German contractor Hochtief reported a first quarter net loss of € 169,5 million, compared to net profit of € 34,1 million in the same period in 2010, after poor results at its Australian subsidiary Leighton impacted group figures significantly.

In line with the profit warning it issued earlier this year, Hochtief said it expected full-year profit before taxes to be about half 2010's figure of € 756,6 million as a result of Leighton's woes.

Leighton, which announced a net loss of AU$ 382 million (€ 285 million) for the nine months to 31 March 2011, said it expected to report a net loss of AU$ 427 million (€ 319 million) for the 2010/11 financial year after having to write-back earnings on two major projects and also suffering impairments on its business in the Middle East.

Nevertheless, Hochtief's remaining divisions reported positive results for the first quarter, albeit not enough to offset the sharp fall in Leighton's earnings.

Hochtief Europe profited from improved project margins in the German building construction business and successes in international markets, improving its operating earnings by € 23 million to € 30,6 million in the first quarter.

And Hochtief Americas more than doubled operating earnings compared with the prior-year quarter to € 47,7 million, while Hochtief Concessions also reported a € 6,9 million increase in operating earnings year-on-year to € 24,9 million.

Strong orders

The group also reported strong momentum on its order books. Fuelled by major new contracts in Hochtief's Asia Pacific division, new orders totalled € 5,4 billion, up +57% compared to the first quarter of 2010. The order backlog stood at € 45,6 billion at the end of the first quarter, an improvement of +25% on the prior year's figures.

Hochtief also indicated that it expected the negative impact from Leighton to be short term. For 2012 and 2013, the group expects to report net profit of € 500 million and € 450 million respectively.

Meanwhile, the saga of Hochtief's hostile takeover by Spanish contractor Actividades de Construccion y Servicios (ACS) moved a step closer to its endgame this month after ACS dominated in the election of Hochtief's new supervisory board.

Board exodus

Hochtief's former supervisory board Chairman Detlev Bremkamp, together with board members Hans-Peter Keitel, Heinrich von Pierer, and Wilhelm Simson stepped down as candidates, while ACS increased the number of its representatives on the eight-strong supervisory board from two to four.

In addition to these departures, three members of Hochtief's five-strong Executive Board also stepped down in April, while Hochtief CEO and Executive Board chairman Dr Herbert Lütkestratkötter has also announced his retirement from the company, despite being aged 61 - six years short of the normal German retirement age - and having occupied the post for just two years.

ACS announced an all-share takeover offer for Hochtief in December. The company says it aims to secure just over a 50% stake in Hochtief to give it control of the company but still leave a substantial number of shares available as a free float. The move was opposed by Hochtief's management.

ACS spent € 736 million during the first quarter purchasing Hochtief shares in a bid to breach the 50% ownership threshold in the reluctant German contractor. ACS said in its first quarter results release that it had built a 43% stake and added that it expected to reach 50% ownership by the end of June.

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