July 7, 2014 / 9:41 AM / 3 years ago

UPDATE 1-Dutch builder BAM plans cost cuts, divestments after losses

* BAM announces 75 mln euro loss on 2 projects

* Shares tumbled more than 20 pct

* CEO rules out issuing new shares to raise capital (Adds details, CEO quotes)

AMSTERDAM, July 7 (Reuters) - Shares in Dutch construction company BAM Group plunged more than 20 percent on Monday after the builder announced heavy losses at two projects, prompting it to promise sweeping cost cuts and consider selling off assets.

The company pledged cost savings and property divestments netting some 200 million euros ($272.81 million) a year. Chief Executive Nico de Vries, on an analysts’ call, said he was “open minded, looking to all possibilities” regarding selling parts of the company. He ruled out issuing new shares to raise capital.

BAM announced losses of 75 million euros - more than its 2013 profit - at two projects in Britain and Germany, the result of poor ground conditions and unexpectedly bad weather, which had required expensive remedial measures at both sites.

“I apologise for these results,” said de Vries. “We accept the urgent need to raise our game.”

“For both projects we can now see that we bid too sharp,” he said. “We ended up bearing the contract risk for the ground conditions and we underestimated the potential downside.”

The company had tightened up on bidding procedures and could no longer make the same mistake, he said.

BAM shares were down 24.3 percent to their lowest level since November 2012 at 0926 GMT.

BAM, which has a workforce of 25,000 and is heavily exposed to troubled construction and real estate markets across Europe, has had a difficult few years and was forced to cut 500 jobs in 2013.

Earlier this month it announced the merger of its civil engineering and roadbuilding subsidiaries, which it said would cut management overheads.

“A healthy financial situation is the top priority,” de Vries said, announcing plans to raise the company’s working capital by 300 million euros. “We want to keep the capital ratio above 20 percent.”

The company said the cost savings were needed to keep the company within its banking covenants. It would also consider divesting other assets to improve results.

“I am open minded about this and will consider all options that will unlock value and not damage the future performance of the group,” de Vries said. But he ruled out issuing new stock in the company, which made a profit before tax, impairments and one-off charges of 49.8 million euros in 2013.

It is due to announce first-half results on Aug. 21.

The company would use external consultants to help find ways to cut costs, he said. ($1 = 0.7331 euros) (Reporting by Thomas Escritt; Editing by Kenneth Maxwell and Susan Fenton)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below