Shikun & Binui Announces Financial Results For the First Quarter of 2015

AIRPORT CITY, Israel, May 27, 2015 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the first quarter ended March 31, 2015. Management will host a conference call to discuss the results tomorrow May 28 at 09.30 ET, 2.30pm UK time, 4.30pm Israel time. To listen to the call, please call one of the following numbers: US: 1-888-407-255 UK: 0-800-917-9141 Israel: 03-918-0664.

Management Comments

Mr. Moshe Lahmani, Chairman of the Shikun & Binui Group Commented, "The Group is presenting an improvement in the operating and net income in the first quarter of 2015 and has continued in the implementation of its strategy of global expansion and focus on mega projects. During the quarter and subsequently, we reported the win of mega projects in the US and Israel. These contracts ensure future revenues in the years to come. Even before the inclusion of these projects, our backlog has reached record level."

Mr. Ofer Kotler, Shikun & Binui's CEO, commented, "We continued to implement the strategy that guides us, acting with our corporate values of excellence and uncompromised quality of execution. We believe that these values are one of the main factors underlying Shikun & Binui continued wins of mega projects, such as the tunneling of the Light Rail in Tel Aviv and the building of toll roads in Colombia and Texas. We will continue to act in order to broaden our business activities in Israel and around the globe, deepening our foothold in additional markets and new countries."

Mr. Tal Raz, Shikun & Binui's CFO, added, "During the first quarter Shikun & Binui demonstrated that it continued to maintain its financial stability. The Group's backlog of orders and the significant projects that are not yet in the backlog ensure substantial future revenues and enhance our strength. In order to share the success with our shareholders, the board of directors decided on a dividend distribution at the amount of NIS 50 million."

Main events during and subsequent to the reporting period:

• SBI–Shikun & Binui Infrastructure - Won its first-ever tender in the US – express toll lane in Texas: on February 26, 2015, the company reported that a consortium in which it is a partner won a BOT tender for the planning, construction, financing, operation and maintenance of express toll lanes and additional road infrastructure near Houston, Texas. The project's construction phase is valued at approximately $800 million.
• Shikun & Binui International Real Estate (RED) – ADO completed acquisition of properties in Berlin: On March 31, 2015, ADO completed the purchase of a portfolio of residential properties in Berlin for €400 million.
• Shikun & Binui Israel Infrastructure – Won Tunneling Project for the Tel Aviv Light Rail: On May 19, 2015, the Company reported that it had won an over NIS 3 billion project for the construction of tunnels and subway stations for the Tel Aviv Light Rail (a tender that had been offered by NTA - Metropolitan Mass Transit System Ltd.). The company will own 49% of the consortium that will be established for the project, and a third party will own the remaining 51%. It is estimated that the construction phase of the project will take place over a period of approximately 6 years.
• Order Backlog - As of March 31, 2015, the Company's order backlog totaled NIS 12 billion, an NIS 900 million increase compared with December 31, 2014. Of this backlog, NIS 9.2 billion is in respect of international activities compared with NIS 8.1 billion in respect of international activities as of December 31, 2014.
• Dividend: on May 27, 2015, the Company's Board of Directors declared a dividend distribution totaling NIS 50 million.
• Sale and delivery of apartments:

Financial Results for the First Quarter of 2015:

Revenues: the Group's revenues for the first quarter of 2015 totaled NIS 1,394 million, compared with NIS 1,467 million for the first quarter of 2014, a 5% decrease that derived from completion of projects in the infrastructure segment in Israel.

Gross profit: the Group's gross profit for the first quarter of 2015 totaled NIS 285 million (20.4% of revenues) compared with NIS 230 million (15.7% of revenues) for the first quarter of 2014. The increase was generated primarily by the International Construction and Infrastructure segment.

Other income, net: the Group's Other Income, for the first quarter of 2015 totaled NIS 39 million compared with NIS 4 million in the same period of 2014. The increase reflected NIS 25 million before tax profit recognized during the quarter from the sale of photo-voltaic installations, and the cancellation of a NIS 9 million provision in the water segment.

Operating income, net: the Group's operating profit for the first quarter of 2015 totaled NIS 270 million (19.3% of sales) compared with NIS 135 million (9.2% of sales) in the same period of 2014, an increase that derived primarily from a NIS 47 million rise in the operating profit of the Israel Real Estate segment (due to the sale of two real estate assets), a NIS 35 million increase in the operating profit of the International Building and Infrastructure (particularly due to the rise in the dollar/shekel exchange rate), a NIS 27 million rise in operating profit of the Renewable Energy segment (due to the sale of photo-voltaic installations), and a NIS 15 million rise in the operating profit of the Water segment (due to the effect of the signing of the negotiated settlement and the cancellation of the provision, as mentioned above).

Net financing expenses: the Group's financing expenses in the first quarter of 2015 totaled NIS 92 million compared with NIS 31 million in the first quarter of 2014, despite the period's decrease of long-term interest expense from NIS 43 million to NIS 33 million. This reflected the NIS 42 million of financing expenses recorded due to the period's changes in currency exchange rates (because of currency devaluations, especially in Nigeria and Ghana, and the decline of the Euro/dollar exchange rate), coupled with a NIS 20 million loss from index hedging, compared with a NIS 7 million loss from index hedging during the first quarter of 2014.

Net profit: the Group's net profit for the first quarter of 2015 totaled NIS 116 million compared with NIS 74 million for the parallel period of 2014.

Accounts receivable at the end of the first quarter of 2015 increased by NIS 250 million, reflecting
1) the slowdown in payments received from Nigeria due to the re-organization of relevant local institutions following a change in government; and 2) a number of projects in the Israel Construction and Infrastructure segment whose payments are received by milestones, resulting in a lack of coordination between the rate at which work is completed and the rate at which payments are made.

Accounts payable: payments due to suppliers and service providers for the first quarter of 2015 decreased by NIS 82 million, reflecting a NIS 71 million decrease in Israel and a NIS 11 million decrease outside of Israel.

Cash flow: the Group's cash flow from ongoing activities during the first quarter of 2015 declined by NIS 199 million compared to a NIS 68 million decline in the first quarter of 2014, reflecting primarily the increase in payments due from customers, as described above.

Cash and cash equivalents: as of March 31, 2015, the Group's cash and cash equivalents totaled NIS 1,713 million, while its unused bank credit lines totaled NIS 946 million.

Order backlog: as of March 31, 2015, the company's order backlog totaled NIS 12 billion, a NIS 900 million increase compared with December 31, 2014. Of this backlog, NIS 9.2 billion is in respect of international activities, compared with NIS 8.1 billion in respect of international activities as of December 31, 2014. The backlog does not include projects that have not yet reached financial closure, including the Ashalim Project, the projects in Colombia and Texas and a number of additional projects that were awarded during the past several months to the Israel Construction and Infrastructure segment.

International Construction and Infrastructure segment:

Revenues for the first quarter of 2015 for the International Construction and Infrastructure segment totaled NIS 653 million compared with NIS 665 million for the first quarter of 2014. The NIS 12 million decrease reflected the completion of work in Uganda and a slowdown in the rate of work in Tanzania due to the beginning of the election process. The effect of changes in the average dollar exchange rate increased the period's revenues by NIS 74 million (the average USD exchange rate raised during Q1 2015 rose by 12.8%, compared with the first quarter of 2014).

The segment's gross profit for the first quarter of 2015 totaled NIS 189.6 million (29% of the segment's revenues) compared with NIS 153.2 million (23% of the segment's revenues) for the first quarter of 2014, a NIS 36 million increase. Excluding the effect of the change in the dollar exchange rate between the two periods, the rise in the segment's gross profit would have been just NIS 14 million. The increase in the gross profit and the gross margin derived primarily from projects in Nigeria and Kenya.

The segment's operating profit for the first quarter of 2015 totaled NIS 157 million (24% of segment revenues) compared with NIS 122 million (18% of segment revenues) for the first quarter of 2014.

Israel Real Estate Segment:

Segment revenues for the first quarter of 2015 totaled NIS 262 million compared with NIS 241 for the first quarter of 2014, a NIS 21 million increase that reflects primarily a rise in the number of apartments delivered during the period (186 compared with 176 in the first quarter of 2014, company's share) together with a higher average price of apartments populated during the period (NIS 1.19 million before VAT, compared with NIS 1.1 million before VAT for the first quarter of 2014).

The segment's gross profit for the first quarter of 2015 totaled NIS 46 million (17% of segment sales) compared with NIS 42 million (17% of segment sales) for the first quarter of 2014, with the increase derived primarily from the segment's residential projects. The segment's operating profit for the first quarter of 2015 totaled NIS 67 million (25.5% of segment sales) compared to NIS 20 million (8.3% of segment sales) in the first quarter of 2014, a NIS 47 million increase that derived primarily from the sale of two assets during the period.

Israel Construction and Infrastructure segment:

Revenues for the first quarter of 2015 for the Israel Construction and Infrastructure segment totaled NIS 420 million compared with NIS 564 million in the first quarter of 2014, a NIS 144 million decrease that derives from: 1) a NIS 92 million decrease in its building activities (due to the completion of the Police Department Training Center and the Tel Aviv Court Building); 2) a NIS 19 million decrease in the activities of the segment's Roads Division; and 3) a NIS 12 million decrease in revenues from the Concrete & the Prefabricated elements manufactory Division.

The segment's gross profit for the first quarter of 2015 totaled NIS 32.5 million (8% of revenues) compared with NIS 27 million (5% of revenues) in the first quarter of 2014. The segment's operating profit for the first quarter of 2015 totaled NIS 12 million (3% of segment sales) compared with NIS 9 million (2% of segment sales) for the first quarter of 2014.

Renewable Energy segment:

Revenues of the Renewable Energy segment for the first quarter of 2015 totaled NIS 54 million compared with NIS 24 million in the first quarter of 2014, a NIS 30 million increase that was due primarily to a rise in the number of land-based and rooftop photo-voltaic installations built (primarily for the installation of the Nevatim PV project).

The segment's gross profit for the first quarter of 2015 totaled NIS 10 million (18% of segment revenues) compared with NIS 7 million (31% of segment revenues) in the first quarter of 2014. The segment's operating profit for the first quarter of 2015 totaled NIS 27.5 million compared with NIS 1 million for the parallel period of 2014. The increase reflected primarily a NIS 25 million capital gain from the sale of photo-voltaic installations in Israel.

Concessions segment:

For the Concessions segment, first quarter 2015 revenues of NIS 26 million were generated primarily by the North Roads Upgrade and Maintenance Project and from the Government Office Building Project, compared to NIS 13 million in the first quarter of 2014. The NIS 13 million increase derived from the construction of the Government Office Project in Jerusalem.

The segment's gross profit for the first quarter of 2015 totaled NIS 2.9 million compared with NIS 3.3 million in the first quarter of 2014. The segment generated an operating loss for the first quarter of 2015 of NIS 2 million compared with NIS 0.7 million in the first quarter of 2014.

International Real Estate segment:

Revenues of the International Real Estate Segment for the first quarter of 2015 totaled NIS 10.3 million compared with NIS 2.1 million in the first quarter of 2014, an NIS 8 million increase that derived primarily from NIS 9 million in revenues from the sale of 24 apartments in the project in Poland, for which sales began in the fourth quarter of 2014.

The segment's gross profit for the first quarter of 2015 totaled NIS 2.5 million compared to a loss of NIS 0.4 million in the first quarter of 2014, an improvement due primarily to the sale of apartments from the project in Poland, as mentioned above. The segment's operating loss for the first quarter of 2015 totaled NIS 1.1 million compared to a NIS 4.4 million operating loss in the first quarter of 2014.

About the Shikun & Binui Group

The Shikun & Binui Group is a global construction and infrastructure company that operates in Israel and internationally in seven segments: 1) infrastructure and construction contracting outside of Israel; 2) infrastructure and construction contracting within Israel; 3) real estate development within Israel; 4) real estate development outside of Israel; 5) renewable energy; 6) concessions; and 7) water. The Group's activities focus on large, highly complex projects carried out for entities in private and public sectors with a focus on sustainability.

This summary announcement was prepared solely for the convenience of the reader and does not replace Shikun & Binui Ltd.'s (hereafter – "the Company") full report. The information contained in this announcement is, by its nature, incomplete. All of its contents are provided as a supplement to the Company's report, and are subject to the declarations therein stated. This announcement includes forecasts, assessments, estimates and other information relating to the Company or its subsidiaries, or to other parties or to future events and matters, the extent of whose realization is not certain and is not under the sole control of the Company (forward-looking information, as defined in the Securities Law-1968). The key facts and data serving as the basis for this information are facts and data, among others, related to the current status of the Company and its businesses, facts and data relating to the current status of the operating segments in which the Company engages in its areas of operation, and other macroeconomic facts and data known to the Company on the preparation date of this presentation.

It is understood that forward-looking information does not constitute a fact and is based solely on subjective assessments. Forward-looking information is uncertain and for the most part, is not under the Company's control. The realization or non-realization of the forward-looking information will be influenced, among others, by the risk factors that characterize the Company's operations, as well as developments in the general environment and external factors that impact the Company's operations. The Company's future results and achievements could differ significantly from those presented in this presentation. The Company is not obligated to update or modify the said forecast or assessment, and is not obligated to update this announcement. This announcement does not constitute an offer to purchase the Company's securities or an invitation to receive such offers. An investment in securities in general, and in the Company in particular, carries risk. One must take into account that past data do not necessarily indicate future performance.

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