Ballast Nedam Annual Results 2008: Results in Line With Expectations

Results in line with expectations

The Infrastructure division again improved its operating result. Theresult was in line with the forecast, and was satisfactory in view of thedeterioration in market conditions. Volumes were excellent in all segments ofthe infrastructure market. The price level in the public procurement marketfor traditional contracts remained unsatisfactorily low. The sharp pricerises imposed by suppliers and subcontractors depressed the margins evenfurther. The regional companies, which are largely dependent on publictenders of this kind, suffered most severely from this trend. The largeprojects were better able to elude these problems, and they booked anexcellent result. One factor in their favour was the good performance ofprojects in new contract forms, and another was the focus on niche segments,such as industrial construction and offshore wind farms. The price rises andthe satisfactory volume in the market enabled the specialized companies, theprefabricated concrete companies and the raw material companies to achievesatisfactory results.

Various innovations are helping strengthen our position on this nichemarket. Infrastructure has developed a frame that enables the heavy liftvessel Svanen to pick up complete heavy windmills in the harbour, transportthem to the offshore location, and then install them on site. Thisdevelopment renders unnecessary the assembly of wind turbines from multiplemodules in expensive and risky offshore time. Furthermore, the technicalfeasibility of a drilled prefabricated concrete pile as an offshore windturbine foundation has been demonstrated. The advantages of this foundationare reduced noise levels, because no percussion is needed, lowermanufacturing costs, and the greater price stability of concrete comparedwith steel.

Building and Development

A number of regional construction companies produced a disappointingperformance. The regional companies bore the brunt of greatly elevated costs,which could not be charged on in full to customers. Errors made in theprimary process in some regions were then duly magnified in a financialsense. Organizational adjustments and changes in working methods have sincebeen put in place in the regions concerned. The large projects performed wellin line with expectations. Property development produced excellent results,as did the division’s two prefabricated concrete companies.

In the coming years, as in 2008, we expect a substantial fall in thevolumes of both housing and commercial construction. For housing we foresee asimilar decline in the number of homes due for completion. In the commercialproperty market the proportion of semipublic and public works contracts, forinstance in the care sector, is set to increase.

Ballast Nedam Concessies

Ballast Nedam Beheer

Ballast Nedam Beheer was formed in 2008 through the merger of activitiesfrom the two divisions. Ballast Nedam Beheer manages the maintenance andoperation of infrastructure items, real estate, and energy-related projectsalike. Beheer was involved in the successful acquisition of PPP projects andof design & construct infrastructure projects with a long-term maintenancemanagement component. The ongoing Waldwei N31 road project, the N210 roadproject now under construction, the real estate portfolios of AllianceApotheek, SEB and Belgravia, the Egmond offshore wind farm, and the CNG Netnatural gas filling stations are examples of projects under management.Ballast Nedam Beheer works on projects for both divisions, and isproportionately consolidated on a 50% basis in each division.

On a group level, the margin decreased to 2.9% on a 12% higher revenue.This margin was slightly below the target range of 3% to 5%. TheInfrastructure margin increased from 2.7% to 2.8% on a slightly higherrevenue. On a much higher revenue, Building and Development saw the marginfall from 5.5% to 3.9%.

Recent developments that are a perfect fit with the Ballast Nedamstrategy include the final contract award of the offshore wind farm Baltic 1and a contract for the construction of Nieuwegein town hall. CNG Net’scontract with public transport operator HTM in 2008 for the design,construction, maintenance, financing and operation of a natural gas fillingstation for 125 city buses, which was concluded in 2008, has recently beenfollowed by a collaboration agreement with Tamoil Nederland B.V. for buildingat least 10 natural gas filling stations. This is an important step inrolling out a nationwide filling station network. There were 13 operationalfilling stations at the end of 2008, with a further 7 under construction.Ballast Nedam Concessies and its partner Econcern have also acquired theexclusive development rights for two Dutch offshore wind farms: Helmveld 493MW and Rotterdam NW 180 MW.

Equity and cash flows

Financing

The Ballast Nedam share

Dividend policy

Strategy

Ballast Nedam’s three main strategic priorities in 2009 are as follows.

To increase the value of the business through further improvements in itsoperating performance (‘operational excellence’) and to increase margins on astructural basis through a change in the mix of activities: a greaterproportion of development and of management of maintenance and operationcompared with construction, and a greater proportion of operations in nichesegments (such as offshore wind farms, industrial construction, internationalprojects, large complex projects, high-rise construction and compressednatural gas [CNG] stations). Achieving an improvement in the operationalperformance of the regional companies is a major priority for 2009.

To strengthen the front and back ends of the horizontal value chain byacquiring land positions and to strengthen the activities in the field ofproject development, by strengthening management of maintenance andoperation, and by gaining a leading position in the PPP market. A prudentapproach will be taken in 2009 regarding investment in land positions.

To strengthen the supply companies in the vertical value chain byenhancing the product range and expanding the specialized companies,continuing to improve the operating performance of the prefabricated concretecompanies, and replacing and possibly expanding the raw-material concessions.

Outlook for Ballast Nedam in 2009

For 2009 the Board of Management expects the operating result of theInfrastructure division to remain almost unchanged on a likewise unchangedrevenue.

The Board of Management expects the Building and Development division toachieve a lower operating result on a lower revenue in view of the virtualstandstill in the market for property development, and in particular thehousing market. No improvement is foreseen in this situation in the shortterm. Building and Development will accordingly adjust the cost level ofdevelopment activities, intensify cooperation with housing associations, andaccelerate the development or redevelopment of less expensive homes.

SOURCE Ballast Nedam NV

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