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Brazil and USA hit Arcadis profits

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Arcadis has reported strong growth in the first half of the year but that profitability was affected by tough conditions in Brazil and one-off project cost overruns in the USA.

 

Gross and net revenue grew by 41% and operating EBITA were up by 22%. The company’s ‘Performance Excellence’ programme had a positive effect, but there were also a negative impacts from one-off cost overruns of €13.9m (£9.8m) in the USA, and from Brazil where tough market conditions persist.

The company reported that the integration of Hyder is “on track with synergies captured faster than with previous acquisitions”.

The statement for the first half of the year said that the company expects to benefit from strong revenue growth from acquisitions for the full year and from positive currency effects. As a consequence, Arcadis expects 2015 revenues to grow by about 30% and anticipates net income from operations to increase by approximately 20%.

The company said that the growth in net revenues of 41% was mainly driven by acquisitions and favourable currency effects. “Organic net revenue growth was +2%, reflecting the combination of an 8% growth created in rest of the world and an organic decline in North America of -2.5%, and -16% in Brazil where tough market conditions persisted,” said the statement.

Arcadis CEO Neil McArthur said: "We made good progress on our leadership priorities for 2015. However, our Q2 results have been impacted by continuing poor market conditions in Brazil and cost overruns on four environmental remediation projects in North America.”

He added that, in Brazil, the recession, lower spending by mining clients and a national slowdown in procurement processes led to an organic decline in revenues of -17% in the second quarter.

Regarding North America, he said: “During the second quarter we recognized a €9 million cost overrun on a ten-year old lump-sum environmental project. Based on a subsequent review of the US environmental lump-sum project portfolio, cost overruns estimated at €4.9 million across three other projects were recorded. Having completed the review, we are confident these adjustments are one-off in nature.”

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