Bouygues shares decline after group drops construction unit's FY margin target

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Bouygues shares decline after group drops construction unit's FY margin target
Credit: © Reuters.

By Scott Kanowsky -- Shares in Bouygues SA (EPA: BOUY ) fell on Thursday after the French industrial firm scrapped its profit margin target for its Colas construction unit, citing macroeconomic headwinds.

In a statement, the Paris-based company said it no longer expects Colas to register an operating margin of 4% in 2023. Instead, it now sees the division posting an unspecified annual increase.

"Given the inflationary environment, particularly in countries bordering Ukraine, and its dilutive impact on the current operating margin, especially in the bitumen trading business, it is no longer relevant to set profitability targets for 2023 in terms of the current operating margin rate," Bouygues said.

Colas is still seen posting "significantly higher" full-year revenue, driven by elevated product prices offsetting rises in input expenses and a recent strengthening of the U.S. dollar against the euro . Current operating profit is also expected to come in above its 2021 level.

On a group-wide basis, sales in the nine-month period to September 30 jumped by 8% relative to the same timeframe last year to €29.7 billion (€1 = $1.0360), thanks in part to the price of road construction projects in Europe and North America being enhanced by inflation.

Meanwhile, net profit attributable to the group fell by more than 10% to €537M, reflecting a €106M charge due to costs related to mergers and acquisitions.

However, Bouygues confirmed its 2022 financial guidance for an uptick in both sales and current operating profit.

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