HOCHTIEF Annual Report 2006 - Management Report

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Financial Review

Positive earnings trend from strong growth in international activities

Exceptional sales growth
Leading position in international industry further strengthened
Ambitious business goals attained
Marked like-for-like increase in earnings

Earnings

HOCHTIEF's strong growth is reflected in an exceptional increase in sales. Total sales came to EUR 15.51 billion, up EUR 1.86 billion or 13.6 percent on the prior year's EUR 13.65 billion.

Sales growth was especially strong on international markets, where HOCHTIEF generated sales of EUR 13.38 billion- a 17.6 percent increase on the EUR 11.38 billion international sales figure in 2005. The Asia Pacific division was notable in sustaining a dynamic upward trend that had emerged in the preceding fiscal year. A contracting boom in public infrastructure on the Australian market and rapid expansion in the mining business produced substantially higher sales at Leighton, our Australian subsidiary. Leighton boosted sales by AUD 2.12 billion to a total of AUD 9.57 billion, an increase of 28.5 percent over the prior year figure of AUD 7.45 billion. On its important US market, HOCHTIEF profited from rigorous implementation of a focused structure geared to market needs. Our subsidiary Turner increased sales by 13.6 percent, from USD 7.29 billion in 2005 to USD 8.28 billion in 2006.

HOCHTIEF reaffirmed its position as the world's third biggest construction services provider and the most international company in the construction industry with an 86.3 percent international share of sales (up from 83.4 percent a year earlier).

Sales in the German construction market were down overall from EUR 2.27 billion in 2005 to EUR 2.13 billion in 2006, a decrease of EUR 144 million. Operating below capacity due to adverse weather conditions in the first four months of the year significantly weakened Europe division sales. In contrast, the Development division acted as a sales driver on the domestic market-especially in the real estate business and the highly promising PPP sector.

Group strategic focus underpinned by operating successes

Sustained growth in earnings is a central goal for HOCHTIEF. The company has made convincing progress in this regard during fiscal 2006.

When comparing earnings figures, account should be given to the gain on establishing the airport investment partnership in the prior fiscal year. This once-only item boosted consolidated earnings by EUR 51.8 million in 2005. Meaningful comparisons can therefore only be made using prioryear figures normalized for this item.

It should also be borne in mind that HOCHTIEF changed the method of accounting for pension obligations in fiscal 2006, making use of the option provided in IAS 19* for recognizing actuarial gains and losses directly in equity. Under IAS 8, this change in accounting method must be applied retroactively. The prior-year comparison figures are therefore restated to account for the change in method, as a result of which profit before taxes is increased by EUR 8 million.

*See Notes to the Consolidated Financial Statements, page 113.