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Giant Spanish international construction, water and environmental services group Fomento Construcciones Y Contratas (FCC) which is publicly listed on the Spanish Stock Exchange and is controlled by billionaire Esther Maria Koplowitz continues to set about putting its house in order.
After losing large amounts of money, and having seen a sustained fall in its shares, late last year FCC raised some new equity capital when Bill Gates bought in to the company, and George Soros also bought some shares in the market too in December.
With a program of asset sales and changes in management the corporate ship has stabilized enough, with its shares recovering again somewhat already, for FCC to focus more of its management time on some of its particularly important new overseas contracts now. Just two weeks ago, for example, week the company’s top management were in Riyadh in Saudi Arabia to show the flag there over a massive new subway project they are building for the city.
Finally, with its 2013 full year financial results reported yesterday, FCC claims it is now at a point where it is able to draw a line under the restructuring process it has been going through and move forward to begin making progress again in 2014.
In addition, the company reports it expects to finalize very shortly new credit arrangements that have been under discussion with its banks. Taken together these are all positive developments for the company.
FCC reported total consolidated revenues of US$9.3 billion (Euros 6.3 billion) for the full fiscal year in 2013, a drop of nearly 10% year-on-year on a comparable basis, i.e. after adjusting for changes in the balance sheet because of asset divestitures during the year and the liquidation of a subsidiary.
For the full year 2013 the company is also reporting a combined consolidated net loss from all sources, including business losses, impairments of goodwill, losses on discontinued operations, restructuring charges and non-controlling interests, of US$2.08 billion (Euros 1.51 billion) The previous year the company had lost US$1.42 billion (Euros 1.03 billion), on the same basis.
In 2013 special charges and restructuring write-downs altogether totaled US$ 2.3 billion (Euros 1.68 billion), and without them the company would actually have recorded a small profit.
Having recorded a total loss of US$3.5 billion (Euros 2.54 billion) over the last two years therefore, the company’s recorded equity base has however been badly eroded, with book equity at December 31st 2013 down to just US$334 million (Euros 242 million).
Even so cash flow was positive for year and, with divestitures and the deconsolidation of an Austrian subsidiary that was liquidated, total consolidated net debt at December 31st 2013 was just US$8.25 billion (Euros 5.98 billion), a net reduction of over US$1.5 billion (Euros 1.1 billion) compared to the year before.
So even though the net equity has eroded, the company’s banks are reported to be satisfied with the substantial debt reduction and the company states that plans are well underway to complete shortly a satisfactory refinancing of its with-recourse credit facilities, to meet its needs moving forward. Of the consolidated debt outstanding at December 31st 2013 as much as US$2.87 billion (Euros 2.08 billion), or about 35% is non-recourse to the parent company.
Looking ahead as well, the company reports it expects further operating efficiencies to flow through to the bottom line in 2014. With a business backlog now of US$45 billion (almost Euros 33 billion) of contracts, provided these have been well priced the company should be able to gradually claw its way back to health and prosperity.
This has certainly been an initiation under fire for the company’s incoming Chairman and CEO, Esther Alicia Koplowitz, daughter of controlling shareholder Esther Maria Koplowitz, who came to office almost one year ago, but so far she seems to be performing at an exceptionally high level in doing all the things that have needed to be done to turn the company around.
The stock market seems to think so too, attributing a market capitalization to the company as of the time of writing of US$3.2 billion (Euros 2.3 billion) on the Spanish Stock Exchange.
With some outstanding international shareholders who obviously took the long view as well, when they came on board late last year, the company may well be back on the path to recovery, as long as the Spanish economy itself, on which much of its domestic business depends, is finally stabilizing now as well.
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