HOCHTIEF Geschäftsbericht 2008

 

HOCHTIEF Americas Division

In the year under review, the division's companies secured new successes in North America. Turner was again recognized as the number one general builder in the United States, the world's largest construction market. Flatiron, which specializes in the civil engineering segment, was fully integrated into the HOCHTIEF Group in 2008. In addition, HOCHTIEF PPP Solutions' entry in the North American market was supported by our existing US subsidiaries.

Turner*

In 2008, Turner continued to retain its position as market leader in the high-growth educational and healthcare property segments. The industry publication Engineering News-Record again recognized Turner as the largest general builder during the year under review. Another industry publication, Building Design and Construction (BD+C), even named the HOCHTIEF subsidiary as one of the best places to work in the industry and as the top contractor of the year. Turner has ranked number one in the BD+C annual Giants survey for more than 20 years.

In the year under review, Turner secured its 15,000th large-scale contract in its more than 100-year history.

Project highlights

Education segment

In the education market segment, Turner is the number one established partner of schools and universities"a position the company further expanded in 2008. For example, we will be responsible for preconstruction planning and construction of a number of buildings for the Stanford University Graduate School of Business in California. Among the features of the Knight Management Center will be state-of- the-art solar technology, which will reduce the energy required by at least 40 percent. The sustainable green building is seeking to achieve Platinum certification, the highest level possible, for Leadership in Energy and Environmental Design (LEED) from the United States Green Building Council**.
In the period under review, Turner was awarded contracts totaling EUR 150 million by the Los Angeles Unified School District. Our US subsidiary will construct several classroom, administrative and multi-use buildings as well as sports facilities for three schools.

Healthcare segment

In the healthcare segment, market leader Turner won new hospital contracts in 2008 amounting to a total of around EUR 1.3 billion. Currently, our subsidiary's projects include preconstruction, planning and building the Middle Tennessee Medical Center Replacement Hospital in Murfreesboro, Tennessee, a contract worth approximately EUR 135 million. The building complex will have space for 286 beds, ten operating rooms, a number of diagnostic imaging facilities, an emergency department and several intensive care units. Nationwide Children's Hospital in Columbus, Ohio, was also among Turner's clients in the reporting year: Turner was selected to manage the construction of its replacement hospital. The hospital, which will accommodate 460 beds, is slated for completion in spring 2012. Turner"s business relationship with the hospital goes back 15 years.

Turner was also selected to provide construction management services for the EUR 62 million Health Services Center for Yale University in New Haven, Connecticut. Scheduled for completion in 2010, the 13,000-square-meter medical facility is being built sustainably. Yale is seeking LEED Silver certification for the Health Services Center. The university also sought the services of Turner Logistics. The procurement experts bought medical and technical products for the center. The project represents a continuation of Turner"s more than 30-year relationship with Yale University.

Public building segment

Turner is also active in the public sector. The company will manage the construction of the Readiness Center for the Army National Guard in Arlington, Virginia. Covering more than 23,000 square meters, the approximately EUR 150 million US Army building complex will be built in two phases. The project is seeking LEED Silver certification.

Sports facilities segment

In the sports facilities market segment, Turner continued construction works at the new Yankee Stadium in the Bronx, New York. The stadium offers 52,325 seats. In addition, the company completed the Citizens Business Bank Arena in Ontario, California, in October of the year under review after a construction period lasting only 18 months. The 11,000-seat arena had an order volume of about EUR 94 million. It is situated on a roughly 21,000- square-meter parcel and includes training areas, locker rooms as well as 36 luxury suites, refreshments stands and merchandise kiosks.

Green building segment

Turner identified the trend toward green building in the United States early on and is a key player in propagating the use of sustainable construction practices.

More than 300 of Turner's environmentally friendly structures valued at a total of approximately EUR 9 billion have already been completed or are currently being constructed, with 80 of these projects receiving LEED certification. Approximately 600 Turner employees hold the title of "LEED Accredited Professional." There is no other construction company in the United States employing so many specialists in this field. Turner topped Engineering News-Record"s list of the "Top 100 Green Contractors for 2008."

A building complex for Westinghouse Electric Company in Pittsburgh, Pennsylvania, is among those projects earmarked to receive LEED certification. Turner is building the headquarters campus for Westinghouse's nuclear power arm, due to be completed in 2010 and valued at a total of EUR 142 million. The contract comprises the construction of three office buildings covering more than 78,000 square meters.

Also in line for certification is the Great American Tower at Queen City Square in Cincinnati, Ohio. In the year under review, Eagle Realty Group awarded Turner the EUR 165 million contract to construct the property comprising over 74,000 square meters. Upon completion in 2011, the 41-story tower will become the tallest in Cincinnati and include offices, retail areas and a car park. Green features include

floor-to-ceiling windows to allow for maximum daylighting, the use of specially-coated insulated glass and systems to automatically introduce fresh air into the building.

Turner was selected to serve as the general contractor for the prestigious EUR 81 million office building One Marina Park Drive on Boston's waterfront, which is similarly in line for LEED certification. The 18-story tower, scheduled for completion in late 2009, features more than 46,000 square meters of office space. The building represents the first phase of construction of the Fan Pier Master Plan, an LEED registered mixed-use community development.

Turner innovations

Turner's technical know-how is notably reflected in innovative projects. In October 2008, the Experimental Media and Performing Arts Center (EMPAC) opened its doors. Turner had spent four years building the approximately 20,500-square-meter center in Troy, New York. The project features a highly innovative design – for instance, in terms of its acoustics and architecture as well as its lighting and ventilation systems. Many of the systems in the building are groundbreaking. This innovative structure includes state-of-the-art performance and production facilities, including a 1,200-seat concert hall, a 400-seat theater, eight studios and a radio station.

Flatiron*

HOCHTIEF successfully provides civil engineering services to the North American market through Flatiron, the subsidiary acquired in 2007. Flatiron is one of the top ten service providers in the United States in the bridge, road and rail transit segments and also enjoys success in Canada in these fields. The company puts us in an ideal position to tap growth markets in North America.

Project highlights

Bridges segment

In September 2008, Flatiron completed the St. Anthony Falls Bridge three months earlier than contractually agreed after just eleven months of construction time. The previous bridge over the Mississippi River, used daily by more than 140,000 cars and trucks, had collapsed during rush hour traffic in 2007. Opened amid keen media and public
interest, the new, ten-lane road stretches 370 meters over the river. Among other materials, high-performance concrete was used to ensure the superior stability of the structure built as part of a Flatiron-led joint venture, and a cuttingedge monitoring system was installed for added security. The contract was worth a total of EUR 158 million. The bridge has already received multiple awards.

In Canada, Flatiron won the contract to build a EUR 79 million steel girder bridge spanning the Athabasca River in the province of Alberta. The bridge in Fort McMurray will be completed by spring 2011, increasing the busy crossings capacity from four to nine lanes.

Currently, Flatiron is participating in a joint venture to construct a nearly eleven-kilometer stretch of the Highway 17 Bypass* around Washington, North Carolina. The project is valued at EUR 128 million. It includes construction of bridges for which Flatiron is utilizing a patent-pending variation of innovative top-down construction technique to ensure minimal disturbance to the surrounding environment.

Roads segment

In California, our subsidiary is reconstructing more than 16 kilometers of Interstate 15 near San Diego, adding new reversible lanes and direct access ramps for High Occupancy Vehicles, in a series of contracts totaling EUR 115 million. Flatiron successfully opened three new portions of the I-15 to traffic in 2008 and secured a seventh contract for I-15 improvements worth EUR 36 million for the project.

Public-private partnership segment

Flatiron is an active partner in public-private partnership projects in Canada. For example, the company is working with the NorthwestConnect PPP team to plan and build a new portion of Anthony Henday Drive. The contract for design and construction of the northwest section of the Edmonton Ring Road in Canada, in which Flatiron holds an interest of 66 percent, is valued at nearly EUR 624 million and is the largest contract in Flatiron's history. The twoand three-lane highway will circle around the provincial capital of Alberta and include 29 bridges and eight interchanges.
This is the second PPP project for the government of Alberta in which Flatiron has been involved.

Cooperation between the US companies

Cooperation between our US subsidiaries, which also market their services jointly, holds considerable potential. Turner and Flatiron received their first joint contract in summer 2008. They are responsible for planning and constructing the new terminal at Sacramento Airport under a contract worth EUR 182 million. The building covering around 30,000 square meters will consist of a 19-gate passenger concourse with an international arrivals facility. The project"s expected completion date is 2012, and LEED certification is anticipated.

Expanded PPP expertise

In the United States, HOCHTIEF combines civil engineering and building construction skills with PPP expertise. In 2008, we formed the company HOCHTIEF PPP Solutions North America, which specializes in public-sector building construction and transportation infrastructure.** As a skilled PPP service provider with international experience, HOCHTIEF is now optimally positioned through its subsidiaries also for this developing market in North America.

HOCHTIEF do Brasil***

In the year under review, the HOCHTIEF subsidiary HOCHTIEF do Brasil successfully completed a large-scale industrial construction project started in 2007. The company was involved in building a steel plant for ThyssenKrupp to the west of Rio de Janeiro. The HOCHTIEF subsidiary was responsible for the concrete work for the two blast furnaces.

Facility management activities initiated in 2007 continued during the year under review. HOCHTIEF FM do Brasil currently provides comprehensive facility management services to various shopping centers.

HOCHTIEF do Brasil saw earnings decline because of delays in the construction of small-scale hydropower plants in the first six months 2008. The projects are almost finished by now.

Americas division

(EUR million) 2008 2007
New orders 7,743.3 7,715.7
Work done 8,117.6 7,270.4
Order backlog 8,397.9 8,379.9
Divisional sales 8,045.1 6,953.3
External sales 8,045.1 6,953.2
Operating earnings (EBITA) 102.8 77.0
Profit before taxes 76.9 76.0
Capital expenditure 37.0 215.3
RONA (%) 19.0 21.8
Net assets (December 31) 465.3 482.7
Employees (average over the year) 10,752 9,778

The HOCHTIEF Americas division's key figures

Despite the general weakness in the economy, new orders in the HOCHTIEF Americas division remained at the same level as in 2007. Work done clearly exceeded the prior year. Compared with 2007, both of these order KPIs showed a negative exchange rate effect and a positive effect from the inclusion of Flatiron for the full year for the first time. The order backlog stabilized overall at the record level of the prior year.

The positive business performance in 2008 was particularly reflected in the operating earnings, which increased 33.5 percent. This increase compared with 2007 compensated the positive nonrecurring effect from the return of guarantees to Aecon in 2007. Profit before taxes stood at the prioryear level (up 1.2 percent), primarily due to the increased interest expense arising in connection with the acquisition of Flatiron.

Capital expenditure, which rose sharply in 2007 due to the acquisition of Flatiron, fell back to the level of prior years in 2008.

The increase in the average number of employees is attributable to two opposing effects: The inclusion of the Flatiron employees for the full year resulted in a significant increase. By contrast, in Brazil, temporary capacities that had been built up for the completion of major construction projects were shed again.

Outlook

Earnings in fiscal 2009 will be shaped by the general weak economy caused by the financial crisis and by uncertainties regarding the future exchange rate trend. Nevertheless, in view of the large order backlog, we are confident that the HOCHTIEF Americas division will again be able to generate the same level of profit before taxes in 2009 as in the prior year. This is assuming that no contracts are cancelled or other shortfalls occur as a result of the financial crisis.


 
HOCHTIEF Geschäftsbericht 2008 | Copyright 2008 HOCHTIEF