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114 Annual Report 2009<br />
The downturn in the construction industry in the United<br />
States stemming from the financial and economic crisis<br />
has not been reflected to date in the earnings of<br />
HOCHTIEF Americas due to factors including a healthy<br />
order backlog. In fiscal 2009, an expansive economic<br />
recovery package bolstered the construction sector,<br />
and its effects are expected to continue into 2010. Traditionally,<br />
Turner has not been involved to any significant<br />
extent in the residential construction market, which<br />
has declined precipitously due to the mortgage crisis.<br />
In addition, Turner builds a substantial percentage of its<br />
projects for governmental and quasi-governmental<br />
clients, such as in the educational and healthcare seg-<br />
ments. Flatiron’s focus is on the growing infrastructure<br />
segment.<br />
The HOCHTIEF Asia Pacific division—along with our<br />
subsidiary Leighton—benefits in particular from its<br />
diversified activities in the Australian market, various<br />
Asian markets and the Gulf region. During the year under<br />
review, demand in the attractive Gulf region construction<br />
market slumped. However, HOCHTIEF was not<br />
materially impacted by the emirate of Dubai’s payment<br />
difficulties, which were made public at the end of 2009.<br />
Moreover, the focus of our activities is in Abu Dhabi<br />
and Qatar. Our subsidiary’s strategy is to concentrate<br />
on high-growth markets. Future developments in Australia<br />
depend substantially on worldwide demand for<br />
raw materials. In our contract mining operations, we<br />
cannot for this reason completely rule out a decrease<br />
in the number of new orders. Nonetheless, we expect<br />
the division’s performance to be positive because of<br />
the large order backlog and governmental economic<br />
recovery programs along with a sustained high level of<br />
demand for raw materials from China.<br />
HOCHTIEF Concessions has been affected in its air-<br />
port business by the economic crisis. International air<br />
transport declined in 2009. It can be expected that<br />
passenger volume will continue to depend on the overall<br />
performance of the economy in the future. In the<br />
long term, we anticipate sustained growth in this segment.<br />
The expansion of non-aviation activities in particular<br />
underpins independence from developments in air<br />
transport. In the road segment, weakening economic<br />
performance, normally also associated with a down-<br />
turn in road traffic, can directly affect the profitability of<br />
projects depending on the structure of the contract.<br />
The European construction market was on the decline<br />
in 2009. In the residential segment, HOCHTIEF Europe<br />
was able to counter this downward trend by concentrating<br />
on premium apartments which are still highly<br />
sought-after, even during the crisis. In the future, profitable<br />
international projects are expected to compensate<br />
for the planned decline in building construction in Germany.<br />
HOCHTIEF Europe is thus holding its strategic<br />
course of focused growth in Central and Eastern Europe<br />
and by carefully choosing international projects, particularly<br />
in the Middle East. In addition, promising market<br />
segments will be developed further using profitable<br />
business models. These include renovating or expanding<br />
public-sector facilities based on PPP contracts in<br />
conjunction with other Group units.<br />
The financial crisis has had a negative impact on the<br />
real estate investment market. However, the sales proceeds<br />
generated by HOCHTIEF Real Estate at the end<br />
of 2009 demonstrate that the strategy of only investing<br />
in prime locations and projects has proven successful.<br />
Against the backdrop of the market situation, the division<br />
continued to adhere to its restrictive policy for acquiring<br />
new projects in fiscal 2009 and will go on leveraging<br />
market opportunities through systematic selection<br />
of new projects and focusing on promising market segments.<br />
The lease rates of our projects are currently high.<br />
However, demand for leased space in the markets in<br />
which HOCHTIEF Real Estate operates could be adversely<br />
affected by the still strained overall economic<br />
situation. The effects of the crisis on property demand<br />
are difficult to predict. Due to the dependence of the investment<br />
market on the smooth functioning of the credit<br />
markets, 2010 will again see risks because longer marketing<br />
periods and declining sales rates cannot be ruled<br />
out.<br />
HOCHTIEF Services addresses economic risks with a<br />
diverse product and client structure.
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