* Q2 group adjusted EBITA 65 mln euros vs 93 mln last year
* Power division EBITA drops to 9 mln euros
* Shares up 4.9 pct, top performer on MDAX
(Recasts, adds background, analyst comment)
By Marilyn Gerlach
FRANKFURT, Aug 11 German industrial services
group Bilfinger, whose chief executive resigned last
week after two profit warnings, said cost cuts in the second
half of the year should help cushion an expected fall in annual
Bilfinger on Monday reported a 30 percent drop in
second-quarter earnings before interest, tax and amortisation
(EBITA), adjusted for one-time items to 65 million euros ($87
million), due to weak demand in the energy market.
At the power division - which produces, supplies and
installs boiler components for power plants - earnings plummeted
by 74 percent to 9 million euros.
The industrial services and construction group has been
trying to wean itself off a business model vulnerable to price
wars in the building sector, shifting its focus to higher-margin
engineering and services for industrial facilities, power plants
and real estate.
But the strategy failed when Germany's big utilities cut
spending due to the country's shift from nuclear power to
greener energy sources.
The group issued two profit warnings within around six
weeks, blaming weak demand from energy companies and the loss of
a project in South Africa, prompting Chief Executive Roland Koch
to step down last week.
Bilfinger said last week that it expected 2014 adjusted
EBITA to drop to between 340 million and 360 million euros from
409 million in 2013. In the first half, adjusted EBITA was 111
The company's shares, down 37 percent since the first profit
warning on June 30, were up 4.9 percent at 55.12 euros by 1012
GMT on Monday on investor relief that the quarterly results were
not worse. They were at the top of Frankfurt's mid-cap index
, which was up 1.9 percent.
"It wasn't as bad as I had feared," said analyst Marc
Gabriel of Bankhaus Lampe, adding that non-core earnings helped
bolster Bilfinger's profits.
Bilfinger said it expected to make 50 million euros of cost
savings this year, as plans announced last year to cut 1,250
administrative jobs start to take effect. The company aims to
reduce annual costs by 80 million to 90 million euros from 2016.
Chief Financial Officer Joachim Mueller said the company
planned to reduce costs further at its industrial division,
although job cuts would be fewer than the 200-300 announced last
month at the power division's high pressure piping business.
Bilfinger is about 20 percent owned by Swedish activist
investor Cevian, which has been seeking to expand its footprint
in Germany. Bilfinger's share price is now about 14 percent
lower than when Cevian started investing in the company in 2011.
Its major clients are utilities, industrial companies, plant
manufacturers and research institutes. Its biggest rivals
include Alstom Power, Apiq, Balcke-Duerr,
Doosan-Babcock, Mitsubishi-Hitachi .
($1 = 0.7472 euro)
(Reporting by Marilyn Gerlach; Editing by Erica Billingham)