Strabag thinks positive despite drop in half year group revenue

Publicly listed construction company 945 Strabag reports “a very positive development” in the first six months of 2016, despite lower group revenue.

Consolidated group revenue fell back 8% to €5,312.15 million.

Strabag also generated an output volume of just over €5,677 million in the first half of 2016, corresponding to a decrease of 8%. The report noted that output volume declined in Germany against very high levels reported for the same period last year. “The same can be said of Hungary and of Russia and neighbouring countries,” the report said.

The order backlog increased 4% over the first half of the previous year to reach just over €15,413 million.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) improved in the first half of 2016 by 27% to nearly €156.8 million. “This was in part because large-scale projects and southeast European markets were no longer a burden,” according to the report. “However, this figure also includes earnings from the sale of a shareholding related to the acquisition of the minority interest in subsidiary Ed. Züblin that cannot be assigned to the operating business.”

The depreciation and amortisation was reduced by 8% especially through the sale of the equipment of the hydraulic engineering business. The earnings before interest and taxes (EBIT) amounted to -€20.78 million. “The fact that this figure is not in positive territory is usual for this time of the year,” according to the report.

The board expects a slightly lower output volume for 2016. Organic growth at about the level of inflation is expected for the years to come. The Management Board confirms the target of achieving a sustainable EBIT margin (EBIT/revenue) of 3% starting in 2016, as the efforts to further improve the risk management and to lower costs have already had a positive impact on earnings.

“A non-operating profit led to a steep increase of our earnings. But even adjusted for this effect, the earnings improvement would still have been quite positive,” said Thomas Birtel, chief executive of Strabag. “We, therefore, confirm our aim of achieving an EBIT margin of 3% for the full year 2016, even when not taking into account the unplanned profit.”

Züblin Scandinavia, a Swedish subsidiary of Ed. Züblin, was awarded a contract by the Swedish transport authority Trafikverket to build a section of the Stockholm motorway bypass. The project comprises the construction of around 950m of motorway, including an interchange for a total of about €76 million.

The Stockholm Bypass in the northwest of the Swedish capital is part of the E4 motorway and will have a total length of 21km and six lanes. Work on the Zublin’s Akalla section is to be concluded in 2021 while completion of the entire project, with a total value of about €3.1 billion, is scheduled for the 2025.