Strabag raises outlook

31 May 2011

Strabag CEO Dr Hans Peter Haselsteiner.

Strabag has raised its output volume forecasts for 2011 and 2012 after reporting better than expected first quarter results, fuelled by favourable weather conditions in Europe.

The Austrian contractor increased its output volume forecast for this year by € 500 million to € 14 billion and said it expected the figure to rise to € 14,3 billion for 2012. Earnings before interest and tax (EBIT) for full-year 2011 are now forecast to be € 320 million, compared to the previous forecast of € 295 million.

The revised outlook came after Strabag reported a +26% rise in first quarter output volume to € 2,3 billion, while revenues grew +24% year-on-year to € 2,2 billion. CEO Hans Peter Haselsteiner said the increase reflected the fact that construction activity in the previous year had been greatly restricted by unfavourable weather conditions.

"The first quarter of the previous year was characterised by a very long and hard winter. This year's weather conditions allowed us to begin building significantly earlier," Mr Haselsteiner said.

Growth in construction volume was witnessed across all segments during the first quarter, though it was particularly strong in the transportation infrastructures segment, where revenues increased +38% during the first quarter to € 715 million after benefitting from increases in Germany, Scandinavia and Poland.

Polish doubts

However, Strabag said it did not expect the positive conditions in Poland to continue beyond 2011. "The construction boom in Poland will likely be over towards the end of the year. In January 2011, the Polish government passed planning legislation to limit investments in road construction to € 23 billion between 2010 and 2013. Nearly the entire amount is accounted for by projects which have already been awarded," the company said.

Strabag's assessment of conditions in Poland agrees with the latest report by research company PMR, which forecast the pace of growth in Poland's construction sector to steadily fall in the remaining part of the year.

Strabag also highlighted public-sector budget cuts in Austria, which it said would lead to "a significant decline in the output volume" in the transportation infrastructures segment.

"There is price pressure and an even more significant need for acquisitions in the federal states," the company said.

Offsetting these negative pressures, Strabag pointed to the recovery in Russia - where several large scale construction projects have been awarded - and an improving construction climate in the Czech Republic and Slovakia, where the EU is funding more infrastructure projects.

Net loss

However, despite the first quarter output and revenue gains, the contractor still reported a net loss of € 117 million for the first three months of the year, albeit an improvement on the net loss of € 129 million reported in the first quarter of 2010.

The company said the weather-dependent nature of the construction industry generally led to lower results during the first two quarters of a year - an effect which was often overcompensated by the second half of the year.

The company's order backlog also fell short of the previous year's first quarter at € 15,2 billion, down -3% year-on-year. Strabag attributed this decline to the cancellation of projects in Libya due to the political unrest in that country, while the order backlog in Hungary amid public sector savings efforts.