last year.

Both groups said their construction activities had benefited from mild weather conditions. Heijmans attributed most of the rise in its order book to its infrastructure, non-residential building and technical services.

BAM also announced a joint venture with Dutch pension fund administrator PGGM in public-private partnerships in which it will transfer 150 million euros of its current contracts while PGGM will co-fund 240 million euros targeted for future contracts, easing pressure on the Dutch builder's balance sheet.

Analysts said the deal made it less likely that BAM would turn to shareholders for cash again. Last June BAM carried out a 240 million euros rights issue which it said was primarily to fund investments in public-private partnerships.

BAM's Chief Financial Officer Jan Ruis told analysts that its 2011 net profit outlook remained unchanged in spite of the PGGM deal because some profit as a result of equity sales in projects had already been factored in in its earlier outlook.

(Editing by Sara Webb and Jane Merriman)

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