* Bilfinger scraps goal for rise in adjusted 2014 profits
* Now sees adj EBITDA at 380-400 mln eur vs 419 mln in 2013
* To cut capacity and costs, restructure power business
* Shares drop as much as 17 percent to one-year low
* No plans to cut dividends - CEO
(Adds details on Power)
By Marilyn Gerlach
FRANKFURT, July 1 Shares in Bilfinger
slumped on Tuesday after the German engineering and services
group issued a profit warning and said it would have to
restructure its power business, entailing "significant" job
Its shares fell nearly 18 percent after it scrapped its
forecast for a rise in 2014 profit, blaming Germany's shift to
Chief Executive Roland Koch said the company planned to cut
capacity and costs at its power business, which would result in
"significant" job losses, without being more specific. Its power
sector employs 10,000 people worldwide.
The company did not plan to cut dividends, however, as it
would remain profitable, Koch said.
Germany's decision to phase out nuclear power and push into
renewable energy means big utilities - major customers of
Bilfinger - are cutting costs and adjusting strategies, so they
are investing less in power and industrial services than the
company had expected.
The falling price of natural gas in the United States has
also prompted oil and gas companies to reduce their investments
in Germany, where Bilfinger generates some 39 percent of output
Bilfinger is in the midst of switching out of civil
engineering and construction businesses to wean itself off a
business model vulnerable to price wars in the building sector
and is focusing on providing higher-margin engineering and
services for industrial facilities, power plants and real
Most of the clients of its power division, which generated
about a third of Bilfinger's core profits last year, are German
utilities like E.ON, RWE and EnBW
, as well as major utilities in other countries.
Koch said on Tuesday that several of the power division's
clients were either cancelling projects or were withdrawing
tenders, with the high pressure piping business particularly
Bilfinger said late on Monday that it now expects its 2014
adjusted earnings before interest, tax and amortisation (EBITA)
to fall to 380-400 million euros ($520-$545 million) from 419
million last year. It expects adjusted net profit to drop to
230-245 million euros, from 255 million euros in 2013.
The company had previously - in May - forecast both adjusted
EBITA and adjusted net profit would "increase significantly"
compared with 2013.
The power and industrial businesses accounted for about 86
percent of Bilfinger's 409 million euros of adjusted EBITA last
Bilfinger's shares closed down 17.7 percent at their lowest
since September 2012.
DZ Bank analyst Jasko Terzic said the profit warning was
"very surprising" and implied Bilfinger's customers were cutting
their spending more than expected.
Bilfinger estimates that its power business will see output
volume fall to 1.5 billion euros this year compared with 1.7
billion last year.
Koch said capacity at its high pressure piping business in
Germany, where it has around 1,100 employees, would have to be
slashed by half and the adjustments would lead to an additional
restructuring expense in the low to middle double-digit million
range in the second half of the year.
But Koch, a former premier of the German state of Hesse,
said while the group faced "market stress" at the moment, it was
"With all this difficulty we are still in a comparatively
robust situation. We are not in a free fall ... we are not in a
situation where we have to cut dividends," he said.
($1 = 0.7331 euros)
(Additional reporting by Kirsti Knolle; Editing by Maria
Sheahan/Pravin Char/Susan Fenton)