By Brenda Goh
LONDON Feb 28 Builders are struggling in the
face of weak economic growth and sluggish construction activity
across Europe, with several announcing writedowns, restructuring
plans and job cuts on Thursday.
Government spending cuts and tightening private sector
budgets in Europe have held back a recovery in construction
markets in the region, in contrast to the United States, which
is seeing signs of improvement.
Dutch builder Heijmans said on Thursday that it
wrote down its property holdings on the way to a
bigger-than-expected 2012 loss, while Germany's
biggest construction firm Hochtief AG said it may sell
about half its European businesses after missing expectations
with its full-year figures.
In Spain, ACS, which controls Hochtief, posted a
net loss of 1.93 billion euros after writing down the value of
its investment in power firm Iberdrola and taking a loss on the
disposal of a 12 percent of the utility.
Other builders Sacyr Vallehermoso
and FCC also posted important losses
after writing down stakes in other utilities and construction
firms amid a prolonged domestic recession which has hit its core
construction and environmental businesses.
Weak economic conditions translated to a fall in first-half
profit for British construction and property firm Kier Group
, and to 1,400 job cuts in Belgium for
U.S. giant Caterpillar, the world's largest maker of
"We have had a culmination of three years of cyclical
decline and the aggregation of that is now hitting even the best
businesses. While it might not really impact much in the first
year, now, however good you are, it's unavoidable," said Cenkos
Securities analyst Kevin Cammack.
"I think we're going to see more of that," he said of the
cost cutting measures that construction firms were now resorting
Poor construction output was a key driving factor behind
Britain's recession in late 2011 and the first half of 2012, and
the country slipped back into contraction in the last three
months of 2012, raising fears of renewed recession.
European's construction market declined by 4.7 percent in
2012 due to deteriorating economic conditions in the euro zone
and is expected to contract further by 1.5 percent in 2013, with
growth only returning in 2014, said Hochtief, citing
"The situation in the housing market remains dramatic, and
this has led to writedowns on our property holdings and a
reorganisation at residential building," said Heijmans executive
board chairman Bert van der Els in a statement.
Shares in Hochtief, which trade at a price to earnings ratio
of 22 versus - sharply higher than at rivals Skanska AB
and Bouygues SA, at 14 and 9 - were down 7.2
percent at 51.5 euros, underperforming a 0.2 percent firmer
Europe Construction & Materials Index.
Heijmans shares were 0.2 percent higher at 7.08 euros, while
shares in Kier were down 4.4 percent at 1293 pence.