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Foundations no longer to support Bilfinger business

By: Chris Anderson 12/02/2015 Chris Anderson/Bilfinger press release

Foundations General Substations Windfarms

2014 was an unsatisfactory year for Bilfinger. While output volume increased as a result of acquisitions, orders received declined significantly due to developments in the Industrial and Power business segments. In contrast, the Building and Facility business segment met expectations.

Adjusted EBITA for the Group was in line with the forecast issued in September 2014. The decrease as compared to the prior year was primarily the result of the negative development in the Power business segment. In this segment, the earnings outlook for subsequent financial years also had to be corrected. In the end, the resulting goodwill impairments led to a negative net profit.

Bilfinger intends to move forward with its continuity-oriented dividend policy. For financial year 2014, investors should receive a dividend of €2.00 per share.

Expectations for financial year 2015 are cautious: with a lower output volume in the magnitude of €7.5 billion, the Group anticipates an increase in the EBITA margin and, overall, a slight improvement in adjusted EBITA.

The Power business segment has been hurt by ongoing weakness in demand. According to Bilfinger this has been due as a result of the energy transformation in Germany and its negative impact on investment behaviour also seen in other Central European countries. They therefore believe that this requires a fundamental realignment of the segment’s activities. Output volume decreased to €1,445 million in 2014. Orders received of €1,090 million were also below the prior-year figure, as was the order backlog of €1,060 million on the balance sheet date. Due to the under-utilization of capacities in a number of areas as well as burdens from various projects, EBITA decreased to €8 million (previous year: €148 million).

Offshore and marine activities put up for sale

Activities related to foundations for offshore wind turbines and in marine construction along with the Polish production facility have been put up for sale by Bilfinger. According to their press statement this major project business no longer complies with Bilfinger's risk profile. The companies active in these areas expect an output volume for 2015 of approximately €140 million.

In this context, the Offshore Systems and Grids division will be disbanded. Bilfinger's overhead power lines business, which was also a part of this division, will now be allocated to the Power Systems division.

Bilfinger Marine & Offshore Systems has been one of the market leaders in the field of offshore foundations. The business also provided solutions for building wharfs, locks and piers, and in the construction of floodwater protection systems, pile-driven foundations and foundations for bridge construction.

Bilfinger Marine & Offshore Systems was active in the field of offshore wind energy for over 15 years installing over 630 foundations for wind turbines, meteorological masts and transformer stations at sea, often as part of international joint-ventures. Four of the largest offshore wind farms currently stand on foundations installed by Bilfinger.

The projects included Alpha Ventus, Dantysk offshore wind farm, Rødsand 2 offshore wind farm, Thanet offshore wind farm, London Array offshore wind farm and Horns Rev 2 offshore wind farm.

Construction division sold to Implenia

As planned, Bilfinger is parting with its civil engineering business: leading Swiss construction company Implenia will acquire the Construction division, which is active in Germany and other European countries. The company employs nearly 1,900 people and in 2014 had an output volume of about €600 million. The transaction is expected to be finalized at the beginning of March.

Net proceeds from the sale, after deducting transaction-related expenses, are expected to be in the magnitude of €230 million, depending on the annual financial statements for 2014 of the units sold. As a result, additional liquidity of approximately €60 million will flow to Bilfinger in the first quarter of 2015. Taking into account a risk provision, a capital gain in the low double-digit million range will remain and will also take effect in the first quarter of 2015.

Development of the Group
Despite the need for restructuring, Bilfinger belives that according to their current assessments, the global economy is about to enter a period of recovery, and that the company's markets remain demanding. Because a considerable share of sales is currently generated in difficult industries such as energy as well as oil and gas, Bilfinger generally anticipates a reserved development of its business.

Provided that the economy does not fall considerably short of current expectations and the oil and gas sector does not experience a longer-term worsening of framework conditions, Bilfinger anticipates the following development in 2015, not including future acquisitions:

Industrial
In the Industrial business segment, about 40 percent of output volume is accounted for by the oil and gas sector. In the Industrial business segment, Bilfinger currently expects a significant decrease in output volume and adjusted EBITA in 2015. Through positive effects from programs for efficiency enhancement and process optimization, an EBITA margin at the level of the reporting year is expected. Estimates relating to the extent of the consequences from the low oil price are subject to considerable uncertainty.

Power

The market for power plant services should revive somewhat around the world in 2015 when growth and thus also the financing capabilities of emerging markets once again rise. In Eastern European countries of the EU, uncertainties about European energy policy are inhibiting new construction and in Germany, a renewed increase in investments in urgently needed fossil fuel reserve capacities can only be expected when the state increases planning security through appropriate provisions. Therefore in the Power business segment, Bilfinger expects a significant decrease in output volume in 2015 as a result of restrained orders received. Adjusted EBITA was at an unusually low level in 2014. In 2015, it will increase significantly due to positive effects from capacity adjustments and as a result of the elimination of one-time burdens.

Building and Facility

Due to low interest rates in the capital markets, there is a significant pressure to invest in the euro zone, especially in Germany and the United Kingdom, therefore Bilfinger anticpates that demand on the real-estate markets will once again be at the level of 2014. Output volume of the Building and Facility business segment will grow organically in 2015 and will increase significantly as a result of the 2014 acquisition of British real-estate services provider GVA. Adjusted EBITA will show a significant increase in 2015 with a margin at the level of the reporting year.

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Foundations no longer to support Bilfinger business

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