Colas to sell subsidiary
By Sandy Guthrie15 January 2016
Colas is to stop production and sales of refined products in France, and has decided to sell SRD (Société de la Raffinerie de Dunkerque).
The board of French-based Colas, the transport infrastructure company which is part of the Bouygues group, has been examining its three-year business plan and reviewing the group’s activities – including SRD.
Chaired by Hervé Le Bouc, the board found that for the last few years, this line of business had recorded increasingly high losses, with €22 million in current operating losses in 2012, €46 million in 2013, €64 million in 2014 and an estimated €75 million for 2015.
At the end of 2014, in an effort to save the SRD production site, the decision was made to suppress the base oil production lines and to refocus on the production of bitumen.
It said the target was progressively to reach the operating break-even point in 2016 and 2017, at a time when the price of crude oil was still over US$100 a barrel.
Colas said that unfortunately, 2015 had shown that this model was not viable for Colas.
It said that in particular, crude oil prices had continued to fall since the end of 2014, coming close to the US$30 mark, leading to a decrease in the sales price of refined products. This fall was made worse by lower demand in France and in Europe as a result of a sharp contraction of road markets, said Colas.
It added that on the other hand, the purchase price of the raw material (vacuum residue) required for the production processes had not decreased at the same rate.
Lower bitumen sales prices coupled with raw materials prices remaining high reduced refining profit margins to practically zero, it said, leaving fixed costs at the production unit uncovered. The result was that the cost price of refined products was much higher than the sales price of bitumen.
The board said that faced with what appeared to be a lasting effect on the market, projected losses had led to the halt of the production and sales of refined products, and that the group was now looking for a buyer for SRD.
It said this decision resulted in the recognition of non-recurring expenses in the financial statements at 31 December, 2015, of some €80 million.
Colas said that with these non-recurring expenses, net income for Colas in 2015 should be close to that of 2014, excluding the capital gain from the sale of its stake in Cofiroute, its concessions company, which was sold to Vinci.