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FCC completes asset writedowns in the first half of 2013


FCC completes asset writedowns in the first half of 2013

  • The impact of the Alpine liquidation and depreciation of Energy area assets led to a loss of 607 million euro.
  • The Group maintains its objectives and is accelerating fulfilment of its strategic plan.
  • Interest-bearing debt declined by 6.1% while the backlog expanded by 6.6%


FCC completes asset writedowns in the first half of 2013

FCC, the Citizen Services Group, ended the first half of 2013 with a loss of 607 million euro, due mainly to writedowns at subsidiaries Alpine and FCC Energy. Having completed those adjustments, the asset writedown process that began last year is practically complete, and the company is now concentrating on the early execution of its strategic plan.

The income statement for the first half of 2013 reflects two exceptional circumstances: the insolvency and subsequent liquidation of Alpine, FCC Construcción's subsidiary in Central and Eastern Europe, and the value adjustment at FCC Energy as a result of the regulatory changes implemented by the Spanish government. Those adjustments together represent a loss of 570 million euro: 372 million euro at Alpine and 147.9 million euro at FCC Energy.

Losses recognised in the income statement in the first half of 2013 do not change the forecasts in the budget or in the strategic plan, which focuses primarily on reducing debt and attaining a recurring cash flow of 800 million euro and EBITDA of 1.2 billion euro within two years.

Group revenues amounted to 3.133 billion euro in 1H13, i.e. 13.7% less with respect to the same period last year. Revenues reflect the effect of divestments in the period, including the handling business. In terms of geographic areas, the market in Spain contracted, contrasting with growth in Central America, the US, the Middle East and North Africa. For comparison, Alpine's contribution was eliminated from the figures for the first half of 2012 (Alpine's assets and liabilities were derecognised following the declaration of insolvency and the commencement of the process to liquidate the construction company and its holding company by the receiver in June).

EBITDA totalled 293 million euro, i.e. a decline of 34.7%. This figure slightly exceeds the company's expectations, which assume lower profit in the first half as a result of the seasonal nature of certain activities, such as construction and cement. Environmental Services and Water contributed more than 90% of EBITDA in the first half of the year.

A total of 210 million euro was recognized for depreciation and amortisation, 6.3% less than in the same period of 2012. Other operating income, which amounted to 46 million euro, was attributable to the Cement area and reflects capital gains of 104 million euro from the asset swap with CRH and the sale of a port terminal in the UK, and also provisions of 60.8 million euro for impairments and staff restructuring costs. As a result, EBIT amounted to 129.3 million euro.

Income before tax from continuing operations was -92 million euro due to net financial expenses of 210 million euro. The latter increased almost entirely due to the complete refinancing by Cementos Portland Valderrivas, while other financial income totalled -9.2 million euro, due to changes in the fair value of financial instruments.

The parent company's net attributable income amounted to -607 million euro, after applying the following to pre-tax income: corporate income tax (+50.6 million euro, due to a tax credit), net losses at FCC Energy (-147.9 million euro, due to the successive regulatory changes implemented by the Spanish government), other assets reclassified as discontinued operations (-50.1 million euro), and writing off Alpine (-372 million euro).

Group capex was 361 million euro, of which 148 corresponds to injections at Alpine prior to its declaration of insolvency. The remainder was maintenance capex for the Environment and Water businesses.

In line with the leverage target established in the strategic plan, net interest-bearing debt declined by 433 million euro, i.e. 6.1% with respect to December 2012. The 6.654 billion euro in debt does not yet reflect the effects of the main divestments in the first half (50% of Proactiva, for 150 million euro; 49% of the Czech water business, for 97 million euro). Those two operations, together with the disposal of FCC Construcción real estate assets and the reduction of the debt due to the deconsolidation of Alpine, will provide total divestments of almost 1 billion euro.

All these divestment processes are under way at present, and the programme is expected to be completed by year-end or in the first half of 2014 at the latest. Debt amounted to less than 5 billion euro as a result of divestments and cash flow.The backlog expanded to 32.935 billion euro at the end of the first half, i.e. 6.6% more than in the same period in 2012. Order intake increased in the three business areas, especially in Environmental Services, guaranteeing more than 3.5 years' work.