Balfour Beatty announces review of European rail business

Balfour Beatty shares fell 18 per cent yesterday after the construction firm announced profit concerns and a review of its European rail business.

The company said that the struggling UK and U.S. construction markets would result in 2012 profitability being “slightly lower than expected”.

A review of the firm’s European rail interests was also announced following “critically low” activity levels in Italy and Spain.

The UK will not be included in the review.

Speaking during a media conference call, Balfour Beatty chief executive Ian Tyler said that the company remained optimistic about major rail construction projects in the UK and overseas.

In a statement, Balfour Beatty said: “In the UK, we are seeing further market deterioration. On the one hand, the business is continuing to migrate towards smaller contracts in a market with very few major projects.

“Approximately half of our order book is now in our regional business, up from a third a year ago. At the same time, the supply chain is suffering which in turn, reduces our ability to negotiate terms that match the worsening market conditions.

“This, combined with the increasing commoditisation of work in Germany and the UK, is expected to give rise to a further adverse impact on profits of around £10 million in 2012.”

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