To better counter increased costs and supply difficulties for construction materials, we have set up a company, HOCHTIEF Procurement Asia, together with a Chinese partner. This unit supplies HOCHTIEF Group subsidiaries worldwide with construction materials and fit-out elements sourced directly and cost-effectively from Chinese manufacturers. Production is continuously monitored by our cooperation partners, TÜV Rheinland, which among other things provides inspection and certification services. In this way, we assure the material quality we require.
HOCHTIEF's business operations go hand in hand with social and environmental responsibility. We are proud to report that, as in the previous year, our sustainable management practices have been rewarded by the inclusion of HOCHTIEF stock in the Dow Jones Sustainability Indices (DJSI). We are thus once again the only German construction company to feature both in the prestigious DJSI World and in the DJSI STOXX.
New orders showed a further marked rise in the third quarter, the nine-month total of EUR 15.91 billion representing 15.9 percent growth on the same period in 2006. The increase mostly reflects growth at our subsidiary Leighton in the expanding Asia-Pacific markets, a number of successes in securing business at HOCHTIEF Development, and major contracts at HOCHTIEF Europe.
Growth in all divisions swelled work done to EUR 13.66 billion, an increase of 13.1 percent. This accomplishment is based on substantial progress on major infrastructure projects and in the contract mining business at HOCHTIEF Asia Pacific, as well as on healthy order books at HOCHTIEF Americas and HOCHTIEF Development.
The Group order backlog set a new record of EUR 27.13 billion, beating the comparative figure for the prior-year period by a clear 17 percent. Adjusted for exchange rate effects (a reduction of EUR 0.14 billion), the increase was 17.6 percent.
The outstanding orders position is also reflected in substantially higher external sales, which gained 7.9 percent from EUR 11.4 billion in the prior-year period to EUR 12.3 billion in the first nine months of 2007.
The successful business trend sustained throughout the period under review fed through to double-digit growth in our earnings figures. Despite the losses in the Europe division, operating earnings rose by 55.6 percent to EUR
Capital expenditure reached a historical high of EUR 1.4 billion, almost double the figure for the prior-year period of EUR 710.3 million. Capital expenditure on property, plant and equipment and intangible assets, at EUR 504.8 million, was broadly on a par with the figure of EUR 497.5 million for the first three quarters of 2006. As a result of the ongoing expansion in fast-growing, lucrative markets, the lion?s share of capital spending went on financial assets. In the first three quarters of 2007, HOCHTIEF has invested EUR 893.5 million in financial assets, compared with EUR 212.8 million in the same period of 2006.
Group outlook
Despite the losses in the HOCHTIEF Europe division, we are confirming our earnings forecast for the current fiscal year. The losses will be compensated for by earnings from other divisions, in some cases significantly above expectations, with particularly substantial contributions from HOCHTIEF Airport and HOCHTIEF Asia Pacific.Assuming that there will be no crisis-scale weakening of the economy during 2007, the international financial markets will not be restrained by turbulence and the situation in areas of political tension will not worsen, our forecast is as follows:
New orders, order backlog and Group sales will be above the 2006 figures. We also expect that profit before taxes and consolidated net profit will exceed prioryear levels. Consolidated net profit is set to pass the EUR 100 million mark, meaning that 2007 will already see us exceeding the medium-term target we communicated during 2006.
2007 is another successful year for HOCHTIEF. We will therefore continue to build on our effective goal of creating and growing value.
Dr.-Ing. Herbert Lütkestratkötter
