Dear Shareholders and Friends of HOCHTIEF,
On April 1, 2007, I took over as Chairman of the HOCHTIEF Executive Board. I am now very pleased to announce good overall results for the first quarter of 2007, with a 40 percent rise in operating earnings and a 31 percent increase in profit before taxes. We have achieved this despite losses in the German building construction business.
All told, this means our company is living up to the high expectations set by clients, others we do business with, and investors. And speaking of investors, we are happy to welcome Actividades de Construcción y Servicios (ACS) as a new major shareholder. The Spanish construction group has purchased a 25.08 percent stake in HOCHTIEF. We have known ACS for many years from working partnerships on various major contracts, including joint operation of the Vespucio Norte Express toll road in Chile. We are pleased that the purchase by ACS restores stability to our ownership structure and allows us to forge ahead as planned with our successful Group strategy. Together, we are now exploring selected openings for cooperation as a way of creating extra shareholder value.
In this connection, it clearly pays that we have invested strongly in HOCHTIEF's ongoing development over the last few years. Our capabilities and services are tightly integrated throughout the Group. This is shown by the many contracts in which we bring together the abilities of multiple HOCHTIEF units to form full service packages spanning the entire value chain. We will continue to actively pursue strategic integration across our full range of capabilities. In doing so, we foster innovation - the inHaus2* project is one example.
In our strong concessions and operation module, we are able to report continued value growth across the project portfolio. HOCHTIEF AirPort as a whole has grown to become a major earnings driver for the Group. Our early mover advantage in this segment and our staying power are paying off.
We also successfully expanded our Australian concessions business in contract mining. In the first quarter, we added to our range of mining services by acquiring CE Marshall and Sons Earthmoving Pty Ltd.
In our development module, a further acquisition effected in April gives new impetus to Leighton's real estate development business: Leighton has repositioned itself in this market by purchasing a stake in Devine Limited, a leading residential developer in Australia.
In Germany, HOCHTIEF Projektentwicklung reported an excellent first quarter with high-quality new development projects. We are also notching up successes in the Central and Eastern European markets, for example, in the growth segment of logistics.
Growth in our construction module showed major regional variation. The Asia Pacific division achieved outstanding gains both in orders and in earnings. Our subsidiary Leighton is carrying out numerous major contracts, especially in the strong infrastructure business. We are also ideally positioned in the Americas division with Turner, which has recorded notable new contracting successes in the healthcare real estate segment.
In the German building business, we have had to sustain losses and now face major challenges ahead. The recovery in the construction industry led to sharply rising material prices. On several large fixed-price contracts, we have not yet been able to pass on price rises for subcontracting and materials to customers. We have taken corrective action, tightening the selection criteria for new contracts and revising the internal requirements regarding bid calculation and terms of contract when bidding. We will exercise greater restraint than ever in low-margin general contracting.
