Dutch Engineer Arcadis Collateral Victim of Brazil Scandals
AMSTERDAM, April 23 (Reuters) – A sharp drop in revenues from Brazil and continuing falls in its North American markets kept gross revenue growth before acquisitions to just 1 percent at Dutch engineer Arcadis in the first quarter, sending its shares down 3 percent.
Growth at the company was led by recovering demand in Europe, the Middle East and Asia, but the company was hit by the fallout from corruption scandals in the Brazilian oil and gas industry.
Dutch rival SBM Offshore is being investigated by Brazilian authorities and has paid record fines for bribery. The scandal has led to a national procurement slowdown, which triggered a 15 percent decline in Arcadis's activities there.
Arcadis Chief Executive Ian McArthur said the company needed to adjust to a "new reality" in Brazil, and needed to make up to 300 redundancies in the country in response, though he insisted Arcadis was well placed there in the long term.
"A 15 percent decline is clearly a serious decline, so we've adjusted capacity to the projects we currently have and anticipate to have," he said.
The company said it remained on track to achieve "significantly" improved revenue and profit in 2015 although its first-quarter margins slipped, partly because of its acquisition of smaller rival Hyder last year.
Gross revenue was up 40 percent year on year helped by acquisitions, while organic gross revenue growth was 1 percent. Gross revenue of 823 million euros topped the 810 million forecast by analysts.
Earnings before interest, taxes and amortisation rose 35 percent to 59.4 million euros ($63.6 million), slightly behind forecasts.
Margins at the environmental, construction and water engineering group fell to 9.1 percent from 9.6 percent a year earlier. Without Hyder, they would have risen to 9.8 percent, McArthur said.
A decline in its North American business, which contributes more than a third of revenues, was slower than in previous quarters. Emerging markets, including Brazil, accounted for 29 percent of net revenues last year.
McArthur said integrating nearly 6,000 new staff after several acquisitions last year had taken "significant leadership time and effort", adding that the company would stick to a strategy of pursuing organic growth alongside acquisitions.
The company's shares were down 3.19 percent at 29.70 euros at 0716 GMT. ($1 = 0.9335 euros)
(Reporting by Thomas Escritt; editing by Jason Neely and Vincent Baby)
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