Despite Shady Accounting, Construction Giant Suffers Rout

Investors smell a bigger rat, beneath the bad numbers.

Spain’s shrunken construction giant OHL began this week in spectacular fashion, as its shares plunged over 11% in the first two hours of trading on Monday, to plumb depths that hadn’t been seen in decades. By the end of the day, shares settled at €3.00, down 9.9% for the day, and down over 40% year-to-date.

The market was reacting to the company’s worst half-year results ever. The headline-grabber was that OHL’s profits had shrunk 94% during the six-month period. According to analysts at Spanish lender Bank Inter, one of the biggest causes for concern is the company’s steady loss of international contracts.

Since the collapse of Spain’s real estate sector in 2008-09, opportunities for large construction firms in the once-abundant home market have run dry. The ability to survive the new reality hinged on firms’ ability to carve out new opportunities abroad. OHL was particularly adept at that, winning prestigious construction and infrastructure projects all over the world, from Montreal to Mecca, from Mexico to Manila.

But things have soured, particularly in its Middle Eastern markets

Continue reading the article at WOLF STREET

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