Bouygues Sees Good Demand in Second Quarter; Colas Hurt by Cost Hikes

Bouygues' second-quarter results continued to show good demand for its construction and services business. The backlog improved by 6% to EUR 35.1 billion, 1% at constant-exchange rates. By industry, civil works' backlog declined 5%, which was compensated by a 3% increase in energy works. Colas, the road division, had a 14% increase in its backlog and 9% organic sales growth. However, Colas' EBIT was the main detractor from group profitability, as it contracted sharply due to higher energy and commodity costs. Colas could not pass these costs on to customers, especially for the contracts booked before the price hikes. As we mentioned previously, and despite being correctly managed, Bouygues' engineering, procurement and construction businesses are at the mercy of external factors like the weather or price hikes, which can make profitability fluctuate sharply. In France, residential activity continued to perform strongly, while demand for commercial property remained weak, a comment we have already heard in previous quarters. We maintain our EUR 35 fair value estimate.