Bouygues increases its 3rd quarter profit but warns of a “difficult environment” in real estate

Overall, the French construction giant is doing well, thanks to its main businesses of construction and now energy services with Equans, a huge division bought from Engie in 2022. Since the start of the year, over nine months, the figure Bouygues' business jumped 38% to 40,9 billion euros, including 13,7 billion from Equans.

But real estate development activities, which represent a small part of the group's turnover (1,1 billion euros), plunged -19% over the first three quarters of the year.

Affected by the sharp rise in interest rates, the commercial activity of office sales (tertiary) "is at a standstill", indicated financial director Pascal Grangé, during a telephone call with the press. “Investors are postponing their decision-making,” the group said in its press release.

In the residential sector, reservations are down 23% year-on-year, and the “sharp drop in unit sales was only very partially mitigated by block sales,” the company continued.

Consequently, the real estate development activities of Bouygues, whose order book is down 22% compared to the end of September 2022, "has postponed the launch of certain projects", added Mr. Grangé without specifying which ones, but in noting that the real estate business had “very little inventory”.

New real estate is in crisis, suffering both a sharp drop in buyers' purchasing power and an increase in construction costs.

The latest government figures, published in October, show a 28,3% drop in building permits over the period October 2022-September 2023, as well as construction sites started (-16,6%).

Bouygues in good shape

The net profit of the diversified group (construction, construction, real estate, energy services, media, telecoms) amounted to 440 million euros in the third quarter (+12,8%), and 665 million over the first nine months of the year (+23,8%).

Bouygues construction's turnover increased by 6% to 7,2 billion euros over nine months. That of Colas (BTP) by 2% to 11,8 billion euros. That of Bouygues Telecom by 3% to 5,7 billion euros. In addition to real estate development, TF1 is also down (-11% to 1,5 billion euros).

The market reacted well to these figures, a little better than the forecasts of certain analysts, with Bouygues shares gaining 5,16% around 14:30 p.m. to 33,42 euros on the Paris Stock Exchange, in a market up 0,8%. .

The results, described as "reasonable" by Stifel Research, show "the importance of the infrastructure sector" for the group, with performances coming in particular from the Colas construction industry, Stifel indicates in a note published after the results.

The group does not see any consequences of the real estate slowdown for its construction activity, whose “order book is increasing very sharply”. “Activity for the coming months is completely assured and covers most of 2024,” said Pascal Grangé.

The order book for construction activities increased by 8% year-on-year, including the contract to extend a metro line in Hong Kong, a residential district in Lucerne, and two motorway phases in Croatia.

Colas has won a contract for the extension of a transport line in Manila.

For the year 2023, Bouygues confirmed its outlook for “turnover close to that of 2022” and “an increase in current operating income from its activities (ROCA)”.

“These prospects are based on a 2022 proforma integrating Equans as if the acquisition had been completed on January 1, 2022, i.e. a turnover of 54,4 billion euros and current operating income from activities of 2,16 billion euros,” the group said.