Abstract
The French companies that operate in the infrastructure sectors, from Vinci
and Bouygues, to EDF,
Veolia and Lafarge are among the leaders in their
respective fields globally. Though their 2008 financial
performance was
relatively stable, they have all expressed concern for the short to medium
term. They all
pin their hopes on the infrastructure-geared fiscal
stimulus plans of France, other European countries and
the United States
and beyond, though there is precious little else at the moment to offer
comfort from the
downturn.
Especially in the infrastructure sector,
once the pace of investments begins to slow, recovery is also a
lengthy
process, which in turn raises the concerns over the private sectors decline in
orders and large
scale concessions. According to a report published in
early April 2009 by ratings agency Fitch, the
economic downturn will have
a effect delayed on European infrastructure majors, culminating in
declining revenues and reduced cash flows. Indeed, this is also expressed in
the analyst consensus polls
by Reuters, which indicate that all the French
infrastructure majors will see declining financial
performance in 2009 and
in some cases extending into 2010 as well.
The delayed full effects of the
impact in France’s infrastructure sector are also evident from
BMI’s
forecasts. Accordingly, we forecast that industry value will
decline in 2009 from EUR122bn in 2008 to
EUR116bn in 2009 and fall further
to EUR112bn in 2010. This amounts to real industry value growth of
-5.5%
and -4% respectively. The stimulus plan represents a risk to the upside for
our forecasts, albeit not
one that could lift the real growth figure in
positive territory easily, given the scope of demand destruction
coming
from the private sector.
In December 2008, French President Nicolas
Sarkozy announced a EUR26bn (US$33bn) stimulus
package to boost the
country' s economy. Under the scheme, state-owned companies will increase
investment by EUR4bn (US$5.1bn) in 2009 and the government will supplement
this with a further
EUR4bn on high-speed rail projects, dams and canals,
university campuses, road maintenance amongst
other projects. Though this
will provide momentum for the sector, the international scope of operations
of
the French infrastructure majors means that they are also pinning their
hopes on overseas fiscal stimulus
packages (such as the one in the US for
instance) to breathe life in their order backlogs in 2009.
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