UPDATE 1-Eiffage keeps goals despite weak France

Wed Aug 27, 2014 2:23pm EDT

Related Topics

* H1 operating profit up 7.3 pct to 556 mln euros

* Still expects slight rise in 2014 sales, higher profits

* CEO says likely to propose dividend hike if 2014 goals met (Adds details and CEO comments)

By Dominique Vidalon

PARIS, Aug 27 (Reuters) - French construction and concessions company Eiffage confirmed its full-year forecasts on Wednesday for higher earnings and slight revenue growth despite a difficult economic climate in France.

The country's third-largest builder behind Vinci and Bouygues said that with an order book of 12.3 billion euros at end-June representing nearly 12.4 months of activity, it expected "another improvement" in operating profit and net profit along with a decrease in net debt in 2014.

"There is a sustained pipeline of projects that looks solid," said Chief Executive Pierre Berger, citing in particular the signing of a contract to overhaul the fleet of nuclear power stations of EDF in France.

Berger told analysts that were Eiffage to deliver on its 2014 financial goals, he would propose raising the dividend and keeping it at that level for several years.

Eiffage, which built France's Millau Viaduct and the Sydney Opera House, generates roughly 85 percent of revenue from contracting operations - which include construction and public works - and the rest from concessions, mainly motorways but also prisons and hospitals.

First-half operating profit from ordinary activities rose 7.3 percent to 556 million euros (734 million) as cost control helped offset weaker sales, hit notably by a previously reported drop in public works in the second quarter.

The company's operating margin reached 8.5 percent, compared with 7.9 percent a year ago.

Revenue from public works such as road building fell 6.5 percent in the second quarter, affected by municipal elections in France in March and public holidays in May.

Berger said the worst was now over for the sector, however.

His comments contrasted with those of Europe's biggest construction and concessions company, Vinci, which said earlier this month it expected business to slow down this year because of falling orders in its home market of France.

Builders such as Vinci and Eiffage have seen construction slow down since the 2008 financial crisis and have expanded into higher-growth, more profitable concessions such as airports and motorways.

Eiffage's net debt, inherited mainly from the privatisation of French toll roads in 2006, fell to 12.6 billion euros by end-June from 13.2 billion a year earlier.

Berger said Eiffage expected to have feedback from Brussels on a 3.6 billion euro French motorway plan at the end of October.

"A new dossier was submitted on Aug. 21. Brussels has two months to react. We think that if the dossiers have been fine-tuned and re-submitted, this time it's right," he said.

Eiffage, Vinci and Abertis unit SANEF agreed with the French government last year to bear the cost of upgrades to the country's motorways in exchange for an average three-year extension of their concessions. The plan was initially submitted to EU competition watchdogs in May.

The plan is a much-awaited boost to France's builders, which have been hit hard by deficit-reduction measures. (1 US dollar = 0.7578 euro) (Editing by James Regan)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.