Mexican construction firms boost Q1 incomes on higher project demand

Mexico's largest construction companies have seen their incomes from construction increase in 1Q15 due to higher demand for projects including highways, roads, bypasses, social infrastructure, and water treatment plants.

The construction of three highways was a significant factor in boosting first-quarter earnings for Mexico's largest construction company, ICA.

In Q1, the construction sector contributed to 73% of consolidated income, and 25% of Ebitda, ICA said in its latest earnings statement.

Income from construction in the first quarter reached 6.05bn pesos (US$396mn), up by 7% compared to 5.6bn pesos in the same period last year.

Ebitda reached 400mn pesos in the first three months of the year, up slightly from 397mn pesos in 1Q14.

ICA PROJECTS

Highway projects which contributed most to the income boost include: the Mitla-Tehuantepec highway; the Barranca Larga-Ventanilla tollroad and the highway Palmillas- Apaseo El Grande.

The 169km Mitla-Tehuantepec federal highway in the state of Oaxaca is 51% complete, according to the company.

ICA was awarded a 20-year concession contract for the construction of this project in 2010. Works will require an investment of 9.32bn pesos, and to date, ICA has invested around 4.7bn pesos in the project.

Construction work is expected to conclude in the fourth quarter this year, according to the company.

The Palmillas-Apaseo El Grande highway is currently 25% complete. The project calls for the construction of an 86km, four-lane federal highway, linking the metropolitan area of Mexico City with the Norte and Bajío regions, in Mexico's Querétaro and Guanajuato states.

In November 2012, Controladora de Operaciones de Infraestructura, a subsidiary of ICA, was awarded a 30-year concession contract to carry out this project, which will require an investment of 5.5bn pesos.

Currently ICA has invested around 1.39bn pesos in the project, according to the firm.

And the Barranca Larga-Ventanilla toll road, located in the state of Oaxaca, is currently 69% complete.

The 5.2bn-peso contract involves a 104km toll road which will also provide a faster link between the Pacific coast resorts of Huatulco, Puerto Escondido and Oaxaca, supporting tourism and assisting economic integration of inland communities along the route, ICA said.

The road will reduce travel time between Oaxaca and Puerto Escondido to approximately 100 minutes.

The concession agreement with Mexico's transportation and communications ministry (SCT) includes the construction, operation and maintenance of the highway for a term of 30 years.

MORE COMPANIES BENEFITING

Another company which saw earnings benefit significantly from the construction sector is Impulsora de Desarrollo y Empleo en America Latina (Ideal). Income reached 1.54bn pesos in the first quarter this year, up from 1.05bn, the company said in its latest earnings statement.

Of the 1.54bn pesos, around 848mn pesos came from social infrastructure repairs; 571mn pesos came from the construction of roads, 112mn pesos corresponds to the construction of water treatment plants, including the Atotonilco water plant, among others.

Meanwhile Pinfra saw net income reach 2.06bn pesos in the first quarter, up from 1.57bn pesos y-o-y, it said in its latest earnings statement.

Of this amount, construction income hit 731mn pesos, up 141% from 303mn pesos in the same period last year.

The firm did not disclose information regarding its projects.

Meanwhile, OHL Mexico, currently in the middle of an alleged corruption scandal, saw income from construction total 74.4mn pesos, up by 4% from 71.4mn in the year-ago period, according to the company's latest earnings report.

Of this amount, 70.6mn pesos came from construction of the Bicentennial Viaduct. The firm won the contract to build and operate the road when current President Enrique Peña Nieto was governor of the State of Mexico in 2008.

The rest of the amount, roughly 3.82mn pesos, came from the Autopista Urbana Norte, for which it holds the 30-year concession to design, finance, build and operate an elevated double body viaduct with fully automated tolls in Mexico City.

The project is part of the urban highway which aims to reduce congestion and facilitate traffic from the north to the south of Mexico City on the northern periphery.