Interim Management Report
Financial Review
Earnings
HOCHTIEF generated sales of EUR 3.8 billion in the first quarter of 2008, up 3.2 percent on the same period in 2007 (EUR 3.68 billion). Redoubled efforts to open up new growth areas in the previous year and the target-driven expansion of our capabilities are thus beginning to show results. At the HOCHTIEF Americas division, entry into the US transport infrastructure market in late 2007 supplemented the increase in sales due to organic growth at Turner. HOCHTIEF boosted sales on the important US market by a substantial 18.3 percent compared with the prior-year quarter, from EUR 1.46 billion to EUR 1.73 billion. The fall in the US dollar means that this increase is artificially reduced on translation into euros, the Group currency. In local currency, Turner raised sales by some 25 percent to USD 2.35 billion (from USD 1.88 billion in the first quarter of 2007). The HOCHTIEF Asia Pacific division, on the other hand, reported a decrease in sales compared with the prioryear period, from EUR 1.49 billion to EUR 1.24 billion. It should be borne in mind in this context that Leighton benefited especially in early 2007 from the market trend in infrastructure projects as well as from strong demand for natural resources in contract mining services. Also, a larger proportion of business in the period under review was conducted in joint ventures. Sales in the remaining divisions continued to grow. The HOCHTIEF Europe division benefited from the healthy trend in its Eastern European business with first-quarter sales up from EUR 456.3 million to EUR 494.1 million, while sales at HOCHTIEF Services climbed due to the expanded range of capabilities to no less than EUR 160.6 million (up from EUR 119.3 million).All operating divisions improved earnings in the first quarter of 2008. Operating earnings (EBITA) grew by 83.4 percent to EUR 131.9 million (up from EUR 71.9 million). Our international business continued its outstanding growth trend. The HOCHTIEF Asia Pacific division generated operating earnings in the three-digit millions in the first three months of 2008 alone (EUR 104.2 million, compared with EUR 73.2 million in the same quarter of 2007). Earnings at the HOCHTIEF Europe division have improved substantially from the situation a year earlier. The strategic realignment of the German building construction business has begun to show results, with the operating loss more than halved from EUR 27.5 million to EUR 13.5 million.
Net investment and interest income deteriorated from minus EUR 0.1 million in the prior-year period to minus EUR 17.8 million in the first quarter of 2008. Borrowing taken out by HOCHTIEF to finance the Group's ongoing expansion resulted in higher finance costs.
Profit before taxes improved from the prior-year period (EUR 65.9 million) by 56.8 percent to EUR 103.3 million.
In line with the higher earnings, income taxes rose to EUR 34.3 million (compared with EUR 23.8 million in the prior-year period). Within this figure, deferred taxes remained on a par with the prior-year quarter, and most of the increase was in current income tax, chiefly at Leighton and Turner.
The effective tax rate remained low, at 33.2 percent. There was a further 2.9 percentage point decrease from the firstquarter 2007 level of 36.1 percent.
Profit after taxes showed a marked increase carried by the positive trend in our operating divisions, climbing by 63.9 percent from EUR 42.1 million in the prior-year period to EUR 69 million in the first quarter of 2008.
Consolidated net profit rose even more strongly to EUR 32.1 million, more than three times the EUR 9.6 million figure for the prior-year period. The minority interest grew by
