UPDATE 2-Bilfinger shakes investor trust with third profit warning

Thu Sep 4, 2014 9:56am EDT

* Bilfinger cuts 2014 profit forecasts by almost a quarter

* Third warning since end of June

* Shares down 10 percent (Adds details from analyst and press calls, updates shares)

By Georgina Prodhan

FRANKFURT, Sept 4 (Reuters) - German industrial services and building firm Bilfinger said it was "reasonably" sure it could meet new profit forecasts after cutting them for a third time in two months because of weak power markets, driving its shares down 10 percent.

Bilfinger said a reorganisation designed to reduce the company's exposure to price wars in the construction market had resulted in internal disarray that compounded the effect of weakened demand for its services from struggling utilities.

Under former Chief Executive Roland Koch, who quit a month ago after the second profit warning, Bilfinger had begun a deep reorganisation to shift its focus from construction and civil engineering to services delivering higher profit margins.

But the move was ill-timed, coinciding with a low point for big European utilities like RWE and E.ON that are among Bilfinger's most important services customers and are struggling to adapt to a shift to renewable power.

Late on Wednesday, Bilfinger lopped almost another quarter off its 2014 profit forecasts, saying it had re-evaluated risks and opportunities after Koch's exit.

Bilfinger shares, already down 27 percent this year, fell a further 10 percent to 53.40 euros by 1254 GMT.

"I'm sure one can describe the new profit warning as kitchen-sinking - to pin the strategy problems on the predecessor and make room for a new start," said fund manager Carsten Hilck of Union Investment, who holds Bilfinger shares.

"The question is whether they will stick with this profit warning or whether more is to come," said Hilck, who sold most of his Bilfinger shares after the first profit warning.

Swedish activist investor Cevian, which has built up a stake of just over 20 percent in Bilfinger since 2011, declined immediate comment.

Baffled analysts clamoured for explanations on a conference call on Thursday morning.

"I probably have about 100 questions but I will try to keep it to three," said Will Morgan of Goldman Sachs.

Koch's interim replacement, Herbert Bodner, tried to reassure analysts there were no more skeletons in the cupboard.

"You can imagine that this forecast was done in a fashion that we can be reasonably sure that this is something that can really be accomplished," he said.

But he added: "Forecasting is not an academic process... We have to realise that this reorganisation has brought at least temporarily a certain ineffectiveness into our management."

Bodner told journalists the company's relationship with Cevian was "constructive" and he saw no immediate danger of a break-up, although the company was clearly undervalued.

He said no change in strategy was to be expected, but also said there was no growth in sight in 2015 for the Power division, which would now have to focus on making the current level of sales more profitable.

Bodner said he could give no assurance about Bilfinger's 2014 dividend yet but his personal view was that paying a dividend was important. ($1 = 0.7606 euro) (Additional reporting by Arno Schuetze and Maria Sheahan; editing by Tom Pfeiffer)

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