Austria’s Strabag cuts investment as 2009 uncertain

Austria’s Strabag cuts investment as 2009 uncertain
Published: 01 December 2008

Austrian builder Strabag said on Friday it will cut its investment by more than half next year after a spree in which it spent the cash raised in last year’s IPO and piled up debt.

Strabag did not repeat its target to raise output by 20 percent next year, saying only that output would increase. It did confirm operating earnings would rise "slightly", but said it would review this forecast after the first quarter.

The group, one of Europe’s biggest builders and a major player in Russia, reiterated its goal to post operating earnings of EUR400m this year as it reported third-quarter earnings slightly short of market expectations.

"In the future, we will be more selective in placing bids and will choose a more careful approach regarding our growth investments," Chief Executive and co-owner Hans Peter Haselsteiner said in Strabag’s third-quarter report.

Analysts said the less certain outlook weighed on the stock but the more decisive investment cut was good news.

"I am missing (a repetition of the 20 percent growth outlook)," one analyst, who declined to be identified, said.

"They are also calling the 2008 goal ’ambitious’ now, so of course they have to think about next year too."

Strabag, in which Russian billionaire Oleg Deripaska owns a 25 percent stake, will spend about EUR1.7bn this year, on acquisitions including Austrian and Hungarian units of cement maker Cemex and the facility management arm of Deutsche Telekom.

Its net cash position of almost EUR1bn at the end of last year has turned into net debt of EUR606m at end-September because of those and other purchases.