Bilfinger Shares Tumble After Profit Warning

FRANKFURT--Shares in Bilfinger SE (GBF.XE) nosedived on Tuesday after the German construction and services company slashed its 2014 profit outlook, citing high power costs caused by the country's transition to renewable energy.

"The power business segment in particular is suffering from the effects of the energy transformation in Germany, which has led to a considerable reluctance to invest on the part of energy suppliers," Bilfinger said in a statement.

The company said it now expects an output volume of about 7.9 billion euros ($10.8 billion), down from the previous forecast of at least EUR8 billion. While earnings adjusted before interest and amortization would drop to between EUR380 million-EUR400 million from EUR419 million last year, it expects net profit to fall to between EUR230 million to EUR245 million from last year's EUR255 million.

Shares fell nearly 17% at the open. DZ Bank and Equinet said they would review their estimates on Bilfinger in light of the warning. "The profit cut was very surprising, even despite a slow start in the first quarter," said Jasko Terzic, an analyst at DZ Bank.

The company said the energy transition was affecting its business even outside Germany.

"German wind energy provided at no charge, for example, is preventing the construction of new power plants in Poland," Bilfinger said, referring to surplus energy generated in Germany that shipped over the border.

Europe's largest economy is pursuing one of the world's most ambitious climate-protection strategies, and is aiming to nearly eliminate greenhouse gas emissions by the middle of the century. The government plans to drop all nuclear and most fossil-fueled power generation in favor of alternatives such as wind and solar power, which have been heavily subsidized by the state.

Write to Natalia Drozdiak at [e-mail]

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