* Expects to reach a solution with creditors
* Cuts profit target for second time this year
* Shares fall as much as 21 pct to low of 17.16 eur
By Christiaan Hetzner
FRANKFURT, Oct 29 Shares in Bauer lost
about a fifth of their value on Tuesday after the German
construction and machinery group said it expected to breach
covenants which could lead to creditors calling in 200 million
euros ($276 million) worth of debt.
The company also cut its full-year profit target for the
second time, and its shares were down 18.8 percent to 17.61
euros at 1036 GMT. The broader German smallcap index was
"This is yet another blow to the credibility of Bauer's
forecasts as it follows several earlier misses of guidance,"
Equinet analyst Holger Schmidt said, reiterating his "reduce"
Bauer specialises in products and services for civil
engineering and the exploration of natural resources. It cited
problems in most of its businesses for the cut in profit
forecast, blaming a weakness in the global construction market.
It unexpectedly booked a charge of 20 million euros from a
job building water wells in Jordan - almost all the project's
"Virtually every receivable still outstanding has been
written off, since we no longer anticipate that we will receive
anything for it," a spokesman said, blaming delays and cost
overruns for the project's problems.
The company, which employs over 10,000 people in about 70
countries, said it planned 20 million euros in cost cuts, mostly
next year. It said this would involve shrinking the workforce
through natural attrition, but declined to comment on the scale.
Due to the breach of covenants which relate to the ratio
between the firm's liabilities and earnings, the firm's 10 to 20
creditor banks could technically call the 200 million euros of
debt in at the start of next year, but the company said it did
not expect that to happen.
"The Bauer group expects that an acceptable solution will be
found in consultation with its financial partners. Covenants
will be met again next year in line with the group's financial
planning," it had said late on Monday.
Since the seasonally strong fourth quarter is only expected
to be slightly profitable, Bauer now expects a net loss of about
20 million euros instead of the 20 million euro net profit
In August, the company had cut its forecast from 30 million
Chief Executive Thomas Bauer qualified comments made on
Monday in a statement after the close of markets that said the
group was considering "withdrawing from a number of minor,
economically challenging businesses" as part of the cost cuts.
"We are not planning for any major disposal of assets," he
A spokesman said the firm, which has over 110 subsidiaries
worldwide, may fold some operations together and withdraw from
individual markets where the construction business is no longer
CEO Bauer did not rule out raising capital through a share
sale in the future. "At the moment we are not thinking about a
capital increase but we also never say no to this, this is
something we have to check for the future," he said.
He declined to speculate on whether the Bauer family, which
is the biggest shareholder with a 48 percent stake in the firm,
would potentially participate in such a stock sale.
Net debt is forecast to finish the year at just under 680
million euros, meaning liabilities will be 5 to 6 times higher
than its annual earnings before interest, taxes, depreciation
and amortisation (EBITDA).
Promissory notes issued stipulated however that net debt
must not reach 4 times its EBITDA, while some of its long-term
loans required a ratio of less than 4.75 times.
($1 = 0.7254 euros)
(Reporting by Christiaan Hetzner; Editing by Pravin Char)