A Traditionally Safe Sector Is Ready to Crumble

17.01.2018 • France

Simone Wapler – La Chronique Agora (France) –

If the rate hike is confirmed, the weight of debt in the balance sheet of companies will make them vulnerable to any unforeseen. Construction is particularly exposed.

The Echoes of Tuesday, January 16th:

”  Number 2 British construction industry bankrupt – The fall of the Carillion group threatens 43,000 jobs but HSV HS2 not. ” 

West France from Tuesday, January 16th:

”  If the project of the airport of Notre-Dame-des-Landes, near Nantes, was to be abandoned, Vinci will be well compensated, assured the CEO of the group, Xavier Huillard, who had the confirmation from the government. ” 

Europe 1 of 16 January:

”  The Court of Auditors warns about the ‘considerable slippage’ of the forecast cost of the Grand Paris Express. ” 

“Major public works” have always been an area of ​​dubious rapprochement between politics and business.

At the level of a municipality, we are talking about a few hundred thousand euros and unnecessary roundabouts.

On a regional scale, we are talking about tens of millions of euros and airports or public transport. For a capital, it’s more. Thus, the extra cost of Grand Paris Express is estimated at € 13 billion, 50% more than the initial budget … This new network of automatic lines will not be ready in time for the future financial disaster of the 2024 Olympic Games .

Finally, at the level of a country we talk about a lot more. I say for those who do not frequent the Perfide Albion that LGV HS2 is not a missile or a virus but the British equivalent of the TGV that was to join London and Birmingham then Manchester or Sheffield and Leeds.

The French companies Eiffage and Vinci are also involved in these rail works.

Carillion is number two in British construction, a two-century-old company with a turnover of £ 5.2 billion. Tunnels, construction of hospitals, military bases, prisons, but also canteen services. Carillion is dependent on public orders but has not been sunk by a cancellation.

Carillion was plunged by its debt (£ 1.5bn), contracted notably to honor its pension fund commitments while some yards were falling behind.

In France, Eiffage and Vinci are also very dependent on public contracts. These companies do not have to support the pensions of their former employees, this regime being with us collectivized. But they remain dependent on cancellations or possible delays in government orders under the pressure of public finances and a rise in interest rates; they carry – like Carillion – a heavy debt.

You will object that the stock market of Eiffage and Vinci are hitherto glorious. For 10 years the price of Eiffage increased by 70% and that of Vinci by 82%.

In blue on this graphic, Eiffage and in red Vinci.

Eiffage and Vinci course graph

The debt-equity ratio of Eiffage is 389% and that of Vinci 128%. In general, it is considered that the debt-to-equity ratio should not exceed 2.

Eiffage would therefore be almost twice in debt. Admittedly, the assets cover the debt and there is no danger in the house but in case of rising rates, a fragile situation deteriorates very quickly. See Altice’s recent setbacks in telecoms.


Concrete and cronyism capitalism are likely to be less supportive if the debt and public deficits weigh more heavily.


-Read more at la-chronique-agora.com (French)-

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