HochTief's Profitability Masks Concerning Factors: A Closer Look at Accrual Ratio and Unusual Items

HOCHTIEF's earnings were boosted by unusual items worth €645m in the last 12 months, which may not be repeated. The accrual ratio indicates that statutory earnings were significantly less than free cash flow, with free cash flow at €1.4b compared to reported profit of €820.3m. This may be a cause for concern regarding future profitability.

HOCHTIEF, a leading global infrastructure and services solutions provider, reported strong financial performance in the first half of 2025, driven by significant increases in revenues, profits, and new orders. The company's CEO, Juan Santamaria, highlighted the group's position as a leading provider in growth markets, with a focus on end-to-end solutions.

Group sales increased by 25% year on year to EUR 18.4 billion, with organic revenue growth being the primary driver. Operational net profit rose by 18% to EUR 355 million, aligning with the top end of the guidance range for 2025. However, it is important to note that this figure includes unusual items worth EUR 645 million in the last 12 months, which may not be repeated in the future [1].

The company's free cash flow (FCF) performance was robust, with an operating cash flow of EUR 2.0 billion in the last twelve months, an increase of EUR 0.5 billion year on year pre-factoring. However, the accrual ratio indicates that statutory earnings were significantly less than free cash flow, with free cash flow at EUR 1.4 billion compared to reported profit of EUR 820.3 million. This discrepancy may raise concerns regarding future profitability [1].

New orders rose by 26% year on year to EUR 26.1 billion, with all operating segments reporting increases. The group's order book stood at over EUR 69 billion at the end of June 2025, up by 15% year on year. The strong growth in new orders was driven by project wins in strategic growth markets such as advanced technology, critical metals, energy, and sustainable infrastructure.

HOCHTIEF's performance in various sectors was notable. In the digital and advanced technology sector, the company has established itself as a leading provider for the development and construction of data centers. In the energy infrastructure sector, CIMIC is investing in renewable assets and grid enablement infrastructure. The group also has a strong track record in healthcare, education, and social infrastructure, with significant contracts secured in the U.S., New Zealand, and Germany.

The outlook for 2025 is positive, with the guidance for operational net profit to be between EUR 680 and 730 million, representing an increase of up to 17% compared to last year, subject to market conditions [1].

References:
[1] https://www.marketscreener.com/news/hochtief-h1-2025-operational-net-profit-up-18-to-eur-355-million-new-orders-increased-by-23-to-ce7c5cd3d080fe23