Bloomberg News

Eiffage Rises Most in 5 Years as Profit Seen Rising: Paris Mover

February 27, 2012

Feb. 24 (Bloomberg) -- Eiffage SA, France’s third-largest construction company, jumped the most in almost five years after predicting cost cuts and a record backlog will boost profits and trim debt in 2012.

Shares of the company, based in Asnieres-sur-Seine near the French capital, rose as much as 14 percent in Paris trading, the most since March 2007, and were up 12 percent to 28.54 euros as of 2:54 p.m.

“The guidance targets are reassuring,” said Gregoire Thibault, an analyst at Natixis in Paris, in a research note in which he upgraded the stock to “buy” from “neutral.” “We’re confident that the group’s contracting margins will rebound as of 2012.”

Eiffage’s margins are benefiting from a record backlog of contracts, the closure of loss-making units in the Czech Republic, Belgium and the Netherlands, and a more selective approach to road works orders in France, Chief Executive Officer Pierre Berger said. The closure of subsidiaries will save more than 10 million euros this year, the CEO said.

Net income, which dropped 12 percent to 205 million euros ($275 million) last year, will rise in 2012 as revenue will climb by 2 percent this year to 14 billion euros.

Last year’s operating margin at the company’s public works unit narrowed to 0.2 percent of sales, hurt by provisions on a contract to build a soccer stadium in Lille. Margins at Eiffage’s building and metal works units were little changed, and profitability was up at its energy infrastructure division as it slashed costs.

Stadium Burden

Losses stemming from the stadium, to be completed by September, “are significant,” the CEO said at a press conference today, while declining to give an amount. “Without them, net profit would have climbed” in 2011.

“In 2012, we’re expecting an increase in the operating margin and net profit despite the increase in financial interest tied to the refinancing of the debt of toll roads,” Berger said.

The company’s debt fell by 568 million euros to 12.6 billion euros last year as the company decreased its working capital requirement and sold its stake in a company that operates jails in France. It plans to trim its debt by 2 billion euros in five years, helped by rising profits and further asset sales from 2014, the CEO said.

Eiffage’s Eiffarie unit, which controls the APRR toll-road company, will seek to pay back a 2.8 billion-euro structured credit term loan “as soon as possible” because it’s “expensive,” Max Roche, the head of Eiffage’s concessions, said yesterday.

APRR may sell bonds in coming years to help repay the Eiffarie loan, Roche told journalists today.

Eiffage remains in litigation over 175 million euros of extra works and future maintenance of a hospital it’s built in the south of Paris, the CEO said.

It and Spanish partner Actividades de Construccion & Servicios SA are also seeking to recoup 348 million euros on the construction of a rail line. A ruling is due at the end of 2012, which may have a positive effect on Eiffage’s 2013 accounts, Berger said today.

--Editors: Andrew Noel, Robert Valpuesta

To contact the reporter on this story: Francois De Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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