Ferrovial annual profit cut in half by refinancing costs, slower growth, lower gainsFebruary 26, 2008 at 4:37 am | Posted in Aviation, BAA, Borrowing, Business, Construction, Credit crunch, Debts, Ferrovial, Finance, Gains, Growth, Heathrow, Heathrow airport, Refinancing | Leave a comment
Higher refinancing costs; slower homebuilding growth in Spain bite
By Aude Lagorce, MarketWatch
Last update: 6:10 a.m. EST Feb. 26, 2008
LONDON (MarketWatch) — Grupo Ferrovial SA, the Spanish builder that also owns U.K. airport operator BAA, on Tuesday posted a 49% drop in annual profit as higher refinancing costs, slower building growth and lower exceptional gains dented the bottom line.
Net income fell to 734 million euros ($1.09 billion) from 1.43 billion euros a year earlier, when the group sold several assets including Bristol airport. Earnings before interest, taxes, depreciation and amortization rose 31% to 3.05 billion euros. Revenue climbed 18% to 14.6 billion euros in the first year that BAA was consolidated.
The results, however, missed consensus expectations for net profit of 885 million euros and EBITDA of 3.04 billion euros, according to a survey of 11 analysts conducted by FactSet.
Ferrovial (ES:016260101: news, chart, profile) shares rose 5.4% in Madrid morning trading. The shares are still down 47% from a high of 82.95 euros at the end of April 2007.
Part of the miss was due to higher refinancing costs. Borrowing costs have risen this year as a result of tighter lending conditions in the capital markets. Ferrovial said its financing costs increased to 1.90 billion euro from 1.23 billion euros a year earlier.
As of the end of 2007 the company’s net debt stood at roughly 30 billion euros. Most of it was taken on to finance the 10.3 billion-pound purchase of BAA in 2006. BAA is the world’s largest airport operator. Refinancing plans were delayed last year by a U.K. review of the fees that BAA can charge airlines.
Ferrovial on Tuesday said it is still working on plans to refinance 10 billion pounds in debt despite “challenging conditions” in capital markets.
Chief Financial Officer Nicolas Villen said at a presentation following the results that the refinancing plans also depend on regulatory decisions concerning BAA’s pricing regime. A decision on the matter is expected early next month.
At the same time that financial markets took a turn for the worse, the Spanish housing market has started to wobble. Revenue at Ferrovial’s construction business rose just 1.1% to 5.2 billion euros compared to growth of 17% last year. Operating profit fell 17% to 351 million euros.
At the airport division, much bigger since the acquisition of BAA, revenue rose 89% to 3.86 billion euros and EBITDA improved 77% to 1.54 billion euros. Passenger growth in the U.K. rose 1.6% to 150 million passengers. In 2007, Ferrovial shed non-strategic assets outside of the U.K, including stakes in Sydney and Budapest airports, to lower the financing costs related to the BAA purchase.
BAA is raising a 1 billion-pound loan against its regional airports, the Sunday Times newspaper reported at the weekend.
Ferrovial said it expects BAA to generate about 300 million euros in losses in 2008 compared to 217 million euros in 2007.
At Cintra, the Ferrovial subsidiary that specializes in managing toll roads and car parks, EBITDA rose 17% to 694 million euros and revenue climbed 16% to 1.02 billion euros.
Despite the difficult lending conditions, Ferrovial Chairman Rafael del Pino has yet to renounce expansion plans entirely. On Tuesday he confirmed media reports that the company is studying acquiring an airport in the U.S. Still, he added that any operation will depend on “market conditions” and declined to provide additional details.
Ferrovial could also continue to divest certain assets. Del Pino didn’t rule out the potential sale of other U.K. airports. It sold Bristol airport in 2006.
End of Story
Aude Lagorce is a senior correspondent for MarketWatch in London.
This is straight from MarketWatch this hour. (I post on Pacific Time, you see.) I have more to tell you on this topic, but am late for an appointment, so apologies as I dash off >>>